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Tackling the crisis in adviser recruitment

Hegarty, Tom_700x450

For at least the past decade, there has been a growing awareness that the financial services sector is facing a seemingly unsolvable problem: there are fewer advisers joining the industry than there are leaving.

As well as the obvious average age of advisers, there have been wide and varied reasons suggested for why this is the case. It is unlikely there is just one driver behind the decline but the numbers speak for themselves. In 1998 there were over 250,000 advisers; now there are fewer than 25,000.

While finding a remedy is more important than endlessly trying to determine the root cause at this point, a recent survey we undertook found around 70 per cent of advisers came from insurance companies or tied salesforce backgrounds, where training and development was provided on a wide scale.

The skills taught to those who went through this form of training covered technical product and market knowledge, as well as soft skills, business development and commercial capabilities.

There are some organisations operating today that offer similar training routes, but they have a much reduced capacity for intake than in previous years. Moreover, such organisations are almost certain to require funding from a sponsor or the individual trainees themselves. This funding is not always viable, so its great to see an adviser apprenticeship scheme has recently been approved.

Ironically, recognition of the value of independent advice has grown over the same time as this decline in new recruits. Advice has seen the lowest complaints record of any form of financial activity this year, with recognition of the benefits coming from both the Government and the regulator.

While the adviser community is not without its troubles, awareness of the quality of the service available from advisers is currently very high. But the number of advisers to whom people can turn is growing smaller.

It is impossible to see how the advice gap can do anything but grow if the situation continues. To prevent it from getting worse, we need to promote the financial services profession to those who might consider it as a future career.

That statement may immediately bring to mind images of students and graduates, but what about those moving on to second occupations, such as ex-armed forces or professional sportspeople?

It is impossible to see how the advice gap can do anything but grow if the situation continues.

The cost of getting it wrong

A reduction in the size and capacity of the advisory market would be detrimental to the public, financial services and society as a whole. This is why the work to promote and recruit into it needs to be a joint effort between those with a keen interest in it: providers, nationals and networks, distributors, professional bodies, the Government and the FCA.

Our survey also found over 90 per cent of advisers did not believe the industry was doing enough to attract and support new blood to the profession.

Entry straight to adviser level is not the only route for trainees. Other options include starting off as an administrator, paraplanner or mortgage adviser – all areas in which apprenticeship funding is currently available.

Any of those options would get someone on the ladder to becoming an adviser and build the soft skills that are so difficult to pick up through academic routes. It would also be a useful exercise for employers and trainees to assess progression.

Tackling the widespread issues that spring from a falling number of advisers cannot be done quickly, or by one person or group. We need to find a profession-wide, collaborative method of promoting the sector as an attractive career choice.

Tom Hegarty is managing director of the New Model Business Academy



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There are 32 comments at the moment, we would love to hear your opinion too.

  1. Employers need to look long term and beyond the initial costs. Sadly I do not believe that many are thinking much beyond their bank balances, with a few notable and worthy exceptions.

  2. Well when I explained the regulation and the possible liability to the grave and beyond, my children ask why wound anyone want that Dad?

  3. As an IFA I understand the value of financial advice however as a father of two, I have recommended to my sons that they seek alternative employment. If they wish at some stage to work in financial services I have suggested they consider working for the regulator, FOS, or a dedicated compliance firm. We only have to read the monthly Ombudsman Newsletter to see that too many now view the complaint service as a way of overcoming their naivety and greed. Nor will they need to continually update qualifications as we do as advisers unlike other professions where ongoing CPD is deemed sufficient to update. The financial rewards as an adviser do not overcome the potential risks or liabilities which are only going to increase as the source of funding those liabilities reduces in numbers as highlighted in the article.

  4. I used to recruit advisers in a previous lifetime when there was a clear path for career progression in home service, direct sales, bank assurance or within the provider companies. Seriously, who would recommend this to a young person as a lifelong career path now? Not me that’s for sure.

