In this episode of the BISA Portfolio Podcast, John Olerio of Webster Investments, chair of the BISA Research Committee, speaks with Chayce Horton and Asher Cheses of Cerulli Associates. Recently, BISA commissioned a study through Cerulli that showcases trends and strategies for recruiting and retaining advisors throughout their careers. In this podcast, they discuss some of the study's key takeaways, including:
To access the full BISA/Cerulli whitepaper for free, visit here.
BISA is the leading financial services industry association dedicated to serving those responsible for the marketing, sales and distribution of securities, insurance and other financial products and advisory services through the bank channel.
In this episode of the BISA Portfolio Podcast, John Olerio of Webster Investments, chair of the BISA Research Committee, speaks with Chayce Horton and Asher Cheses of Cerulli Associates. Recently, BISA commissioned a study through Cerulli that showcases trends and strategies for recruiting and retaining advisors throughout their careers. In this podcast, they discuss some of the study's key takeaways, including:
To access the full BISA/Cerulli whitepaper for free, visit here.
BISA is the leading financial services industry association dedicated to serving those responsible for the marketing, sales and distribution of securities, insurance and other financial products and advisory services through the bank channel.
John Olerio
Welcome, everyone to this episode of the BISA Portfolio Podcast, bringing insight and intelligence to the BISA community. I'm your guest host for today, John Olerio of Webster Investments. I'm a member of the BISA Board of Directors. I am also currently serving as president-elect of the association and co-chair of the research committee alongside Kevin Mummau. As a big believer in conducting research important to our industry. I'm honored to share with you today the highlights of our recent research study done in collaboration with Cerulli Associates. The mission of the BISA Research Committee is to support our member firms to be best of class in delivering wealth management, investment and insurance solutions. The research committee and the projects we lead are integral in helping our member firms determine what the differentiators are to success in our business. If you'd like to read more background on the committee, head to Portfolio Pnline, and check out a recent article there by Kevin Mummau. sharing about our joint research. I am very happy to be joined today by two researchers from Cerulli Associates, Asher Cheses, and Chayce Horton. Welcome. It's great to be here with the both of you today.
Asher Cheses
John, thanks so much. It's great to be here with you as well. Just a quick introduction. My name is Asher Cheses, and I'm an associate director here it's really associates. For anyone that's not familiar, we are a research and consulting firm based out of Boston, Massachusetts, and we focus on wealth management, product development and distribution strategy for global asset and wealth managers. I work in the wealth management practice or focus on a wide spectrum of investors across the affluent to high net worth marketplace and cover a spectrum of intermediary channels, including wirehouses, private banks, trust companies, Ras family offices, as well as bank broker-dealers and ready to use majority of the research that we'll discuss today comes from our big broker-dealer research. We also conducted customer research to get additional perspectives from retail banks and credit unions that are part of the BISA members as well. And we're really looking forward to sharing this research with you.
Chayce Horton
Great, yeah. Thanks. Thanks, John. I appreciate the intro. And just yeah, I've been a research analyst at Cerulli for five years and helped lead our research into banks and trust companies, as well as our research into the high net worth and ultra-high net worth wealth and asset management industries. And really happy to share some of the findings from this study today, it was a pleasure to do this with us at BISA.
John Olerio
Awesome, it's gonna be an exciting time together. I'm really thrilled with the results of the study. I want to thank you both, and I want to begin with a background on how the study came to be and why the research committee at the BISA selected this topic, we're always looking at what we think is of most interest to the BISA members, and constant stack ranking. And we have a special kind of longer strategy session at the beginning of each year. And this year, the beginning, the thing that we knew what's on everyone's mind, across all banks, across all credit unions, was recruiting advisors. And it just seems to be always challenging, but more challenging right now, maybe than it's ever been. A lot of us have been in this industry for quite some time. But then we dug deeper in that. And we really wanted to be able to do something that was just going to try to give us more information of what makes an advisor tick, short term long term, what drives the decision making, because right now, they aren't making decisions. They're making decisions to stay, or they're making decisions to go. And we wanted to partner with a firm that could help us understand and provide us with the data behind what they're thinking about and what they're doing out in the field that's impacting all of our banks and credit unions. So that's how we got here. And now it's time for us to talk about the study.
