Quantifying the Risk of Losing a Financial Advisor

The concern about losing an advisor has focused on the risk that advisors who leave the firm will take clients with them.  Risk mitigation efforts have focused on the top producers, who are often the most tenured.  But a far greater cost of advisor attrition is the production that is lost when the advisor departs.  Any advisor.


Quantifying the Risk of Losing a Financial Advisor

The advisor’s replacement rarely is available immediately, and once the new advisor is on board, his or her production is generally less than the former advisor’s gross revenue.  So, the firm loses the difference in revenue between the original advisor’s production and the new recruit.


Moreover, that gap continues year after year.  While the new advisor’s production ramps up, the former advisor’s production would have grown as well. Advisor production generally grows with tenure.  On average, the gap in production fluctuates, but it never falls to zero.


So, the cost of an advisor’s attrition is the cumulative loss in production over the course of the former advisor’s career.


The proposed study will quantify this loss of revenue for advisors of different tenures and demonstrate that the lost revenue from advisors of virtually every tenure is roughly equivalent —$2 million dollars on a present value basis.  The study will help investment services directors in financial institutions convince reluctant institution management to invest in advisor retention and business succession plans.


We will analyze data from the Kehrer Group proprietary database of 2,993 individual advisors from 165 banks and credit unions, including their age and tenure, client book, size of their branch territory, AUM and its composition, production and its composition, access to sales assistants, and whether they are part of an advisor team or are a second story advisor.  While we will focus on the relationship between gross revenue and tenure, we will be able to control for differences in other factors, and segment the analysis for different kinds of advisors, e.g., transactional vs advisory focused.


Sponsorship fee:  $25,000.