  5. I started my career in financial services (my second career) as a financial adviser, I then became a mortgage adviser and then a regulator (at the FSA) and now I work in compliance for an asset management firm. I have good interpersonal skills and i interact with people well. i am also good at explaining things to people in simple terms. so i thought financial advising would be a good career for me. however, i was scared by the ruthless sales culture in the industry. setting unachievable targets and creating an environment of fear and greed. i wanted to be an adviser not a salesman. until that culture changes, i don’t see many people (new or experienced) rushing into the industry. perhaps having too many advisers in the industry created that culture in the first place. Too many advisers and not enough clients. Now that the market is tilting the other way, perhaps advisers will now be able to act as advisers and not sales people, and the industry will get an improved perception. One doesn’t see accountants and solicitors knocking on people’s front doors asking them to buy their products. Why should financial advisers have to. People should be seeking advisers out and not the other way round.

  6. Totally agree that it’s a diminishing profession. However, does anybody know what the total no. of advisers should be?

  7. I would be happy to take on a trainee but can’t afford to do so because of the vast FCA and associate regulation costs that have increased disproportionately over the past 10 years

  8. Last one out turn off the lights then.

  9. The truth us that the costs of Compliance, PI Insurance, FSCS levies and excessive Regulation is fatally strangling the industry, and with > 40 years as an adviser I have to say that I would never recommend such a career to anyone.
    Add to that the time costs and risks associated with taking on an ‘apprentice’, I have to say that the profession is in terminal decline.
    Soon, advisers will be unable to survive and will become extinct in < 5 years whilst the fat cat regulators, FOS adjudicators, ombudsmen and the FSCS collect their fat defined benefit pensions, all paid for by a declining population of advisers facing an ever increasing and permanent liability.

  10. This is looking through the wrong end of the telescope. I too joined financial services (by accident) and as a second career back in the mid 1980’s. I spent time, effort and money paying for any courses that were available. The LIA, the IFP, The CII – indeed anything I could get my hands on. And also read extensively. So you don’t need to be nannied by insurance companies. True I started with Hill Samuel for 2 years and got myself on every course they would allow me to enter. It was a very good introduction and I still have nothing but admiration for the training, but the paid for education was the most comprehensive.

    I well recall a projected statistic in the late 1980’s – “By the turn of the century everyone will have worked in financial services at one time or another”. Indeed before regulation you had milkmen flogging policies. Do you really think that 250,000 is appropriate? I won’t call them advisers, because they were foot in the door floggers. The Allied Crowbars, the Trevor Deaves , Roger Levitt’s and all their ilk.

    Regulation thankfully cleared a whole lot out and judging by events over the last few years there are still a few to go. So 25,000 may even be too many.

    The premise of a shortage of advisers is largely based on the idea that everyone wants financial advice – which is a very long way from the truth. As a matter of fact around 25,000 is probably the right number. This is almost exactly how many solicitors and accountants there are.
    One might suspect that this article is merely a cry to drum up business for an educational establishment.

  11. Our Finance, Investment Risk programme at Glasgow Caledonian University regularly produces graduates who want to go into the financial advice sector. A couple of years ago a graduate of ours was Chartered Financial Planner of the year. It’s not all doom and gloom!

  12. I’m an under 30 trying to get into the planning industry and struggling!
    Articles > Real life
    Lord a mercy.

  13. Wake up – firms wanting to take on advisers still want to work on 80s and 90s model – come laden with 100 names if families and friends and we will pay you 40-50% if fees or Commission generated -why are you suprised people arnt flocking to join

  14. I think that there are two distinct sides within the ‘personalised’ advice/service sector.

    There is most certainly room within high net worth firms for new adviser blood, as the audience can and will pay for their advice at levels which can sustain. It is, however, likely to become increasingly the domain of medium to larger firms and organisations.

    The more densely populated end of the advice market occupied by many smaller firms (a sector spawned by, lets not forget, the endeavours of the door knockers and bancassurers, who created the culture for saving within a large part of the population, whether with good bad or indifferent policies!), is the area where recruitment is more difficult, for the reasons often covered and also mentioned by some of the posters above. This sector will inevitably decline due not only to the age profile of advisers within it, but also the age profile of their clients I suspect; many of whom are not internet savvy and have no desire to be (or to trust it!).

