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Are Advisors an Endangered Species?

A headline on the cover of the latest edition of BISA Magazine about bank advisors caught our eye.

Behind their question is the recent decline in the number of Financial Advisors working in banks and credit unions. The article proposes that short-term drivers for this drop may be increasing competition by wirehouses for reps and disruption from the ongoing debates about Fiduciary Rule.

Alleged longer-term drivers for the decline in advisor numbers are the upward trend in robotics and artificial intelligence (AI) and the advanced median age of bank advisors.

But according to the article, some industry experts view the prospects for advisor growth within banks optimistically, for at least three reasons:

1. Many banks have a cadre of licensed reps on their retail platforms who are eager to graduate to higher-value customers.

2. Recruiting and training in wirehouses is on the rebound, which means there’s an increasing number of well-trained reps who could migrate to banks to access the built-in bank client referral stream – a more attractive prospect for brokers that prefer to mine an existing book of business versus building their own book from scratch in a traditional brokerage model.

3. Some highly successful advisors come to banks because they’re weary of or skittish about having to manage compliance and adapt to changing technology. Better, in their view, to let the bank take care of it.

Aside from these reasons for potential growth, we also think the fear of robo-technology and AI is overblown. There is little evidence that advised clients are moving toward robo. In fact, robo-providers are quickly integrating advisors into their offering to serve clients who need that personal touch. The growth in robo seems to be a shift in how the clients already served through direct models access advice. For the near future, we believe that clients who currently have $trillions with advisors are not at risk of defecting to the robo-advisor world.

Customers tend to trust their banks, and many of them transfer that trust from lending and retail products to wealth management. Likewise, many very good advisors prefer working within a stable, trusted institution. It often makes for a good emotional fit and good chemistry. Which is why bank advisors can probably be taken off the endangered watch list, if they ever were there in the first place.