Editor’s note: David Leo is a longtime columnist with Rethinking65. To read more of his articles, click here.
David Leo
After four decades in the financial services industry, I’ve witnessed firsthand one of our profession’s most persistent and troubling challenges: the staggering failure rate of new financial advisors. It’s a crisis that’s been brewing for years, and frankly, it’s one we can no longer afford to ignore. As noted in a previous article, “Why New Advisors Struggle — and How to Overcome It,”, the statistics are sobering.
Cerulli Associates reports that 72% of new advisors fail within their first five years. But if we’re being honest about what we see in the trenches, the reality is even grimmer. Industry insiders often cite failure rates as high as 90% within the first three years. The higher figures align more closely with what I’ve observed over the decades, including the time I spent in the wirehouse environment during the 1990s and early 2000s.
Think about that for a moment: Up to nine out of ten bright, motivated individuals who enter our profession with high hopes and genuine desire to help clients build wealth will be gone within three years. It’s not just a business problem; it’s a human tragedy that affects careers, families, and the clients who could have benefited from their services.
The Perfect Storm Is Brewing
While we’re struggling with this talent-retention crisis, the number of affluent households (those with at least $500,000 in investable assets) is growing by 4% to 5% annually, far outpacing the 0.6% growth rate of the general population. These wealthier households are willing to pay a premium for human-delivered financial advice rather than digital alternatives, but they may be hard-pressed to find advisors who can assist them.
McKinsey forecasts a shortage of approximately 100,000 advisors by 2034. When you combine this projected shortage with the historically high failure rate of new advisors, the conclusion is inescapable: We need a different approach to develop the next generation of financial professionals.
Why New Advisors Fail: The Real Story
Over the years, I’ve conversed with failed advisors, successful veterans and firm managers to try to understand what goes wrong. The pattern is consistent, and it’s not about intelligence or motivation — it’s about how we’re preparing these professionals for success. For a long time, we’ve needed more training that delivers a deeper, more comprehensive approach to preparing the next generation of financial advisors. I’ve observed and participated in such training at times, and I even remember helpful lessons from my own sales training at IBM, dating back to 1967.
So, what’s challenging new advisors and not being adequately addressed through training?
Client Acquisition Burden
I call the first challenge the “client acquisition burden.” We’re essentially asking new advisors to build clientele from scratch while simultaneously learning one of the most complex businesses in the world. Few have adequate expertise or resources to effectively prospect, market their limited capabilities, or build a sustainable client base. It’s like asking someone to perform surgery while they’re still learning anatomy. Trust me, I have been there.
Confidence Gap
Many new advisors lack the self-assurance and comprehensive understanding needed to deliver demonstrable value to clients. I’ve been there, too, in my career. In fact, “Imposter syndrome” has become quite common. According to Boston University, nearly two-thirds (62%) of knowledge workers worldwide experience imposter syndrome. When you’re uncertain about your own capabilities, it’s nearly impossible to establish and grow meaningful client relationships. Clients can sense hesitation, and in our business, confidence is everything.
Extended Learning Curve
Professional development in wealth management is challenging and often depends on experienced mentors for guidance. Data shows that formal mentorship programs are effective at large companies. However, I have seen very few formal, structured mentorship programs in our industry. And the programs that do exist extend the timeline before a new advisor can generate sufficient income to remain viable. Many simply can’t afford to wait that long, and only some firms provide new advisors with salaries over an extended period.
Narrow Training Approaches
This may be the most critical issue. While product knowledge remains essential and is taught, today’s advisors need broader training in comprehensive wealth management, business development, financial planning, and client relationship management. They also need to develop “softer skills” — active listening and effective questioning to understanding prospect needs and concerns, empathy, adaptability, resilience, time management and organization.
Lack of Follow-Through
A landmark 1997 study from Baruch College found that while training alone increased productivity by 28%, adding follow-up coaching to training boosted productivity by 88%. Yet nearly 30 years since that study, professional coaching remains unavailable to most new advisors due to cost constraints or because experienced team members lack coaching skills or sufficient time to coach.
This finding was a revelation for me. It explains why so many well-intentioned training programs fail to produce lasting results. Knowledge without application and reinforcement is like planting seeds without watering them. The information is there, but it never fully takes root.