    I said prior to RDR that the advice industry would grandfather itself into a new culture over the next 10 years or so, without the need to spend billions trying to ‘fix’ it. There were areas that were clearly wrong, but the blanket change has created more problems than it has solved and will continue to do so for a while yet.

  15. Having worked within 2 of the largest advice firms as an internal recruiter, the access to the candidate market is by far the worse in comparison to other advisory industries which regularly feature hard to fill roles.

    Social and employer engagement, strategic recruitment and development routes within the financial advisory sector are at least 10 years behind other mainstream sectors/industries. One of the main problems is that logistically it is almost impossible for large financial advisory firms to train paraplanners/junior advisers and then deploy into the field with home based roles. Typically paraplanners/trainees/studiers etc are based at head office. For argument sake lets say that was in London; once training is complete and they are DipFA/DipPFS qualified (which can take a considerable amount of time), it will be unreasonable for any employer to require someone to relocate to another city to cover that area.

    More routes need to be developed in order to allow for the abundance of paraplanners etc to transition from there current role into a home based position. This will widen the age gap of the current work force (currently 35-55) and allow much a much larger demographic to enter the industry. Retirement is now having a very real impact on retention, and with a high age demographic, the grandparent effect on the market is inevitable. Widen that to something more akin to other “Professional qualification” industries which will be around 25 – 55 then the continuous fresh blood will eventually rejuvenate the candidate market.

    Unfortunately, the impact made by RDR is now being realised within recruitment as it is restricting another area/route where candidates were once abundant. Gone are the league tables, diverse product offerings etc with many candidates who enter the bancassurance pre-RDR, no longer being suitable due to the limited skills/product knowledge they possess and there ability to challenge.

    One solution could be home based paraplanners, who spend 3 days of the week report writing with the other 2 out with their adviser at client meetings etc. This will remove some of the report writing for the Adviser, allowing them to spend more time seeing clients, which in turn will work towards the cost of the paraplanner. It will also develop their management skills, whilst giving a qualified paraplanner the practical, client facing experience required to be a successful adviser i.e. How to complete a holistic fact find.

    I’ve experienced numerous industries where there are defined skill shortages in the UK, many of my clients have been able to overcome this by generating new strategies individually. Advisory FS will be the only industry to date where I can see a long term legitimate issue which will need a collective resolution.

  16. If I may, I’d like to throw in my two pennies worth as someone coming into the industry and also relatively young at 24. My generation, I would think, are the first who are coming into the world of Financial Advice having not been brought through the ranks at an investment house or provider such as Prudential or Aviva. In this post RDR world I see the role of a Financial Adviser as exactly that, an Adviser.
    I personally enjoy the idea of putting together financial plans and find the industry to be very rewarding and enjoy the role an adviser can play. Finally, and this is not to paint all commenters with the same brush, I often feel that those who complain about the cost of compliance and the risks involved seem to be the same people who were around when the regulation wasn’t. For someone like me who has never known anything but it there really isn’t a problem.

    • Spot on Bakes. Ignore the doomongers. They will have left the industry soon anyway and this profession may well be better for it.

    • I wish you luck but wait until 2030 and a complaint comes in about some advice you gave in 2016 which is upheld. You fill find yourself thinking: “I don’t believe this. I worked hard for that client and did my best but when things didn’t go the way they should have, which was not under my control. Now the FOS rule against me and all I have ever done is act with the best of intentions. Maybe this industry is a total mistake”.

  17. Sadly, over regulation, complex over complicated procedures and the requirement to document things to hell make an advisers job so much less satisfying than it used to be. Whilst some firms and advisers will always be able to manage their clients and their business in a way which provides a rich and varied job experience, for most roles it just isn’t very satisfying any more. I still enjoy many aspects of the role but I would not choose to make a career as an adviser from scratch if I had the choice to start again. Regulators and ombudsmen and compliance functions understand too little about how good and bad advice is given. Too much bum covering procedural documentation simply amplifies the cost of advice both good and bad. And makes a career in financial advice far less appealing to those with the necessary skills and aptitudes compared to other career options.

