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Kitces & Carl Ep 135: Do Experienced Financial Planners Have A Professional Obligation To Create Job Opportunities For The Next Generation?

In its most recent report on U.S. Advisor Metrics, Cerulli Associates predicts that 37.5% (or nearly 110,000) of financial advisors will retire over the next 10 years. And given the industry’s ongoing evolution away from being primarily sales-based and towards a more robust profession driven by deeper service models and long-term client/advisor relationships, many in the industry are genuinely concerned that there simply aren’t enough new advisors entering the profession to meet the public’s need for financial advice. Which, in turn, has prompted some to wonder if firm owners have a specific obligation to their profession to hire and train next-gen talent.

In our 135th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore the question of whether experienced financial planners have a professional obligation to create job opportunities for new advisors, how other professional service industries have traditionally brought in new talent, and how smaller financial planning firms have effectively created programs to hire and train those entering the profession.

At a fundamental level, there are negative connotations around the term “obligation” that, when introduced, are often met with instant resistance by those who appreciate the autonomy to choose their own goals and priorities. Beyond that, however, obligating financial planners to hire and train new advisors could create some unintended (and detrimental) consequences. While many firms are experiencing tremendous growth and have introduced career tracks for new advisors to help with all the additional work, the imposition of being required to create new positions would be felt most by those firms who might not be interested in growing their practice and therefore wouldn’t be hiring in the first place. Which would invariably result (after a considerable investment of both the firm owner’s time and money) in a less-than-optimal experience for the new advisor and would likely do little to improve the industry’s already dismal retention rate.

In other professional industries like accounting and law, the training and development of newly minted CPAs and attorneys are often provided by the largest firms who hire and train in bulk each year, knowing full well that many new hires will move on in just a few years. Accordingly, much of the heavy lifting to meet the demand for new advisors will likely be done by the Schwabs and Vanguards of the world, while professional organizations, like the FPA and CFP Board continue to create systems and structures that make it easier for growing firms to develop training programs and career tracks. On a smaller scale, meanwhile, several firms have implemented residency programs designed to offer meaningful work experience to young planners fresh out of school who are able to take on entry-level work, meet their experience requirements for their CFP certification, and then leave after 2 or 3 years. 

Ultimately, the key point is that there are a number of ways that the financial planning industry can tackle the looming spike in demand for new advisors without imposing an artificial obligation on advisors, which, if not met, would imply a deficiency in professional duty. By leveraging professional organizations, mega-firm training resources, and residency programs, the industry can create pathways for new advisors that address the needs of the broader industry and create a win-win situation for both firm owners and rising financial planners, which offers those who want to be part of the profession an opportunity to have a meaningful impact on their clients’ lives and earn a good living in the process!

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