Research by Money Marketing paints a picture of a buoyant advice market that bucks the trend of doing down the profession.
Advisers are often said to be pessimistic about the future prospects for the sector. They cite a toughening regulatory regime, a shrinking market, rapidly evolving tax policy, and potentially crippling liabilities for bad advice. But our wide-ranging survey points to an advice market in good health and well placed to prove the doom-mongers wrong.
In the latest in our series on the health of the advice market, we take a look at why many advisers are feeling so positive, and how the market can overcome the challenges it is likely to encounter in the face of public scepticism and demographic pressure.
More than 200 advisers responded to a Money Marketing survey looking at levels of satisfaction and optimism.
When asked to place themselves on a scale of one to 10, where one was not enjoying being an adviser at all, and 10 was really enjoying being an adviser, the scores averaged out at eight.
Less than 5 per cent rated their job satisfaction as either one or two, and more than a quarter gave themselves 10.
Advisers see themselves as being highly respected and valued by clients. Our sample shows on a scale of one to 10, with 10 being the best value for money, clients would rate them eight.
Trustworthiness is ranked even higher, with advisers saying clients would give them nine out of 10. Forty per cent of advisers said clients would give them 10 out of 10 for trustworthiness, while 12 per cent said clients would give them the top rating for value for money.
There are plenty of reasons that advisers – and their clients – may be feeling so cheerful about the profession. As markets remain high, recurring incomes are strong, and the pension freedoms and Brexit have only boosted the need for financial planning services.
Ovation Finance managing director Chris Budd believes any pessimism is mainly coming from advisers who have not kept pace with the RDR and the opportunities it brought to the market.
He says: “There’s an awful lot of people who get on with what they do and enjoy it. The complainers are always the loudest, but it doesn’t make them right or the majority.
“I wonder if there’s some advisers still focused on product, what I would call product advice as opposed to planning. That isn’t much fun, and actually there’s a great deal of pressure on the income from that style of advice. Those that have made the move to planning are having a whale of a time; clients are happily writing out cheques for fees.
“We’ve had three people get married and one move job because of us; what’s not to like?”
Getting paid properly
Advisers tend to think they are paid well too. Just 2 per cent rated their remuneration as “very poor”, while 55 per cent thought they were paid “fairly well” and 19 per cent said they were paid “very well”.
Separate research by both Money Marketing and recruitment firm BWD bears this out, suggesting the average adviser is paid around £80,000, with nearly a third earning more than £100,000.
Budd says: “If you are a 50-year-old used to £100,000 a year and 10 weeks’ holiday, you are probably going to say you’re not happy with what you’re now able to earn. But if you speak to a 28-year-old adviser who is getting paid £45,000, they’re very happy.”
But the results highlight a stark difference between how advised clients view their adviser, and how the wider public perceive advice in general. On the value for money test, advisers thought consumers would rate them at five.
A similar discrepancy exists when it comes to what advisers think their clients and the wider public would say about their trustworthiness, with the client rating of nine falling to five among the wider public.
Bradbury Hamilton managing director Sheriar Bradbury says: “Advisers have to convince people they are worth what they are paid. Once the client has been dealing with the adviser for a period of time, there’s a relationship there. The adviser is someone they can trust, they deliver what they are supposed to and clients will value that more. If they have had little dealings with advisers, the experience is either that there hasn’t been much service or it has not been good.”
Budd adds: “There will be a demographic shift in the industry as older advisers who are perhaps still product-oriented start to drift and the next generation, who truly get financial planning and coaching, come through. When they come through, we will start to see the public appreciate the value of planning. Word is getting out there, so there will be more demand, and as demand grows, hopefully so too will the supply of planners.”
Gunning for growth
More than 60 per cent of advisers said they would recommend a career in the advice profession. Just under a quarter said they would not, with the rest undecided.
But amid this positive outlook, there are fears about the lack of new blood entering the profession that continue to play on advisers’ minds.
For example, 73 per cent think there will be fewer advisers in five years’ time. MM research also indicates only half of firms have hired a new adviser in the last five years, although 46 per cent have taken on a new trainee.
Bradbury says a shortage of advisers means salaries have become unaffordable for some firms, and argues the regulatory environment is also not helping to attract potential newcomers.
