The financial advice industry is thriving, but a talent crisis is looming as the pace of advisor attrition outstrips the number of new entrants. However, there are misconceptions which, uncovered, could help the sector boost its recruitment success, according to a Fidelity study.

There is a talent shortage in the RIA and broker-dealer sectors, executives in these fields say, according to a survey that flags the need for firms to “think outside the box” when recruiting.

The poll – taken at Fidelity Institutional’s Executive Forum in Arizona last month - found that while most organizations are using “standard” methods of recruiting, many are starting to recognize the need to cast a wider net when looking for candidates, and 72 per cent believe their industry's talent pool is shrinking.

However, the “real issue” with the perceived talent shortage is in part down to a lack of awareness and understanding of the financial advisor role among younger prospective employees, Fidelity said. For example, many students underestimate the value of the “softer” skills required, such as helping clients navigate significant life hurdles, while others also think sales activities are a major part of the job, even though financial and investment planning activities tend to dominate.

In terms of how industry players are fishing for new talent, the survey found that 61 per cent of respondents rely on traditional methods of including referrals and world-of-mouth, even though just three in ten new hires actually come from referral networks, according to Fidelity's Recruiting Redefined study. Other top sources of new talent cited by respondents were internal recruiting staff and networking at professional/industry events (both 40 per cent).

By contrast, Gen Y (or Millennial) candidates are increasingly using online tools such as social networking sites and student/alumni directories when looking for jobs, which Fidelity believes may be an under-used resource for firms.

“Competition for good talent is intensifying,” Fidelity said. “As firms look to attract younger professionals, it will be important to reach beyond traditional sources to find new hires.”

Results from the poll suggest that executives in the RIA and broker-dealer industries are in fact increasingly recruiting advisors from outside of the financial advice arena.

“Some of the professions are ones we've heard before, such as accounting and law, but several firm leaders cited human resources, military and even education, as sources for talent,” said David Canter, executive vice president of practice management and consulting at Fidelity Clearing & Custody. “So we're seeing firms thinking outside of the box when it comes to finding the right candidates to serve their clients.”

“Some of the best recruiting strategies we've seen have nothing to do with the act of recruiting itself, but originate from the core of the firm,” Canter added. “It's about distinguishing their firm from all the rest through their mission, their values and their strategic priorities. We've seen several firms use those key differentiators to their advantage in their recruiting efforts.”

Indeed, among those firms looking to differentiate from their competitors, culture (66 per cent), brand/reputation (47 per cent) and organizational growth (35 per cent) were cited as top tactics.

Fidelity’s findings reflect wider industry concerns over an aging advisor workforce, with total headcount having shrunk for a fifth consecutive year, according to Cerulli Associates' Advisor Metrics 2014: Optimizing Distribution Channel Resources report. (That said, the research firm noted that the RIA and dually-registered channels were the only segments to have increased headcount during this time). Meanwhile, fewer executives switched jobs last year than any other since 2009, in a sign that employers will need to be more aggressive and strategic with their recruitment endeavors in 2015, according to The Kathy Freeman Company’s Sixth Annual Executive Survey of sales and marketing leaders in sectors such as wealth and asset management (see more here).