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Nic Cicutti: Is it getting harder to attract new advisers?

Nic Cicutti

A few decades ago, when I first started riding scooters to rallies up and down the country, I remember a flyer handed out at one event inviting me to join the Old Bastards Scooter Club.

The OBSC, the leaflet informed me, was aimed at the admittedly tiny minority of scooterists then over the age of 25, who might be getting bored of kids barely old enough to buy a shandy puking on their shoes after a few too many.

Instead, prospective members were promised a social scene in tune with their more mature age group – although it was not clear precisely what was on offer: less projectile vomiting, possibly.

Back then, I was still a year or two off the OBSC’s age limit. I vowed I would rather shoot myself than join an old farts’ club like that. How times change: as I look round many of the scooter events I still go to, I would be delighted if the average age of those attending was under 45, never mind 25.

But as any adviser trying to hire a new recruit to service the needs of an expanding business knows, attracting fresh talent is a pretty thankless task.

Does it specifically need to be young blood? I ask after reading last week’s article by Katie Marriner in Money Marketing, describing her difficulties in trying to understand the demographics of today’s adviser community.

Katie quoted figures from the Personal Finance Society showing the average age of its membership was 47, while that of newer recruits who have joined since March 2014 is 37.

Strangely enough, I remember an article by former PFS chief executive Fay Goddard more than four years ago, in which she stated the average age of her organisation’s members was 47 even back then.

Statistical experts will no doubt wish to comment, but my reading of those numbers is that for those who joined after March 2014 to bring the overall figure to 47 the average age of all other PFS members must be significantly older than it was back in 2012.

That, or the total number of recruits after March 2014 is so small it has little or no impact on the overall average, which remains the same as it was almost five years ago.

What is happening? As Katie discovered, the available data is hard to analyse. My own guess is  attracting young advisers is, if anything, harder than it was a decade ago.

“When people reach their 30s and 40s and are old enough to understand they need advice and seek out an adviser, do they necessarily want someone in his or her 20s to advise them?”

Giving advice, as distinct from some of the sexier areas of financial services like working in the City, has never been seen as an attractive proposition by young people, especially when other job options seem so much more inviting.

Besides, the vast majority of twentysomethings are uninterested in receiving advice: why would they want to learn how to give it to someone else?

And when they reach their 30s and 40s, and are old enough to understand they need it and seek out an adviser who will give it to them, do they necessarily want someone in his or her 20s to advise them?

Apfa director general Chris Hannant’s comment about a “grey hair challenge” is right: unless I am totally convinced the “kid” opposite me is incredibly smart I am much more likely to want someone to advise me who is at least my age, or older.

That said, in the past couple of years I have met one or two stunningly good paraplanners in their early 30s who were, in my opinion, far more knowledgeable and skilled than the advisers they worked for.

As for so-called “soft skills” like asking “probing questions”, it does not take years to acquire them: a few months, not years, of listening and learning from someone who does that sort of thing regularly is what it takes.

In any case, the real skill does not lie necessarily in asking the right questions but in listening to and understanding your client’s answers.

There are too many advisers with decades of experience under their belts who have lost the art of being genuinely reflective about what their clients are telling them.

The answer, then, is less to do with trying to focus on youth than about identifying the right kind  of adviser you need to join your team.

Here, Katie’s article raised a number of interesting options, including that of targeting potential recruits from certain occupational groups with potentially transferable skill sets, like the armed forces.

The other key aspect is training. In the past the industry relied far too much on a steady stream of recruits from banks and insurers, who would keep training advisers up to a certain level before they decided to go independent.

The reality is that even if banks are prepared to remain the industry’s adviser transmission belt, numbers coming through will be far lower than in the 1980s and 1990s. For advice to be seen as a genuine profession, the industry needs to develop its own centralised training structures similar to Intrinsic’s Financial Adviser School.

Perhaps this is an area for trade bodies to get involved in helping to co-ordinate, a bit like the OBSC tried to soften up people like me into joining many years ago – hopefully without the projectile vomiting this time.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 19 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 19th May 2016 at 4:39 pm

    You’re quite right, Nic, that for advice to be seen as a genuine profession, the industry needs to develop its own centralised training structures. I raised this with Tenet a while back and they’ve started to include a training slot on how (better) to formulate and document advice as part of their thrice yearly Professional Development Meetings. The one at yesterday’s PDM that I attended was very useful.

  2. In the past the recruiting ground for the industry was from the “Home service companies” i.e. CIS Pru , Refuge, Pearl etc. With these now gone the recruiting base has disappeared.
    Or
    It could be Nic is putting them off with the stuff he usually writes. 🙂

  3. Matthew Gamble 19th May 2016 at 5:25 pm

    I am a mortgage broker and now 32. I was in this industry, on my own, at the age of 23. I look young now, I loved even more baby faced then. I have to admit, it was a barrier. Some clients had the decency to question my age, when may I knew were thinking it but were too polite to ask or question me on it.

