Older advisors tend to be a firm’s top producers. Advisors build their book over time and become the anchors of the firm’s production. But new evidence from Kehrer Bielan research suggests that many of these more senior advisors are actually underperforming.
As part of our ongoing research exploring data on individual advisors, we tried to isolate the impact of advisor age on advisor production. We found that, controlling for the other factors that influence an advisor’s production—AUM, size and composition of the advisor’s book, branch deposit territory, access to sales assistants, participation in a team—production actually decreases with age.
Access to advisor-by-advisor data enables us to push the edge of the envelope beyond comparing, say, advisors with different years of tenure, advisors who do more or less financial planning, or advisors who do or do not have a sales assistant. We are able to examine how each of the factors in an advisor’s situation combine to influence the advisor’s production. And to isolate the impact of each factor. In other words, not attribute the impact on production to age when it might partly be due to the amount of planning the advisor does, or, most importantly, the advisor’s AUM.
In this analysis, the advisor’s AUM, ROA, number of households actively engaged in planning, age, and how much access the advisor had to sales assistants explained 81% of the differences in production across 1,408 advisors from 34 banks and credit unions. All these factors added incrementally to an advisor’s production, except age. The older the advisor, the lower the advisor’s GDC, accounting for the other factors. Essentially, older advisors tend to underperform, given the assets that they have accumulated.
So they are among your top advisors, yet they are underperforming. Managers are given growth targets and need their most senior advisors to contribute their share of the growth. Fortunately, we’ve learned some things that can contribute to a solution.
Flagging advisor interest in growing their business as they approach the sunset of their careers underscores the value of a succession plan that enables them to back off and yet reap attractive rewards to maintain or grow their books. At a recent Kehrer Bielan virtual dialogue on retaining advisors, WinTrust’s Michael Smyth pointed to the role of advisor teams as a way to help an advisor continue to maintain and grow the business, and provide a route to succession planning.
Forced by necessity to become comfortable with virtual client meetings during the pandemic, aging advisors may begin to see opportunities to serve clients more efficiently than face-to-face meetings, and remotely, even from vacation or retirement homes.
Movement to a second story setting, with no windshield time serving the branches, can also keep the advisor focused on building assets. The data suggest that providing access to a sales assistant will also help and is worth the firm’s investment.
What’s behind the numbers? Join the conversation as we explore fresh insights in advisor performance, and how we can leverage those insights to increase the depth and breadth of client penetration.