A New Approach
Eager to help new advisors overcome the six challenges above, I’m now part of a team of industry veterans that is combining structured training with professional coaching to improve new-advisor success. Here are the six core, client-facing processes we focus on, which are practical, day-to-day activities essential to comprehensive wealth management:
Discovery: understanding client needs, goals and circumstances. This is where relationships begin, and it’s far more complex than most new advisors realize. It’s not just about gathering financial data – it’s about delving into clients’ wants, needs and pain points through questions such as. “Tell me about yourself and your family.” “Tell me about your children, parents, siblings, and others that are important to you.” “How do you envision your and your family’s future lives?”
Financial Planning: creating roadmaps to help clients achieve their objectives and future vision. It goes beyond simple asset allocation to encompass comprehensive life planning, risk management and goal prioritization. An icebreaker: “Financial wealth is important but what else is important to you?”
Investment Planning: developing appropriate investment strategies that align with client goals, risk tolerance and time horizons. This requires technical knowledge and the ability to communicate complex concepts clearly. Although there is a lot of talk about investment planning being a commodity, it remains the primary reason why investors hire advisors. Do not diminish its importance. Talk about the client’s investment beliefs and experiences and your investment philosophy, and show why and how your process delivers on their wants and needs.
Implementation: executing plans efficiently and effectively. This is where many advisors struggle — they can create beautiful plans but fail in the execution phase. Our objective is having a written process for the 20% of processes that represent 80% of the work your team does.
Monitoring: tracking progress and making adjustments. Markets change, lives change, and successful advisors stay ahead of these changes. We think it’s imperative to track metrics, record all clients in your client relationship management (CRM) system, and proactively seek client feedback.
Client Review: maintaining relationships and ensuring alignment. This is about much more than quarterly check-ins — it’s about being a trusted advisor throughout your client’s life journey. This process is the single most important process for relationship management. Providing an agenda in advance of meetings and client progress summaries is a great way to show clients your professionalism, prove your attentional detail, and answer the ever present question, “What have you done for me lately?”
The Game-Changer: Training Plus Coaching, and Feedback
We’ve discovered that addressing these six areas through traditional training methods isn’t enough. As mentioned earlier, the real breakthrough in improving new-advisor success rates comes when structured training is combined with professional coaching. To gather feedback, we regularly ask questions such as:
On a scale of 1 to 5, how confident are you that you’re on track to meet your financial goals?
Looking ahead, what is your most pressing financial concern going into the new year?
Is there one area where you think we could do better in meeting your needs?
Scripts like those included in one of my previous articles, “A Better Way to Seek Client Introductions,” can also become a natural part of your protocol without sounding pushy.
In addition, developing a value proposition and creating meaningful differentiation can help new advisors (and all advisors) better compete in an increasingly crowded marketplace.
Additional Benefits
Implementing solid training combined with coaching can greatly reduce new-advisor turnover and, in turn, recruitment costs. In addition, new advisors can begin generating revenue more quickly and robust development programs are also likely to help firms attract higher-quality candidates. Furthermore, a firm’s culture can improve when everyone shares a common language and approach that helps them deliver superior service.
The Path Forward
The financial advisory industry stands at a crossroads. We can continue with the same approaches that have produced failure rates of 70% to 90%, or we can embrace a new model that combines structured training with the proven power of professional coaching.
The question isn’t whether we can afford to implement better training programs — it’s whether we can afford not to. Consider the full cost of new advisor failure: recruitment expenses, training investments, lost opportunity costs, and damaged client relationships.
The next generation of financial advisors, whether they’re young people just starting out or career changers from other industries, deserve better than the hit-or-miss training approaches of the past. They deserve a systematic, comprehensive development program that sets them up for long-term success.
More importantly, the millions of Americans who need quality financial advice deserve advisors who have been properly prepared to serve them. The stakes are too high, and the opportunity too great, to settle for anything less than excellence in how we develop our profession’s future leaders.
David Leo is founder of Street Smart Research Group LLC and senior coach and co-director of content at AlphaScale, a growth-focused coaching and consulting firm for financial advisors and asset managers. During a 30-year career at IBM, he worked as a business processing reengineering consultant and as engagement manager for the financial-services industry. He also spent seven years at UBS/PaineWebber, directly assisting financial advisors with productivity growth. Contact him at David@CoachDavidLeo.com or visit www.CoachDavidLeo.com.