Asher Cheses
Thanks, John. So I'm going to start off by giving a brief overview, of how we conducted this research alongside BISA. We first started this research by interviewing over fifteen bank wealth management executives, heads of banks across large, large regional bank broker-dealers, as well as smaller community banks and credit unions, to better understand how they're attacking this recruitment and retention issue across the industry. We also interviewed over 20 financial advisors within the bank and broker-dealers to understand their pain points and their preferences in terms of how they work with the bank broker-dealer. And we're able to get a broad range of perspectives across various types of banks and years of experience, across the years of training, so to get a really good understanding in terms of what are their preferences, and what are their pain points when operating within that bank. And I think one of the important elements of this research is that it was conducted on a confidential basis, everything was nonattribution. So that really allowed advisors to give really as a reason, as a third party research firm, they're unfiltered viewpoint and objective perspective on what was going on within their bank. And hopefully, you know, the goal of this research is really to provide that objective level of insight and research and really highlights some of the best practices that banks can take away from this research in terms of recruiting and retaining some of their top talent within banks and credit unions.
John Olerio
It was an exciting methodology and in the fact that you're combining the abundant data that you've got within your resources with what we're, you know, very in-depth interviews and getting real insights from advisors. And again, I agree with the whole confidentiality approach, it seemed to have really paid off. So we were thrilled with the methodology. And we're really happy to continue to present and share it with everyone. The first subject I want to highlight is advisor recruiting, namely what attracts advisors to the bank channel to a bank and to a credit union. This is particularly relevant to recruiting rookie and mid-stage advisors. And please feel free to expand on what interests you about this part of the study. Because I know you are both passionate about this, and, certainly our entire research committee and our entire BISA organization, this is the meat and potatoes of how we know we're going to sustain and grow.
Asher Cheses
Absolutely, thanks, John. Yeah, advisor recruiting was certainly a really, really interesting element of this research. And it continues to be a challenge, really, across the board in the wealth management space, not just unique to the banks, in particular, but really more broadly, as the industry as a whole is really experiencing a shrinking pool of candidates entering into the workforce and becoming interested in and starting careers as a financial advisor. So that's really we do market sizing, what we're known for in the wealth management space is sizing the advisory headcount industry in terms of market share, and what we project over the next five years is that advisor headcount is actually going to start turning negative. So that really emphasizes the critical importance of this issue, particularly among bank wealth management programs, where advisors typically tend to be retiring slightly earlier compared to the broader industry at large. And in tandem with that, we're also seeing significantly more competition across other types of affiliation and other models, whether that's other wirehouse firms, other independent RAs that offer, you know, slightly different economics and different types of flexibility in terms of how advisors run their practice. So banks are, you know, being impacted across the board with lots of challenges from competing business models. And, you know, what we've seen in the research that we've done from the BISA members is that the one thing that really makes the bank channel unique is that ability to generate ongoing referrals and access to the underlying banking clients that work with that credit union to work with that bank, or banks can really be a great place for advisors to start out in their career that are looking to gain more experience, but they don't necessarily feel comfortable with that eat what you eat and kill mentality that a lot of what larger wirehouses have been placed today. So that's really a good a great training ground for younger advisors to come into the industry and learn the ropes and learn how to you know how to work with clients in a solid and repeatable framework. So you know, in summary, to answer your question, what's really attracting advisors into the bank channel, it really comes down to that access to referrals. But it also has to do with culture and the feeling that advisors feel they're a really meaningful part of the organization. And that's really what's driving advisors, especially the younger advisors into the bay channel as it stands today.
John Olerio
Great, very interesting.
Chayce Horton
So those are all some great points about what brings younger advisors and developing advisors into the bank channel when we have a good quote from a credit union advisor here, where they stated, you know, "at a wirehouse, I always felt like I was a little fish in a big seat, you know, struggling to make a significant impact. But when I came to a credit union, I became a big fish in a small sea and was able to make a meaningful impact for my clients and the local community." So that quote, really shows how just it's a different environment that we found in banks and credit unions, and it offers newer and younger developing advisors, a more meaningful experience and a more supportive experience than what they might experience at other firms.
