Why Financial Advisors Are Quitting The Industry

Why Financial Advisors Are Quitting The Industry

It seems like every other day, I’m reading about a new article released on how many advisors actually stay in their chosen industry.

The statistics? It’s quite a scary one:

  • 90% of financial advisors wash out within three years of their practice. That is 9 out of 10!
  • Up to 70% to 80% of new producers will fail – a very high failure rate.

The main point of the story:

The numbers don’t lie. Although financial advisors have many successes, many don’t last long. Most financial advisors give up on their dreams of building a financial planning practice before they even begin.

But why?

The main drivers of this trend include:

Failure To Land Enough Prospects/Clients

If you look at why advisors leave, not landing enough prospects/clients is high on the list. There are many reasons for this, but one of the main ones is that most advisors don’t have a system for generating leads or closing deals.

No matter how hard you try to weave it, closing deals isn’t easy. Finding the right client takes time, effort, and much rejection. Financial advisors who cannot find new prospects regularly will eventually burn out and move on to something else.

Traditional training methods haven’t evolved much since I started this industry decades ago. Buying leads or cold calling to get new clients can yield results, but they’re also incredibly inefficient if not done correctly.

Advisors need to remember that financial planning is extremely competitive, with many people vying for attention from prospects and clients. If you don’t have a system for closing deals, it will be difficult for you to compete with others who have systems in place.

Pressure To Sell Their Products Or Services

Financial advisors are often pressured to sell the products of their employer or sponsor. This can include stocks, bonds, mutual funds, annuities, insurance, and other investment vehicles that may not be in the client’s best interest. A good financial advisor will put their client’s interests above profits, but some do not.

The reason this leads to not lasting too long in this industry is because you will encounter so many objections if this is the way you approach the business – as a product seller – and more than likely you won’t have a good enough answer to quell the concerns of your prospects.

This is why the main tenet of the Taylor Method’s sales system is to focus on “solving problems” rather than “selling products.” This business becomes 100x easier once you figure this out.

Confusion On How To “Sell”

I’ll be honest with you here: to survive the next couple of years, you must be a salesman.

But to be a good financial advisor, you must not be a salesman.

The fact that this is true makes it confusing for both new and veteran advisors. To survive in the industry, you have to get good at selling. To be successful as an advisor, you must not sell.

I’ll explain:

I’ve often heard people say they don’t like being sold. But what they mean is that they don’t like feeling pressured into making a purchase. And most people would rather buy something if they feel like they’re making an informed decision based on reliable information than if someone pressures them into buying something that doesn’t fit their needs or goals. But unfortunately, this hasn’t been what many financial advisors have been doing.

Instead, we’ve been trying to convince people that they should buy something (and then find out later whether or not it works for them). This approach has resulted in unhappy endings. (This, again, is why I focus on “solving problems” vs “selling products.”)

The truth is that selling isn’t easy. It’s not something we naturally do well as humans — which is why there are so many books and seminars that teach how to start selling insurance and other products.

Lack Of Success With Clients

Financial advisors have a lot on their plates. They must manage client relationships, stay up to date with new regulations, and juggle many tasks from creating investment plans to determining the best insurance and annuity products for clients.

The above picture serves as a backdrop to why many advisors quit – they struggle to deliver the value their clients expect. They don’t have a process or system to follow, so they’re always playing catch-up.

They feel overwhelmed and don’t know how to find solutions quickly. This leads to frustration and burnout, and your potential clients will notice.

The Wrong Mindset – Many Didn’t Know What They Were Getting Into

Many want to be a financial advisor because it sounds like a nice way to make a living. However, few people understand what it takes to be a successful financial advisor. Others thought it was a simple job, but it turned out to be more work than they bargained for.

Here is the thing:

People in this category don’t understand that it’s not about selling products or making money for yourself by putting clients into high-fee investments (which can hurt their returns). Advisors should focus on helping clients build wealth over time by providing advice in their best interest. But many advisors don’t have this mindset because they believe they need to make sales to earn their income — otherwise, why would they be doing this job?

Now, don’t get me wrong. The planning we provide for our clients is worth every penny we earn. But what we earn is a byproduct of being helpful and protecting families and businesses.

The Industry Has Changed With Technology

The traditional role of a financial advisor was as a trusted advisoer who would meet clients face-to-face and provide a level of trust that technology cannot replicate. However, we are witnessing a shift with the advent of Robo-advisors and the proliferation of other forms of digital investment platforms, which have led to increased competition forcing some advisors to look elsewhere for another means of livelihood. That said, the extent to which technological advancement influences low retention rates is still quite minimal if you ask me.

But it doesn’t mean you can’t start utilizing technology to grow your “face-to-face” business. With social media, email marketing, and even online advertising, there are many new and efficient ways to incorporate technology into your practice so you don’t fall behind.

John Norwood
John Norwood is best known as a technology journalist, currently at Ziddu where he focuses on tech startups, companies, and products.