FINRA Report Shows Wealth Management Is Losing Financial Advisors

People come and go. But financial advisory firms are seeing a bit more lately these days.

Last year, about 7% of FINRA-registered representatives left the industry while only 6% entered the space, according to a FINRA Instant Report. As a result, the total number of representatives registered with FINRA continued to decline for the fifth consecutive year, to 612,457 in 2021 from 617,531 in 2020.

More FINRA-registered businesses closed than opened. In 2021, 150 FINRA-registered businesses closed while 109 new businesses emerged, ending 2021 with 3,394 total businesses, down 1.1% from 3,435 in 2020, according to the report.

“It’s a very difficult and stressful time to be a financial adviser when the markets are up and down,” said Mark Elzweig, president of Mark Elzweig Company, a consulting firm for financial advisers.

As financial markets continue to be rocked by fears of rising inflation and pressure from Fed rate hikes, it is more difficult to find investment opportunities that will rise in the short term, a said Elzweig. For advisors, that means spending more time working with clients to find good investment vehicles and focusing on long-term goals.

If the market continues to fall, that will prompt more advisers to accelerate retirement plans, Elzweig said.

A Cerul report estimates that nearly 103,000 advisors will retire over the next decade, representing nearly 40% of the industry’s current workforce of advisors. More than 26,000 advisers – or 26% of the total – advising on $1.8 trillion in assets lack a succession plan as the industry fails to generate enough new talent to replace experienced advisers who are retiring.

“Young people today want to work for a high-tech company and are not interested as a group in becoming financial advisors,” Elzweig said. “It’s a very long learning curve to establish a firm, and the success rate for trainees is relatively low.

For those who stayed, people tended to move from large distribution houses to smaller independent businesses. Representatives at large companies with more than 500 registered representatives fell 1.1% to 64,099 in 2021, while at companies with 150 or fewer representatives the number rose 0.7% to 513,923, according to the report.

For wirehouses, it’s an expensive business with lots of compliance regulations to follow, Elzweig said. Total business spending recorded at FINRA in 2021 reached $306.8 billion, up 8% from $284.7 billion in 2020.

To reduce costs, large brokerages focus more on sales per advisor than headcount. The effort is supported by wirehouses that bet on technology to make their advisors more productivewhich pushed their revenues up 10% to $398.7 billion in 2021.