Is financial advisor saturated? (2024)

Is financial advisor saturated?

The financial advisor space is saturated. If you're a financial professional, developing a strong marketing plan is crucial to gaining more clients.

It's an excellent field for those with a dual interest in numbers and helping others. This is a saturated, yet always-growing industry with a reported 330,300 financial advisors in the United States alone.

More recently, a decline in the ranks of advisors appears to be more a result of advisors retiring than firms cutting back, with virtually all wealth management firms lamenting that demand for advisors far outstrips supply.

The good news is that the employment outlook for personal financial advisors appears bright, with an expected 15% growth rate through 2031. However, rapid advancements in technology and shifting demand for advice among consumers may necessitate a new approach with regard to how advisors work.

Financial Advisory Services Market size was valued at USD 85.1 billion in 2022 and is projected to grow at a CAGR of over 5.5% between 2023 and 2032. The rising investments in AI are significantly boosting the market growth.

The most common reasons financial advisors quit are lack of fulfillment, difficulty finding clients, and burnout. Over 90% of financial advisors do not last three years, which means that there is a very low retention rate for financial advisors. To be a successful financial advisor, you need to be able to close a deal.

What Percentage of Financial Advisors are Successful? 80-90% of financial advisors fail and close their firm within the first three years of business. This means only 10-20% of financial advisors are ultimately successful.

Understanding Millennial and Gen Z Preferences

Not only are they more inclined to use a financial advisor, but they are also more likely to bring a larger share of wallet to that relationship as 66% of Millennials and Gen Z want to consolidate more assets with their primary advisor, compared to 19% of Baby Boomers.

While AI technology may be rapidly transforming the financial sector, it is highly unlikely that human financial advisors will become obsolete anytime soon. The future of this industry lies in a combination of AI-driven solutions and human expertise — the ideal blend of tech-powered precision and personalized advice.

A recession might hit financial advisors hard. But the ones who are giving real value to their clients may be spared. That's because the field is changing, and its evolution will really affect the job market for financial services.

What is the long term outlook for financial advisors?

The Bureau of Labor Statistics projects 42,000 new financial advisor jobs will be added from 2022 to 2032. That will increase the total number of positions 13% over the decade from 227,600 in 2022 to 369,600 in 2032.

According to various studies and publications, the average age of financial advisors is somewhere between 51 and 55 years, with 38% expecting to retire in the next ten years.

However, being a financial advisor isn't always easy. They face challenges like keeping up with changes in financial laws and regulations, understanding new investment tools and technologies, and meeting the high expectations of their clients.

The highest salaries for financial planners are in Connecticut, Maine, Rhode Island, New York and New Jersey. States such as the District of Columbia, Florida and North Carolina offer high salaries for financial advisors because of the large number and high concentration of financial companies in these states.

Of high-net-worth individuals, 70 percent work with a financial advisor. You can compare that to just 37 percent in the general population. What's more, far and away, wealthy people consider financial advisors to be their most trusted source of financial advice—more than four times any other source.

Here are some common reasons why financial advisors may struggle or fail: 1. Lack of Prospecting, The Number1 Reason: Financial advisors who don't consistently seek new clients through effective prospecting methods will struggle to build a robust client base.

Cons of Being a Financial Advisor

Building an advisor practice and growing a client base may be challenging. Completing the necessary requirements to get certified and licensed can be time-consuming and costly. Working hours are often long, particularly in the early stages of growing an advisor business.

Financial advisor stress is real, and you're not alone if you feel the pressure. According to a survey carried out by Financial Planning Association, Janus Henderson, and Investopedia: 71% of advisors have experienced moderate or high levels of negative stress, compared to 63% of investors.

Are financial advisors depressed?

An astounding 67% of advisors experienced some level of depression, with 17% of them reporting they were depressed “most of the time or all of the time.”

Additional insights - Financial Health

While just over half of Gen Z (52%) feel confident that they're on track to meet their financial goals, fewer than half (48%) are fully or even mostly financially independent. However, Gen Z still feel able to handle everyday financial activities.

For all those reasons, billionaires typically rely on a team of financial experts, including tax specialists, estate planners, investment strategists and security advisors, to navigate their financial landscape effectively.

Not everyone needs a financial advisor, especially since it's an additional cost. But having the extra help and advice can be paramount in reaching financial goals, especially if you're feeling stuck or unsure of how to get there.