John Olerio
I think that's so interesting that, you know, it isn't just about how much they're going to make. It truly is about, I think the culture, and the work-life balance, and just the overall job satisfaction. And I do think that as banks and credit unions, we've got some definite competitive advantages there. And I hope we all try to learn from this, and that we try to really utilize those to our benefit. But it is interesting to hear that type of feedback
Chayce Horton
I would definitely agree. And John the third month, the main reason that the advisors for the bank channel is really the ability to make that greater impact within a smaller organization, especially those coming from you know, larger wirehouse are larger bank broker dealer, they felt like one in 10,000 advisors within the credit union, bank space are able to make a more immediate impact. And there's really that community feel and you have a bigger say in terms of the way you run your business and the way you service your clients, which I think is a really attractive draw to younger and mid-career advisors.
John Olerio
That's great. Despite that good news. And despite that, you know, we've established that many advisors do find value in the banking channel. Unfortunately, that doesn't mean that recruitment has been easy for any of us, as I've stated earlier and I think any one of our bison members would repeat. So can you share some insights that show why these challenges may be present? Why do we have the challenges right now, despite the fact that people do like to come here? Why do we have problems getting people to come here?
Chayce Horton
Sure. So sort of as Asher mentioned earlier, you know, this isn't unique to the banks and credit unions. That's something we see across all channels of the advisory industry. You know, our data that exists in our annual research, Cerulli Associates shows that trainee failure rates are as high as 75%, across the industry. So it's something a lot of firms are dealing with and having trouble solving. I've got a couple of quotes here that may point to some of the issues and things that came up in these conversations from the advisor perspective. So one thing that we found is that firms often have a difficult time finding the right balance of guaranteed versus performance-based compensation for their younger advisors. In the words of one regional bank advisor, they said that, quote, we found that a lot of junior advisors would leave after three years once their salary guarantee ran out. And once we decided to create a formalized training and mentorship program, we found greater success and retention among advisors. So that's it's very difficult to establish a balance between guaranteeing salaries versus having some sort of exposure to the grid for these younger advisors. And often some quote, "savvy advisors" can find loopholes in the system and jump from firm to firm and never really find their footing. But what we found is that firms that can establish that mentor in that training program often have greater success than the rest of the firms in the industry. And I've got another quote here about mentorship and some development. In the words of another regional bank advisor, they said, "We had a successful training program internally. But eventually, we relied on the goodwill of advisors to pay out of their own pocket to train their assistants or junior bankers, who would often then be promoted into direct competition with them." And so this is a problem as well, that we're finding making it difficult to bring in and establish and develop these newer advisors is that their success is really heavily reliant upon senior adviser mentorship. And it's, it's been very difficult for these firms to sort of incentivize these advisors, given that they generally have a lower long-term stake in the game compared to independent channels, so that they're generally less likely to be 100% invested in the success of that next generation of advisors. So those are some of the challenges that we find that are present that are sort of feeling this difficulty bringing in and developing younger talent,
John Olerio
Can you comment at all about licensed banker programs or any other types of training that are unique to banks that give them a leg up on the competition? Because I think you're spot on that we need to try to develop juniors but we have to develop them better. And we have to give them a clear career path that benefits everyone -- the bank, that junior broker and a mentor, advisor, etc. But where is there the best success in locating a junior broker? Are they sourced directly out of school? Are they sourced by again, licensed banker programs or sales assistants, etc, just any feedback there?
Chayce Horton
I think what we found is that licensed banker programs came up as much as any other sort of strategy to bring younger advisors in. Because it's a captive audience, almost. You have people who are already invested in the bank already aware of the culture, they like being there, and they like working there. And likely being, you know, interested in the advisory program, they've seen the process of generating referrals, getting to understand clients and building relationships. And for those people sitting in the branches that want to move up towards that advisory level profession and go on that development track. It's really been a great success that we found from a lot of interviews with executives and advisors like to be able to develop that talent internally.
