There is one gaping cavern being quietly ignored right under the noses of the very professionals tasked with managing long-term wealth strategies: the Age Gap. Leanne Williams, Managing Director of Financial Solutions, shares her insights.
The internal demographics of the financial services sector show a distinct lack of age diversity compared to the wider UK labour market. The industry heavily favours mid-career professionals while losing out on younger talent and pushing out older experts.
According to data from the Financial Services Skills Commission (FSSC), the industry suffers from a severe hollowing out at both ends of the age spectrum. A massive 55% of the financial services workforce is concentrated between the ages of 31 and 50, meaning the sector employs significantly fewer young (16–24) workers.
The same data suggests the sector also fails to retain 55+ year old workers. Consequently, it’s projected to lose over 260,000 highly skilled workers by 2035 purely through retirement and attrition.
Succession Gap
The problem is being fuelled by a widening Succession Gap.
In recent conversations with adviser’s looking to breakaway, there’s a growing disparity emerging between what corporate principal owners plan to do with their firms when they retire, and what the ambitious advisers sitting across the office think is going to happen.
If you’re an adviser in your late 30s or early 40s, you’ve likely spent the last decade building a loyal client base and assume you are the future of the firm. But the data shows a very different picture.
The average age of a financial adviser in the UK is now estimated to be around 57 years old, and, according to M&A broker Gunner & Co., 51% of IFA business owners expect to exit within the next two years.
Importantly, the same survey highlights that 66% of principals are looking to sell their businesses externally. Research from ValidPath revealed that just 31% of adviser principals consider succession planning as vital, and a mere one in ten treat it as a central part of their business strategy.
The last few years have seen an unprecedented era of consolidation in the advisory market. Driven by private equity investors willing to pay premium multiples for high-quality, recurring-revenue assets, the traditional, slow-burning internal Management Buy-Out (MBO) or Enterprise Ownership Trust (EOT) has lost its luster for retiring founders.
It should be noted that with 46% of UK advice firms operating as solo practices, a lack of internal capacity often delays succession planning until retirement is imminent, and consolidation might be their only option.
If the investment and wealth management industry wants to attract, encourage, and support the next generation of talent, it must first fix the broken ladder at the top. We cannot build a sustainable pipeline for twenty-somethings entering the profession if the thirty- and forty-somethings currently running the engine room are being locked out of the future.
The knock-on effect
This structural preference has a devastating impact on the broader talent pipeline. When young graduates or career-changers look at their career, they want to see a clear path to autonomy, purpose, and structural equity.
If the ultimate reward for a decade of “sweat equity” is simply becoming an integrated employee in a corporate consolidator, the allure of the profession fades. The brightest young minds will choose tech, entrepreneurship, or alternative industries where ownership is a realistic destination, rather than an illusion.
How to rebuild the pipeline
To reverse this trend and better attract younger people into the profession, the wealth management industry needs a structural and cultural overhaul.
1. Champion alternative succession structures
To be fair to business owners, there is a growing appetite for alternative routes. Driven partly by regulatory pressures like Consumer Duty, which stipulates that external acquirers must integrate clients without disrupting their propositions. MBOs and EOTs have seen an uptick, climbing from 9% to 14% of preferred strategies of late. The industry must champion these models, providing better funding mechanisms to make internal transitions financially viable compared to PE cash.
2. Radical transparency
Firms must replace vague promises with structured, transparent career pathways. If a young professional enters a firm at 22, they should know exactly what milestones lead to equity by the time they are 35.
3. Cultivate entrepreneurship
Younger generations are inherently entrepreneurial. If adviser firms treat young talent merely as administrative support to handle regulatory burdens, they will likely leave. Firms should offer mentorship that balances portfolio management with client relationship building and business development.
Building the future
The next ten years will define the future of financial services. For mid-career advisers caught in the Succession Gap, waiting for a transition that data suggests may never come is no longer a viable strategy. And that simply won’t attract a younger, more entrepreneurial generation either.
It is time to have uncomfortable, transparent conversations with principals about where the equity is really going.
If they evade the question, the next generation of wealth managers might just decide that instead of waiting to inherit a business, it is time to exit the gap entirely and build their own.
In doing so, they will create the exact forward-thinking, equity-sharing firms that today’s bright young generation are actually looking to join.
Leanne Williams is Managing Director of Financial Solutions