  18. It is sad to look back and think – it’s all been a frustrating waste of time.
    When asked by anyone – my answer has been for years – don’t join up.
    Regrets – yes. I was far too stubborn and should have thrown in the towel years ago.
    Anyway I am punching this in on my debt free terrace in beautiful sunshine in a lovely far off city having done my best to look after clients avoid regulation and tax so I guess in a way I did get out haha
    Skills of an IFA are very hard to find- salesman, technical and willing to put up with crap. I don’t believe you will find that mix if you don’t hit the high numbers by making them door knock first.
    But do I really care ? Nope
    As the saying goes “public gets what it deserves”

  19. I share agreement with many of the comments above. From my own personal experience, becoming an IFA is very tough- I hold chartered qualifications and in my mid 30’s, but my career change has not been a success as I imagined- no firm wants to take me on as a paraplanner as they think I would get bored, yet have not enough experience an adviser. From a standing start, which I have tried, I generated insufficient income to survive. The CII is a total joke, making out that there is huge demand for advice and it is a great career. I think the industry has some attractive qualities, but getting a break in the industry to get going is a huge obstacle. Now ended up in compliance.

    • I hold a Law Degree but as they say: “Production without sales equals scrap.”
      In many respects this industry is a true meritocracy where you are as good as your last sale. If you can sell then you can survive. If you can advise then you need to find someone willing to pay for your advice … but you still need to sell the advice. The difficulty is that intangible products are sold not bought or advised. How many lawyers earn a living advising on divorce yet to occur? They earn when clients are forced through circumstance to take advice and those same client only buy when “sold”.

  20. Does anybody know the actual average age of advisers now? And how has that average evolved over the last 1, 2, 5 or 10 years? I mean facts, not conjecture or anecdotal “evidence”.

    It is not ironic that the “recognition of the value of independent advice has grown over the same time as this decline in new recruits”. The recognition is as a direct result of increased professionalism. There is no irony. I think that it’s excellent that the number of “advisers” has reduced from 250,000. That wasn’t 250,000 professionals trading their wares. What’s more important, quantity or quality? Let’s face it, some of the widespread “training” from life companies in the 80’s and 90’s consisted of a week’s training, maybe the passing of 1 CII exam, and then you were sent off to meet with clients. They were sausage factories with high drop out rates. The reason that firms offer “similar” training at a reduced capacity now is because the time taken to become qualified, both in relation to qualifications and experience of dealing with clients, is much longer. That is a good thing.

    I also believe the industry can cope with a reduction or stagnation in adviser numbers due to the growth in the use of experienced administrators and paraplanners. These are vital growth areas in the industry and are careers in themselves, but is anybody monitoring the numbers of people in these types of roles? Practice management has evolved people. It’s called division of labour. It’s more efficient. And if yours hasn’t evolved then that’s your own fault.

    As for the 90 per cent of advisers who do “not believe the industry was doing enough to attract and support new blood to the profession” – do something about it if you are that bothered. Take some responsibility instead of just moaning.

    • James,

      In 2012 the average age was 54. RDR may have removed many older advisers so this figures may or may not be accurate. It was my belief that a refusal to permit grandfathering contravened age discrimination laws. Legislation such asa fitness test which all employees are required to pass could be indirect discrimination if fewer older employees are likely to be able to pass the test i.e. level 4 …. but I digress!

      RDR and old age: James Hay Wrap research shows: Average age of IFAs estimated at 54(1)
      1This is based on industry sources. The FSA’s “Financial risk outlook 2007” estimated the average IFA age as 46. James Hay go on to say: Our own contacts with industry sources that put the average ages at 54, 55, 56, and 58 years

      • So in other words, nobody knows what the actual average age is now, and it would appear that there is no formal body recording and monitoring the numbers over time. Where are the facts?

  21. @PG and others.
    I do sympathise. But I think many have entered (or tried to enter) the business (yes, it is a business, please don’t forget that) with rose coloured spectacles.