Asher Cheses
Yeah, I totally agree. Jason, I think another area that they stand out in the unique across the industry is they have centralized call centers, where younger professionals are often able to take a more client-facing role and really learn the ropes of the job without being fully responsible for providing that advice to be on clients. So it can be a great training ground for potential FAs in the industry without the significant risk that, you know, in terms of compensation from the bank's perspective, I think one other unique area or best practice that came up from a few banks that we've heard had success partnering with local CFP Board or a local college or university that could really provide access to a younger pipeline of younger and motivated employees who are more planning driven and can partner with those schools, universities to create a more active pipeline in terms of recruiting potential advisors into the industry. Yeah, and I have one more thing while we're on the topic, years of looking at different sources of talent. And something that we did write about in this white paper is the ability to bring in more diverse talent and people of more diverse backgrounds into the advisory industry. Right. And we really found that banks and credit unions are the perfect type of firms to attract more diverse talent. You know, when you think about the history of the wealth management industry, you know, looking back, you know, the way to break in is, you know, you bring a list of 100 friends or family members that all have notable investable assets. And that's sort of your starting point, your jumping-off point. And that's how the effect is to screen out a lot of candidates that bring far more diverse backgrounds, regardless of the fact whether or not they're screening out some potentially fantastic advisor talent. So when you have firms like banks and credit unions that provide a steady footing of referrals, you can much more easily bring on advisors from these more diverse and historically underrepresented communities in the financial service industry, really when no other firms can offer what banks and credit unions can.
John Olerio
Let's move on to a slightly different topic, but related because it buys your development support is for all advisors, not just for the juniors. But let's start with once advisors are in the door at our institutions, developing and supporting them is of utmost importance. We can't hire someone and expect them to figure out all the ropes on their own. The study explored strategies for improving the junior advisor pipeline and developing and supporting mid-career advisors. Can you explain some strategies companies can use to create an environment for advisors to develop and grow their practice?
Chayce Horton
Sure. So what we found throughout this study, when we've been talking about it a ton already, you know, is the number one most important differentiator for banks and credit unions is the referral stream. This is what helps banks and credit unions develop and retain their younger advisors and it also helps them attract and retain mid-career advisors. Among our calls with advisors, it was by far the top point of satisfaction for being at their firm. But considering some other factors that we haven't discussed as much. Another one that advisors reported to us was the value of having a reasonable competitive and consistent compensation arrangement with their firm. So when firms establish predictability and consistency with their compensation arrangements, as well as their success criteria for their advisors, it frees up the headspace of these advisors and allows them to become more focused on serving their clients as best they can, when not focused on changing their behaviors to match new comp requirements. Some additional things that we found advisors are looking for some improvement from their firms and how firms can better support them related to succession options, technology and culture. And I believe we're going to touch on succession options in more depth later. So I can start by looking at technology. And our findings throughout all of the calls showed that just 12% of research participants, executives, and advisors alike, are satisfied with their firm's tech stack currently. Now, this wasn't a huge focus of this initiative technology that is but from our research into the bank space, it's really we find when we discuss this topic with private banks and executives at those banks, we find that the most important technology initiatives among those firms are streamlining operational inefficiencies, things like Client Onboarding, and additional bringing in enhancing CRM technologies and tools and other advisors supporting technologies, as well as upgrading websites and client reporting capabilities. So those are some of the tactics that we've seen banks looking to improve to help support their advisors. And I'd say one other thing that advisors are looking for from their firms is culture. And we found that advisors felt as though their work was important to the bank, but maybe not necessarily a priority sometimes. And we found that a lot of advisors were left looking for a little bit more support from leadership and overall initiatives at their banks and credit unions. And we put together an action items list in the white paper that anybody who holds it open is confined. And just reading that list really quickly. Number one was to align incentives across both the retail bank and the investment and wealth divisions of the bank that can help you know, advisors feel like they're more part of the operations of the bank, more of a prioritization. And number two was allowing wealth and investment program leadership, sort of the autonomy to direct their operations without being you know, more tied towards the high-level priorities of the bank. And the third one is expanding and promoting the lines of communication through the ranks of leadership, we found a lot of advisors were satisfied with that aspect, but some were dissatisfied. And it's just something that we found is really important for advisors to feel like they can voice their opinion and hear their needs be addressed by the leadership of the bank.