He says: “More needs to be done to deal with one of the big problems we still face in this sector: we carry too much liability and we carry it for too long. It’s one of the things that pushes up costs, and it’s one thing regulators could do to make being an adviser more attractive.
“There’s not enough new people coming in, and that’s a big problem for the future. Batches of people are steaming towards retirement age. When they are gone how are they going to be replaced?”
Yet the predicted drop-off in adviser numbers is far from certain.
Recent data from Apfa, gathered ahead of its merger with the Wealth Management Association, suggests the number of advice firms in the market has stayed stable for eight years straight.
While the number of individual advisers has dipped from its 2009 peak of 27,080, the market added around 900 advisers in 2016, taking the total back up to 24,761.
The most recent data from BWD suggests the average age of an adviser is 45, lower than frequently quoted mid-50s estimates.
BWD argues the average age of advisers has been helped by an uptick in graduate and academy programmes, as the proportion of advisers under 30 went from 3 per cent to 7 per cent in 2016.
But BWD says this still represents a“minimal flow” of new, younger advisers and should remain a concern.
The Personal Finance Society launched its Aspire development programme in February, where employers can access all six diploma exams, regional events and mentoring for £900 for a new starter, or for free if they are a qualifying small firm.
Chief executive Keith Richards says a stall in Government funding for apprenticeships has meant it had to postpone the programme in Manchester and Bristol. Nevertheless the scheme now has 100 apprentices on its books.
Richards says: “Many firms that were thinking about bringing new advisers into their firms wanted to bring new blood in, but it was easier to get someone who was already qualified. It was a stagnant market because people were just moving from firm to firm.”
Banging the drum
Alongside efforts from organisations such as the PFS, many smaller advisers are taking it upon themselves to promote the profession and work towards building a pipeline of talent.
Less than a quarter of advisers Money Marketing surveyed backed professional bodies such as the PFS and the Chartered Institute for Securities & Investment in the way they are promoting the sector. Nearly half said professional bodies are not doing enough, with the remainder unsure.
We have been a fragmented industry for too long, with a minority often distorting external perceptions of the majority
The picture is worse for adviser trade bodies. Only 7 per cent of advisers said the likes of what was Apfa and new trade body Libertatem did enough to support advice, with 44 per cent saying they were not providing enough support.
Budd says: “The fact we have training courses being created by people like me, Steve Martin, and the Next Generation Planners group, shows there’s a gap that the professional bodies are not providing for. Technical exams only take you so far, and the creation of our own courses for soft, interpersonal skills show the PFS are not delivering what we need.
“The CISI seems to have so far lacked interest in what was the Institute of Financial Planning. The PFS have had no interest in planning in the past, but that seems to be changing, so that’s positive.”
Richards says promoting the value of the advice profession has been moving higher up the PFS’ agenda in recent years.
The PFS launched a campaign for a “united profession” two years ago, which tried to change the way advisers are looked at by outsiders and for the profession to gain a stronger hand in policy discussions.
Richards says: “We are completely committed to raising the visibility of the value of advice. Perception is people’s reality. We have been a fragmented industry for too long, with a minority often distorting external perceptions of the majority.
“When people are venting their anger, justifiable or not, it can often come across as very negative and not as professional as we would want to be perceived. There’s been a culture of pointing fingers everywhere else; if you know there’s a problem you are duty bound to do something about it, not just talk about it.”
He argues while many commentators predicted the RDR would deter consumers once they saw the true cost of advice, in fact “the opposite has happened”.
This is backed by FCA data. A data bulletin published in May shows firms providing retail investment advice services provided 1.2m initial advice services and had over 2.6m clients paying for ongoing services in 2016.
Richards adds demand related to pensions freedoms in particular will continue “long into the future”.
Adviser view: Adam Carolan, financial planner, Xentum
Adviser happiness: In numbers
8: How advisers rate their job satisfaction
8: How advisers think clients see their value for money
9: How advisers think clients see their trustworthiness
73%: Think they are paid “very well” or “fairly well”
73%: Think there will be fewer advisers in five years’ time
52%: Have hired a new adviser in the last five years
46%: Have hired a new trainee
7%: Think trade bodies are doing enough to support the profession
61%: Would recommend a career in advice
Source: Money Marketing research
Notes: Ranks given are out of 10