International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, February 24, 2015

JD Graduate Careers? financial advisers count falls fifth straight year because no replacements for retirements

Reuters reports - The number of U.S. financial advisers fell for the fifth straight year as the industry suffers a continuing wave of retiring veteran advisers ... 

There were roughly 285,000 financial advisers in 2014, a 1.9 percent drop from 2013, according to a report by the Boston-based research group Cerulli Associates. The industry has lost more than 39,000 advisers, roughly 12 percent, since its peak in 2008, when there were 325,000 advisers.

Nearly half of all financial advisers are over the age of 55. Over the next decade, Cerulli expects nearly 100,000 brokers will retire.

A 2014 study by Cerulli Associates found more than one-third of U.S. financial advisors (cited by ThinkAdvisor) plan to retire over the next decade, and more than 237,000 new financial ThinkAdvisorprofessionals will need to be added to keep up with the demand of retiring baby boomers.

Are there opportunities for law graduates within wealth management and financial advisory? 

“The 10,000 baby boomer that reach retirement age each day in America are waking up to the probability that they will outspend their retirement plan designed twenty or thirty years ago, forcing a drastic reduction in quality of life style for the ‘golden years’” revealed William Byrnes, author of National Underwriter’s Tax Facts Library.  Cerulli Research Finds 53% of Advisors Clients are between 50 and 70 Years Old."

Cerulli suggests firms encourage advisor teams to bring in junior advisors and train them in a specific area of expertise in order to increase the success rate of these new recruits. To guard against asset attrition, broker/dealers and custodians need to provide support and resources to help advisors tackle succession planning, and development of internal succession candidates.

Increasing pool of retirement clients, high net wealth individuals, and wealth transfer

“By example, social security increases since Ronald Reagan’s presidency, when many Baby Boomers crafted their family retirement plans, did not keep up with the actual inflation.  Also, baby boomers are outliving their retirement plans by ten or more years”, continued William Byrnes.  “Stretching the retirement savings available for an additional twenty years of life expectancy requires correctly managing the complex retirement taxation rules established by Congress and the IRS."  

Are law graduates prepared to be these advisors?

Robert Bloink added, "Lawyers are just as apt to this advising as accountants and financial planners, but most law students skip over courses in the wealth management field that will prepare them for such positions with firms.”

IRA rollover contributions have reached well over $300 Billion.  Thus, generally baby boomer clients have IRA questions: How are earnings on an IRA taxed? What is the penalty for making excessive contributions to an IRA? How are amounts distributed from a traditional and from a ROTH IRA taxed?  How is the required minimum distribution (RMD) calculated?”

“By example of managing the retirement taxation rules, if the baby boomer engages in a prohibited transaction with his IRA, his or her individual retirement account may cease to qualify for the tax benefits.  Thus, then baby boomer needs to understand what is a prohibited transaction?  When can the baby boomer tax pull retirement funds as a loan from a retirement account or policy without it being prohibited?”

"But very few law graduates that my company interviews studied advanced planning and thus can't sit down with clients to address these tax and financial advisory questions." 

What must law graduates know for these careers?

“For complex modern families with multiple marriages and various children, a retirement and estate planner should analyze the non-probate assets”, interjected George Mentz, Esq. of the American Academy of Financial Management which is mentioned as an association for information on the Department of Labor website.  “Such assets may include the client’s 401k, 403b, 459, annuities, property and joint tenancy, among others.  Regarding insurance policy designations, the client may need to reexamine the beneficiaries, contingent and secondary, and percentages among them, based on current circumstances.

"If law students want a career as a financial advisor or financial analysts-wealth manager, they need to have followed a tailored wealth manager curriculum that, at a minimum, will allow then to both pass a Series 7 after the Bar and to understand wealth planning.  Until that happens, these advisor positions will continue to go to MBAs who have more opportunities to follow either financial planning or wealth management curriculums.”

“Because client’s are outliving their life expectancy and thus outliving their retirement planning, and medical expenses certainly factor into retirement planning, long term care for family members must also be addressed,” said William Byrnes.  "Thus, students interested in these positions need to take estate planning and retirement planning seminars during law school."

“Moreover, recent press has focused client’s attention on tragic incident and end of life issues, such as a durable power of attorney for health care (DPA/HC), living will, or advance directives that explain the patient’s wishes in certain medical situations.  Finally in this regard, a client may require a Limited Powers of Attorney to address situations of incapacity, as well as orderly continuation of immediate family needs upon death.  Again, these are issues that are perfect for an attorney to advise upon." 

Robert Bloink included, “Other important issues to address with the client include pre-marital property contracts/pre-nuptials involving the second marriage(s), IRA beneficiary planning in blended families, spousal lifetime access trust (SLATs), and planning for unmarried domestic partners.”

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