John Olerio
So referrals really matter. And that's important to call out. And obviously, the tech we are hearing that and that compensation constancy that it needs to be predictable, obviously competitive, but you can't be changing it every other year. Those things I think we all know but it's so important to have it all in front of us, is a reminder to build our strategies upon. So it's great stuff, and I love how much time you spent on culture. Because in some ways, I think it's a little surprising because we don't think of the advisors really caring about the culture all that much, you know, just pay me and I'll do my job, give me referrals, and I'll do my job. But it seems that they want more than that. Just just a little bit more, why do you think that a bank advisor is different in their approach towards culture than a nonbank advisor? What do you think that's across the board in the industry that that culture is important?
Chayce Horton
I think for us, the industry, culture is important. But I think bank advisors are in a unique position in that consistently across the industry, their bank advisors, you know, that word bank comes before advisor, typically, and I think that's just sort of the source of some of the, you know, potentially, what advisors are looking for an improvement making it feel like they are a part of the success of the firm. And what they do really matters to the firm. And it's something that we found from executives consistently is that the advisory of the wealth business at a bank is a considerable source of noninterest income and that that's been a priority in the industry for a while. So I think it's something that has developed in a positive way. But it's definitely something that we find that bank advisors cite a little bit more than firms and say, The Independent channel or the wirehouse channel.
John Olerio
Excellent. Again, we're constantly learning how to support and develop advisors, so they want to stay, and especially stay beyond the junior level so that we are building veteran teams of professional advisors, what are some of your best insights and how we can navigate this to getting that real strong area of those midterm advisors to long term advisors who want to stay and want a long term relationship with a bank or credit union?
Chayce Horton
Sure. So I mean, I think, you know, when I started, the previous section just really comes down to those referrals and compensation, you know, if a bank can do that, right, or a credit union can do that, right? It's, it's really foundational to establishing an environment that advisors feel comfortable in. And so I won't go on too much about that. But I can just follow up with some quotes here from advisors during these conversations, you know, one of our referrals, a bank advisor told us that it's like they have a well-oiled machine, when it comes to referrals. You know, the tellers are referring to the bankers, the bankers to the relationship managers, the relationship managers, referring to the advisor, they described it as a constant flow of clients that you're really not going to get it any other channels, even the wirehouses. And that's the reason they stay at their bank. And so that's really instrumental, as we've discussed pretty much this whole podcast so far. And I've got another one here about compensation from a credit union advisor, they said, "I've always liked being at this," quote, unquote, firm, I won't say the firm, "because I feel like I can control what's in front of me, I can predict my level of income, and I know what the growth rate is, as long as they don't throw a curveball and change compensation." So I think that just keys in on the importance of that consistency and predictability that a lot of advisors that we talk to crave.
Asher Cheses
And Chayce, I would just add, you know, I think some of the most interesting conversations we had with advisors through part of this research, were those advisors that have recently made a switch from one firm to the next. And we're able to uncover, you know, what are some of the primary reasons for making that jump, and obviously, compensation was a big factor in advisors really dislike when compensation or group payout structures are being changed. So they really value your point, that steady and reliable compensation that is unique to the bank channel. But I think culture was something that came up even more frequently than we had expected. And, you know, fostering that sense of trusting collaboration is really important in those advisors that were dissatisfied with the bank. A lot of oftentimes culture was one of the main reasons why they left and that lack of buying from the top of the of bank, and that leadership. And I think that alignment with senior leadership is something that is really important that we hope executives can end advisory, the light to get out of this study is that when advisors feel that they're being heard and that they have direct access to senior management within a bank, and there's really that active level of engagement that really creates greater collaboration and greater consistency across the business line. So that was something that came up a lot in those discussions with advisors set up recently left. And I think one last thing, John, that you had mentioned earlier was just around work-life balance, and I think coming out of the COVID-19 pandemic, having greater flexibility in terms of working remotely and being able to operate your business within you know, a certain timeframe is something that more and more advisors are thinking about as it relates to work-life balance, and it's definitely an important consideration when they're looking at a respective bank or different affiliation models to work with.
