The current economic downturn has led to a decline in assets under management and a corresponding drop in revenue for firms in the financial planning and advice industry. It has also led to a reduction in new potential revenue inflows into funds under advice due to a projected decline in disposable income. Since industry profitability and financial advisor productivity (due to spending more time reassuring clients) are expected to decline, experienced financial advisors currently are in very high demand.

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Experienced financial advisors are in high demand since they are more productive, generate significantly lower training costs, and have higher assets under management. They also are more likely to receive new revenue inflows of funds from new clients seeking better asset management and from baby boomers seeking retirement and estate planning services.

Most importantly, experienced financial advisors generate large amounts of revenue from well established client bases by providing complex services to both high net worth and corporate clients – market segments that generate over 57% of the US financial planning and advice revenue.

Although employment in the financial planning and advice industry has been growing, a shortage of experienced financial advisors exists; due to factors such as industry recruitment cut backs in early 2000 and retirement. As a result, consolidation within this industry has been taking place since firms determined that it was more desirable to acquire advisors through an acquisition than hire and train more inexperienced advisors with fewer clients and lower assets under management.

Recently, consolidation has also occurred to reduce costs via greater economies of scale due to the addition of teams (groups of advisors serving clients), call centers, and/or online access to advisory services. Since the fortunes of this industry are tied to the wealth of the population (which is expected to take time to recover), what else can firms do to control costs and overcome a shortage of experienced financial advisors during this period of declining revenue?