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