John Olerio
So advisor retention, again, like saying that term might seem repetitive, but we could probably spend the whole time of this podcast talking about advisor retention, Developing advisors effectively is essential for retaining them long term. Make sense? This study also revealed advisors' thoughts on what would get them to stay in the bank or credit union channel instead of going someplace else. And that includes retention of senior advisors, which are big producers in the credit unions and our big producers at the banks are so important to us, can you share some of the study's findings about what really makes those top-level advisors tick, and what in particular, they need, because you can take a big hit if one of those, you know, very top level advisors in your institution decides to leave?
Asher Cheses
Yeah, of course. And as you said, this is a huge issue. And it's something that came up a ton. And it's very critical for banks and credit unions to sort of innovate and be consistent in the times with some of the other things that other channels are doing to support their senior advisors. Our data really shows that you know, advisors in the bank and wealth management programs specifically anticipate retiring considerably earlier than their peers and other channels. So the issue is really pressing for banks and credit unions. Throughout our conversations, I'd say almost every advisor, regardless of age, and regardless, experience, expressed some uncertainty about their firm's support for senior advisors for that high-level producer. And so we spent a considerable amount of time thinking through and trying to distill different strategies and tactics that firms are using and figure out what are some of the top things that they can do to better retain those senior advisors. You know, I'm finding shown a range of strategies that firms are implementing to help stave off this attrition, I'd say the first big one that we found was the implementation of second story programs, which allow advisors to move to a more advanced stage in their career by forgoing new referrals from the bank in exchange for, you know, a more generous grid. And then the ability to develop their book organically, and in some cases have some sort of increased, say as to how their book is passed on or succeeded. But I can get to that in a second. The second strategy that some firms are implementing is some sort of monetization option or buyout program. And though these aren't really widespread, we found that, you know, through conversations with a lot of senior advisors that these agreements in these arrangements are becoming more common, although yet still, unofficial, and more one-off negotiations at this point, rather than formalized procedures at most firms. And finally, we found that firms are starting to think about implementing some programs around succession planning for retiring advisors and that this was a very important factor for those senior advisors and their levels of satisfaction at their current firm. The transitioning of a book of clients to another advisor, multiple advisors was something that many advisors wish they had more control over. And sort of looping this all back to the beginning of the conversation. The problems of succession planning, advisor training and mentoring are problems that sort of solve each other firms can more formally connect and link up these mentors with developing and younger talent. So we can have a good conversation here about second story programs, bio programs, monetization options, and succession planning and how those all sort of play together and what firms are doing to specifically keep those senior advisors satisfied and at their firms through their retirement.
John Olerio
Let's start with second story because it seems like that's gaining in popularity, it seems somewhat contradictory with what we've said, Now, countless times in this podcast, referrals matter. Referrals are important referrals, making bank advisors and credit union advisors stay. Well, once they go the second story, they don't get referrals anymore, but yet they seem to want this. And they seem to thrive in this new realm where they don't need the referrals anymore. So can you help explain the lawyer and why we think it's been successful? And how we, you know, drive more success for the second story type programs. And again, just what drives that contradiction, because it does seem like somewhat of a contradiction, because all of a sudden, they're happiest because they don't have referrals. That's what we thought they really needed.