    Joining as a youngster (with no family or other connections) is, I imagine hugely difficult. The best and the brightest are generally snapped up by the investment banks, the large accountancy practices and the big consultancies.

    In the main young people have huge hurdles. Advice can be very ageist. Does a 50 year old want to be told how to manage his money by a 30 year old who hasn’t got any? Obviously lack of experience in the wider world is also a handicap.

    So what is the ideal adviser? In my view the profile could look something like this:
    Over 40 with another successful career under his/her belt. An enthusiasm for and a love of money. (Sounds corny, but true – this is a money business). Willingness to study and learn and take a real interest in all aspects. Then, in my view, most importantly but be of a level of solvency which means that if he/she doesn’t earn for 6-9 months at outset it won’t hurt too badly. That their interest is piqued form the aspect of having to look after their own funds and that once trading they don’t have to worry unduly if cash flow is weak in a particular month.
    In brief, giving advice from a position of strength is a mighty advantage.

    If this sounds like an entrant capable of starting his own business eventually – then so much the better.

    I wonder how many may fit this specification? I actually know of several. The bottom line really is: Like any other business you need capital, unless all you want to be is a wage slave.

  22. @Harry
    I actually find myself agreeing with what you describe as an ideal adviser if you are setting up as a self employed adviser from scratch. I am lucky enough to work in an area teaming with largish firms that are willing to see the potential in youth and offer salaried roles. Obviously the requirement to bring income in is still there but the vision is there to understand that after 2-3 years of experience will produce dividends. In terms of age, I say if you’re good enough and confident enough then you’re old enough. Of course when you work for a relatively large company with a good reputation in the area it is easier to back this up, if a client is concerned you can always point out that if the firm didn’t believe in you they wouldn’t have you sitting in front of a client.
    I was recently told that recent research from Capita confirmed the average age for someone describing their profession as a financial adviser was 54 but the average age for having the required level 4 qualification is 32. I think the point about a 50 year old chap trusting someone in there 20s or 30s with money is a fair one but I would also question why they would trust someone who was potentially from a less regulated and professional background (again not to accuse everyone who was an adviser in the pre RDR world as such)?

  23. @Bakes
    You are of course quite right. What I meant was that any adviser (at any age) has to be well qualified and I regard level 4 as a minimum. Level 6 is preferable, but then qualifications on their own are only half the story. The rest has to be in place as well.

    Again I agree with you regarding larger firms – hence my comments regarding investment banks etc. However I believe that the majority of firms and the majority of advisers are all smaller entities. The other side of the coin is that those who work for the big outfits are unable to set their own tariff, which from a client perspective is not ideal.

  24. Agree with Harry’s comments- position of strength is key. It is somewhat insured that this position comes from complaince work!

  25. IMO, the underlying issue is effective demand, not supply.

    Millions of people want financial advice, but once you filter out those for whom paying for advice would not be viable, or who are simply not prepared to pay to get to the real level of demand.

    This would of course, mean having some idea of how much an IFA would need to charge to make the whole exersize viable.

    My conclusion is that there will always be an effective demand at the HNW/UHNW end of the market.

    Perhaps a more limited range of products based on a guidance model, (clearly stated) for the rest.

  26. An Industry Fit for Purpose?

    To “attract” new recruits your need an “attraction”, an industry fit to work in and thrive in. Direct sales was once the nursery slopes training the future IFA’s but now it’s been killed off. Any sensible young graduate would be unwilling to work under the oppressive yoke of UK regulation. The FSMA 2000 places the livelihoods of the potential new recruit in the hands of a regulatory authority, it makes him or her an outlaw, at risk of their future rights. The UK legislature has delegated quasi legislative, and judicial powers to the regulator and asks its practitioners to operate without the protection of the normal legal process. The only protection check or control being a judicial review (costing circa £30K) but this does not challenge the regulatory authority only their process, which of course is always within due process granted by (bad) law i.e. FSMA. Consider Hector Sants “snub” statement to the TSC, an elected authority on the 9th of March 2011! He basically said if you don’t like it go back a legislate meanwhile I’ll do as FSMA permits!

    Create an industry fit to work in and it will be self perpetuating.

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