IFAs are becoming an endangered species – or at least an increasingly elderly one. IFAs and recruitment agencies agree that finding new IFAs is becoming more and more difficult. But while the industry recognises this shortage, firms are reluctant to recruit graduates. Instead, they are all trawling the same ever decreasing pool of qualified and experienced advisers.
The average age of an IFA is over 50 and the traditional recruitment source of the life offices is drying up. So reluctantly, IFAs are facing up to graduate recruitment.
“IFAs are getting older and older, with many due to retire soon. A big gap in the market is developing. It is accepted that there is a need to get new blood in,” says LFI recruitment agency senior recruitment consultant Ken Roberts.
DBS Network spokeswoman Sue Lewis says: “There is a strong case for graduate recruitment. Some graduates will find it hard to get into the sector and yet there is a shortage of IFAs.”
Aifa director general Paul Smee says the association has recently conducted research into why graduate recruitment is not attractive to IFAs but he will not be drawn on the results.
IFAs are moving inexorably towards greater professionalisation. Unlike solicitors and accountants, there is no industrywide graduate recruitment and training scheme for the industry.
But Smee believes introducing such a training scheme would be “going far too far”. However, some of the bigger networks are planning to contact universities and would like to set up a work placement scheme. This would still fall short of a formal graduate programme.
Given the regulatory burden, the cost of training a graduate acts as a big turn-off. Lewis says: “The sector is so heavily regulated that you need to have FPC3 before you can practise and that, together with the years of supervision that the regulator requires, make it a costly exercise.”
It is the bigger IFAs that are willing to recruit graduates. Roberts says: “Smaller firms are less likely to take on graduates, not just because of the cost of training but also because their reputations are built up on personal recommendations and working relation- ships built up over many years. They do not want someone young coming in and potentially ruining things.”
At present, the most usual entry into the profession is as a paraplanner. They can end up doing everything, bar face-to-face work with the client.
Commonly, the adviser will see the client and then the paraplanner does the research, the reason-why letter, gets illustrations and prepares everything for the adviser to present back to the client. But this experience does not form part of a official traineeship, as it would with solicitors, for instance.
But even with paraplanners there is a bar to graduates. DBS Network, for instance, will only recruit paraplanners with a minimum of FPC1 despite the fact that PIA rules do not require paraplanners to have any qualifications.
Another perennial concern is that after lavishing expensive training on a graduate recruit, the newly qualified IFA will leave. Roberts says: “There is always the risk that people will get trained and then move on. But that is the same with all financial services. If you do not take the risk you do not get the reward.”
Without an industrywide graduate training scheme, the few graduates who are trained will be prime candidates for poaching. Perhaps the solution is more graduate recruitment rather than less. As IFAs continue the current trend of consolidation and grow bigger, the costs of graduate training could become easier to bear.