Joseph H. Clinard Jr. is 76 and spends his days planning for retirement — just not his own.
Mr. Clinard has worked for more than 50 years as a financial adviser, and he has no plans to stop anytime soon, despite the fact that many of his clients have stopped working or soon will.
“I don’t think my wife wants me home, to tell the truth,” Mr. Clinard said.
Many of Mr. Clinard’s peers share his outlook. The average financial adviser in the United States is older than 50, a number that shows no sign of getting lower because relatively few young people are interested in the work. That is creating a problem for Wall Street, which after the financial crisis likes the idea of managing other people’s money more than it did before. As both independent firms and large broker-dealers attached to investment banks try to expand their asset management businesses, they must figure out how to attract and retain a fresh pool of talent that is increasingly looking to find its riches elsewhere.
“All of us in this industry are facing the same dilemma, which is, where is that next generation going to come from?” said Erica McGinnis, the president and chief executive of the AIG Advisor Group, where the average financial adviser is 54. “There certainly are people who are not being served by financial advisers because there are not enough of them.”
Of the 315,000 advisers working in the United States, only 5 percent are younger than 30, according to data from the consulting firm Accenture. Richard Stein, a partner at the executive recruiting firm Caldwell Partners, estimates that half of all advisers working today are within 15 years of retirement.
At the same time, firms like Morgan Stanley and Bank of America Merrill Lynch, which rely on thousands of advisers to serve their clients, have made it clear that they intend to increase their wealth management businesses as traditionally more lucrative operations, like trading, have largely dried up.
“It’s a real problem for them because the only way they can grow their assets under management is by hiring new advisers, and there’s a limited supply,” Mr. Stein said.
As a whole, Wall Street is a less attractive place to work than it used to be for new graduates. Many Americans distrust the banking industry more now than they did before the financial crisis, and the paychecks aren’t as large. Fewer college students want to go into the financial services sector at all, Mr. Stein said. Instead, they are drawn to budding social media and technology start-ups, hedge funds and other fields beyond the financial services sector.
In one sense, that could mean less competition — and more opportunity — for younger people who choose to become financial advisers. But the compensation model has changed as well.
Advisers used to rely on commissions, meaning that they would make money from every transaction executed on a client’s behalf. But the industry has shifted more toward a fee-based model, which pays an adviser a percentage of the money under management. That may be fine for an older adviser who has a large book of clients, but it can be a deterrent for people just starting out in the business.
Big firms say that the fee-based model helps align the interests of clients and their advisers, but it is also contributing to their staffing problem. Big retail brokerage firms are increasingly losing advisers to independent firms, which offer a bigger cut of fees. According to Mr. Stein, more than $100 billion followed brokers from the big firms to independent ones last year.
Complicating the overall matter is a generational issue. Many young people resist the idea of working with advisers close to their parents’ age, and many older clients view 30-something advisers as too inexperienced.
“Advisers tend to attract people that are within a range of their own age,” said Mr. Clinard, who co-founded North Ridge Securities, an independent broker-dealer based in Melville, N.Y., more than 20 years ago. “I just think the experience level is more important to older people than it is it to younger people.”
The growing amount of money under management has added to the sense of urgency among the large brokerage firms, which also face competition from a plethora of cheaper digital options, like E-Trade and Charles Schwab, that allow people to manage their own investments online. As the baby boomer generation enters retirement, there are more potential clients — and more competition for them.
“The urgency is really the fact that there are more clients retiring than there are advisers who can cover them,” said Racquel Oden, the head of new adviser development for Merrill Lynch Wealth Management.
Last year, AIG Advisor Group had more advisers older than 80 than younger than 30, according to one former top Wall Street executive who met with the company’s management. According to Mr. Stein, only 4 percent of all financial advisers working today are younger than 30, while 32 percent — the largest group — are 50 to 59. Mr. Stein said that a quarter of advisers are 40 to 49, while 18 percent are 30 to 39.
But AIG and the other firms are trying to buck that trend.
“We realize we needed to start earlier introducing individuals to the wealth management business,” said Ms. Oden at Bank of America Merrill Lynch. This summer will be the first year for an intern program for financial advisers.
Big banks are also seeking to improve the compensation situation. Bank of America and others are offering a base salary to newer advisers, for example, to help them get started.
AIG is focusing more outreach on women and minority groups, which has an added advantage because they are making up an increasing percentage of its clients.
“As the client demographic shifts, I want to have a sales force that mirrors what our client base looks like,” Ms. McGinnis said. AIG says it now has “significantly more” financial advisers who are younger than 30 than older than 80.
Other large advisory firms are also focusing their recruitment efforts on diversity, which executives say will help relate to the needs of a changing customer base.
Firms try to recruit more aggressively, but the talent pool has limits. Many of the robust training programs that used to churn out a steady supply of fresh financial advisers no longer exist, and the ones that do still face high turnover rates that have always been a hallmark of the industry.
For example, Bank of America has more than 3,000 people in its adviser training program. Of those, only 35 percent will graduate into the firm, Ms. Oden said. She said that the graduation rate still beat the industry standard of 25 to 30 percent and that the bank was trying to push that figure as high as 50 percent.
In general, as many as half of all trainees won’t stay with their firms after five years as many cycle out during times of economic downturn.
“Everyone is looking to get rid of their bottom 20 percent of people on a yearly basis,” said Mr. Stein, the recruiter from Caldwell.
Morgan Stanley, the largest retail brokerage firm by employees, had 20,000 brokers after it agreed to buy Smith Barney from Citigroup in 2009. That number has since dropped to 16,000.
Mr. Stein and others say that the well-documented technology issues Morgan Stanley had after the merger contributed to the exodus. But a spokesman for Morgan Stanley, Jim Wiggins, said that the firm offered retention bonuses to keep only its top-performing advisers. Mr. Wiggins declined to say how many advisers were offered such packages
“Adviser attrition at Smith Barney actually slowed after formation of the joint venture,” Mr. Wiggins said in an email. “Head count over the past two years has been quite stable at 16,000 and change.”
No one works forever, of course. Mr. Clinard says that he’s working on a succession plan.
“I have a good backup person that works with me,” he said. “They’re going to carry me out of here feet first.”