Chayce Horton
Yeah, of course. So I think, you know, you're completely right, it does seem like sort of a contradiction. But when you think about it on the spectrum of referrals and compensation, we talked to a lot of advisors who get client relationships and client counts far above the industry average from what we see. And so it gets to a point where advisors are willing to, you know, advisors have hundreds and hundreds and hundreds of clients, it gets to a point where they're willing to forego some of those referrals in order to bump up that compensation arrangement. And that's what we see as sort of that late-stage advisor when they've gotten enough clients, maybe there's succession going on among their clients, and now they're advising their clients' children as well in the book is really churning organically to the point where it can grow still without the referrals from the bank. But because banks provide a good environment for advisors, regardless of the stage of career they're in, they want to stay with the bank, they like the bank, and their clients like the bank. And so they want to stay there. But they want to do a little bit more of a trade-off from referrals to compensation, it's about that freedom, really, for those late-stage advisors to be able to make that decision.
John Olerio
So it seems as soon as we get them into the second story framework, where they're excited, and they're doing well, and they're thriving, and they're happier, it's time to think about their succession planning. So this is an ongoing evolution of the advisor at our institutions, as senior advisors transition from second story to retirement. Succession planning, obviously, then becomes what we really need to think about apart I found fascinating in the white paper the expected retirement age differences, which you had already commented on for bank broker-dealers compared to all advisors. Can you give us a little more facts and figures around that and why you think that's the case? And how do we need to plan around that?
Asher Cheses
Absolutely. Yeah. So succession planning certainly is one of the leading topics that came out of this research, I think only three or four of the 20 advisors that we talked to had any type of real succession plan or sunset plan in place. And you know, when we think about the broader industry at large, as we entered earlier, as an advisor, headcount is starting to decline, and the average agent advisor is steadily rising. And our research actually really showed us that nearly a third of bank advisors within the industry, I plan to retire within the next 10 years. So that leaves a very vulnerable talent shortage in terms of succession planning, in terms of advisors transitioning into retirement. And among those advisors that are looking to transition into retirement, a quarter has no succession plan in place. So this is an area that we tried to really dig into in terms of what are the best practices that banks and advisers and be thinking about when it comes to succession planning. And, you know, while there isn't one best answer, I think it comes down to collaboration and communication between the bank and between the end advisor. And we've seen, you know, a number of best practices that have come out of the research is really providing better career pathing options for those late-stage advisors, where they can bring in a younger associate on their team, they can really train that associate and be compensated for that training, and then over time, then get a payback for any assets are any clients that are then moved over to that next-gen or to that next advisor once that senior adviser, retires? So I think, you know, in terms of some of the monetization solutions that Chayce alluded to earlier, you know, one thing that banks can look to do in terms of rolling out a more thought-formalized buyout program for those senior advisors that once an advisor leaves, they're still being paid based on a percentage of the clients that were made with the firm throughout the transition. So it really encourages the senior advisors that have skin in the game, even once they have decided they're going to leave the firm because they have a vested interest in having the practice succeed and obtaining some of those clients as well. So you know, you certainly saw a lot of frustrated advisors who didn't really think that the bank really prioritized succession planning. But now that being said, there are a lot of banks who are starting to really create more formalized programs that are starting to get ahead of this issue. So you know, it is encouraging to see that banks are thinking about this more strategically in nature.
John Olerio
So when you look at someone who's going to retire, the person who takes their place, I would think is very important to that advisor, who should be having the primary input into who their replacement is, isn't the primary input of the bank, is it shared is the primary input of the advisor? And how much does this matter to the advisor? How much does it matter? Who replaces them?
Asher Cheses
That's a great question. The advisors that we spoke to seem to believe that they should have significant influence in that decision in terms of who's taking over their book of business. And I think that also gives them a greater sense of autonomy and say, in the situation where they can actually be involved in selecting who's going to take over their business, and who's going to be their successor. And it can really help reinforce not only their confidence but also in their clients' confidence in staying with that team or that advisor that has been working with the Senior Advisor for some time and not just, you know, a random person who they're meeting for the very first time, which really does not exude a lot of confidence from the bank standpoint. So I think it's very important to give advisors a say in that conversation, so that they can provide their input in terms of who's going to be best to succeed in their business and relate their way of operating with serving clients,
John Olerio
Great. Going back to the data relative to the age, and likely retirement for a bank or credit union advisor compared to all of the channels, what was the specific data there? What is the differential?
