(This article was originally published Wednesday.)

 
 
   By Matthias Rieker 
 

When Megan Rowe studied finance at Georgia State University, she though she might end up as a research analyst. But she wanted to work with people as much as in finance.

That's where Cornerstone Advisors Group LLC came in. In May 2010, while still in school, she started a mentorship program at the Atlanta financial advisory firm. The career "literally found me," Ms. Rowe says, and it turns out "it was right up my alley."

Now a graduate, she is preparing for her securities and insurance brokerage licenses, with some product, portfolio and customer-service training already under her belt.

The advisory industry needs a lot more stories like Ms. Rowe's. Most veteran advisers are turning gray and getting ready to retire, and there are too few young replacements. "The industry is really facing a cliff," said Kim Guimond Dellarocca of Pershing LLC, which provides custodial and other services to investment advisers.

"In 10 years...it's very possible that the demand for financial advice is going to outstrip the number of qualified people who can deliver it," said Ms. Dellarocca, head of practice managment at Pershing, which is a unit of Bank of New York Mellon Corp. (BK).

Pershing and FA Insight, a Tacoma, Wash., research and consulting firm, estimates that the industry needs 237,000 new advisers within the next 10 years to keep pace with market demand as well as replace those retiring. An average of about $850 billion in new investable assets will come available each year over the next decade.

The firms' research counted 329,000 advisers in 2012; the average financial adviser is 50 years old.

"There are about three junior advisers for every five lead advisers" right now, said Dan Inveen, FA Insight's director of research, illustrating the shortcoming the industry is facing. That is "an insufficient replacement pool for those soon-to-be-retiring lead advisers," he said.

Big firms have long trained advisers and some, like Bank of America Corp.'s (BAC) Merrill Lynch, have expanded the program in recent years. The three largest brokerage firms, Morgan Stanley (MS), Wells Fargo & Co. (WFC) and Merrill Lynch hired a combined total of almost 3,300 trainees this year. They currently employ almost 46,000 advisers.

Smaller firms are starting to realize the challenge. "When I first started to go to financial planning association meetings 20 years ago, I was the youngest person in the room," said Cornerstone's president, John Locke, who is 47. "Today, in many cases, I am still the youngest person in the room. There is no one behind me. It's frightening."

He set up his firm's mentorship program three years ago. It is designed for would-be advisers who start while still in college, and offers roughly five years of training.

Ms. Rowe heard about it from a sorority sister. She started with administrative jobs, then moved on to schedule client meetings, do billing, help to set up accounts, and follow up with clients on brokerage sales.

After graduating from Georgia State earlier this year, she started sitting in client meetings. In biweekly mentor meetings with Mr. Locke, she learned industry basics like the differences between classes of mutual fund shares and working with Individual Retirement Accounts.

In the third year his trainees participate in discussions about a client's financial goals. "No selling at that point, pure planning," Mr. Locke said. The pressure to produce revenue comes only as the mentorship ends. "At the five-year point, they can fly on their own," he said.

Brent Brodeski, the chief executive of Savant Capital Management, a Rockford, Ill., investment advisory firm, designed a training program that grew out of the firm's summer internships, mostly for local college students.

Early next year, three trainees will spend about two years in what he calls an "adviser accelerator program," rotating through areas of the firm's businesses like financial planning, investment research, trading and operations. The training continues in junior adviser positions, where trainees gain experience with clients.

Three to five years is an ideal time period to establish to get the next generation fit to give financial advice, said Craig Pfeiffer, the founder and chief executive of Advisors Ahead LLC, a firm that prepares students for a career as financial advisers.

Too many big firms "don't have the patience for that," he said. "In financial services, for some reason, we throw them into the pool in a sink-or-swim basis."

Advisers in training at large firms can be expected to produce at least some revenue after between five months at Morgan Stanley, seven months at Merrill Lynch, and 29 months at Wells Fargo.

Mr. Locke and Mr. Brodeski said the training programs pay off for the firms even without the interns generating a book of business. Mr. Locke decided in 2011 to double his firm's revenue in five years and, thanks to the help from his trainees, he now expects to reach the goal one year earlier. That's because the trainees have helped free him from administrative tasks so he can spend more time on clients.

"If I hire three or four of those individuals, it'll cost me $200,000, $250,000 all in." Mr. Brodeski calculates. "I am going to get way more than that value through higher productivity of my senior people."

 
 

Write to Matthias Rieker at matthias.rieker@dowjones.com

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