Asher Cheses
Yeah, that's an interesting statistic that came out of the research, we found that the dealers are more likely to retire at a younger age of 64, compared to the broader industry at 68. And I think a lot of this has to do with the fact that banks have done a better job attracting those younger advisors that are starting out early in their careers. But it also speaks to a threat that exists within the banks analyze advisors are looking to retire. And those advisors are looking to retire up to five years earlier than the broader industry, yet they are among the least prepared and doing so in preparing for that succession plan.
John Olerio
Excellent. This is interesting, staying on succession planning. So we've got somebody who wants to retire. And that seems to be where we can find a solution for that we make sure we find the person who is right for them, they have involvement, and then we start that transition. But what about somebody who isn't ready to retire? What if they really look at the independent model, where I think people do, you know, sometimes work beyond 70, they just have, you know, lesser involvement, but they still have some ownership or they still have a big stake? But they've got other people that are kind of doing the work for them. That independent type model is something that could ever have some place or traction within a bank or a credit union environment.
Chayce Horton
So I think there is an opportunity for that. And we see, just stepping back, obviously, the trend of advisors looking for independence, especially in the later stages of their career, that trend is alive and well. And we don't see any reason that that trend is going to go away. So I think it really is important for banks to start experimenting with some options for their advisors that are interested in that sort of arrangement. And we talked to a few advisors and a few executives who have some ideas about how that might work. And maybe a few firms that have started to implement some of those options. And they've implemented them and experienced some solid adoption from their advisors. Because like I said earlier, I mean when we're talking about second story programs, these advisors have been in their bank or their credit union for you know, a decade, two decades, three decades, they want to stay, they like their firm, their clients are comfortable with the brand and the services and the interactions. But you know, it is important to offer that independent option in that freedom for advisors. So we have seen that, but it's really like I said, it's sort of an experimental stage, nobody's really solved it or found the best way to go about it. So far.
Asher Cheses
We've definitely seen some banks have success offering those multiple affiliation models. And at the end of the day, it offers those retiring advisors, greater flexibility and determining how they want to go about running their business at the latest stages of their careers. So you know, we have, you know, we have seen some firms that have had success with that multiple affiliation models. And we also are seeing smaller, smaller mid-tier banks that are exploring those affiliation models as well to help train some of those employees.
Chayce Horton
Yeah, and I would just say, for any banks that are looking to implement something like this, you know, it's sort of like you need to crawl before you walk, and you need to walk before you can run. So we see programs like second story programs and starting to formalize succession options is that crawling to walking, but adding these independent affiliation options for their advisors, we really found that in order for those to be successful, the banks and credit unions need to be able to do that crawling and walking, they need to be able to have a fine-tuned second story program, you know, a fine-tuned succession planning option and sort of buyout monetization options first, Asher and Chayce, it's coming to our conclusion time for our time together today, I want to thank you so much, it's been great spending time with you. We, unfortunately, don't have time to walk through every finding of this study, because it's just so rich and informative. But we certainly want to encourage our listeners to take a deeper dive themselves. So I want to encourage everyone to check out the white paper. It addresses so many different things technology stack demands, operational support, branch referrals, compensation, the disconnect between bank wealth management programs, product availability, just again, so many items above what we had time to discuss today. And a very important note, this white paper is free to all and that's sometimes different than what we will do with our BISA research white papers and we will make them only exclusively available to buy some members. But we feel this one is so important that we want to spread the word and we want to get it out there. So again, dig deep into this, download it and send it to a friend as well. Because we really have some great work here, and we want to share it. And we want to make sure that this is just the beginning of some real pertinent dialogue among all of us so that BISA and the industry together come up with better solutions for the future.
Asher Cheses
All right, thanks so much for having us, John and BISA team.
Chayce Horton
Thanks, John. It's been a great discussion and excited to see this get out in the field.
John Olerio
Awesome. And again, thank you for listening today. Make sure you're following the podcast and rating and reviewing it on the podcast platform that you're listening to now. If you enjoyed the show as I said, share it with your colleagues and everybody have a great day.