    I remember over compensating by using industry terminology and jargon and three letter acronyms to compensation for my lack of experience, but that was exactly what the client didn’t need.

    Being genuine, relaxing more and using more layman language and having the confidence in my ability, all ended up helping, but it certainly cost me money being young and offering advice to client sometimes twice my age.

  4. Julian Stevens 19th May 2016 at 5:52 pm

    Good point. Many financial advisers, myself included, came up through life companies and not just home service ones such as those mentioned above. We started out at the city branch in a junior clerical role, moved on to a national IFA firm and from there to progressively smaller firms until eventually branching out on our own. Well, that’s my career path, more or less.

    Whether the products flogged by the home service companies were actually any good, though, is very much open to doubt. Most of them, I suspect, typify all that’s bad about legacy policies.

  5. Nic
    You have got this pretty much right. Yes, people really want advisers with a bit of experience advising them. Additionally it helps if the adviser is actually solvent and appears to have done what he is advising the client to do. An impecunious adviser is hardly the ideal.

    Where you are not exactly spot on (but I guess right taking the broad view) is that twenty somethings are not interested in finance. The bright ones certainly are – hence the scramble for jobs at the investment banks and asset managers. Which IFA practice can compete with a graduate starting salary of around £30k? Why would a bright graduate with a good degree choose to go to a financial adviser rather than an investment bank? Of course then there is nepotism. Some youngsters join the family firm, but this is hardly in significant numbers.

    Financial advice has always relied to a great extent on poaching and on attracting those on a second career. (Just as you are in your second career after working in healthcare). True many currently have also come from the banks, but this avenue is gradually drying up. Who knows it may yet be opening up again.

    Instead of handwringing about the dearth of young blood, perhaps we should be looking at intensive retraining programmes for those starting on their second career. This is as it was in the late 80’s. Indeed, I recall an odd projection from that time. It was reckoned that at the then current rate of recruitment, by the end of the century (1999) practically the whole working population will have worked in financial services at one time or another. And then we had regulation.

  6. Christopher Petrie 20th May 2016 at 6:18 am

    Following on Harry’s comment, at one point about 30 years ago, 240,000 people were “financial advisers”. There were around 24 million people working in those days. So, 1 in 100 jobs were as financial advisers….more than there were doctors, nurses or policemen!!

    I suspect supply and demand will come into effect….There’s more demanding for advice than ever. Earnings and salaries for IFAs remain high and the qualifications levels will be a barrier to entry welcomed by graduate trainees wanting to be sure they are embarking on a bona-fide career.

    I see adviser numbers have risen slightly in the last two years, I expect this trend to continue.

  7. Without wanting to make massive generalisations, most IFA firms are relatively small, they don’t have a training department, they don’t have many ‘non income producing’ staff and they don’t have a vast amount of cash knocking around that can be used to invest in the future. Especially in the knowledge that once somebody has been trained up and started to earn the business some money they know that nothing is stopping them going off to ventures new. It takes a lot of time effort and money to develop a graduate into an IFA and the fragmented nature of the industry means that there isn’t enough capital sat around in one place to do so.

    Historically, the Pru or the banks had deep pockets and could afford to pay a salary with training to lots of people entering the industry (and I’d be willing to bet that at least 80% of the contributors on this site came into the industry this way), those that were sucessfull then left and became IFA’s.

    I don’t think that there is really a solution to the problem to be honest and frankly from a purely selfish point of view thats no bad thing as it means more clients for those of us that are here!

  8. I think a major reason for young people not becoming financial advisers is the type of regulator we have. No long stop. No real understanding from the regulators of how cumbersome our regulatory framework is . No recognition from the regulator that outcomes can never be certain and an insistent view that advisers are bad and clients are stupid. A regulator which deals in punishment rather than improving standards. A regulator which has such a broad scope that it cannot hope to have the expertise required to understand all the activities it regulates. And from the outside looking in we as advisers all have our own point of view and disagree with each other. Most other professions have proper training programmes set up and offer recognised career paths. I can see why an outsider would look in at our world and think no thank you.

  9. Steven Pearman 20th May 2016 at 10:43 am

    Wrong question Nick. It is has become the case that to train new staff is just not worth the hassle, responsibility and investment in an industry where any business plan is constantly being re-written to accomodate the new costs and increased time required to trade year on year.

    The regulator needs to spend some of the fortune it obtains from the industry to resolve the problems it has caused through its simplistic, one scenario fits all approach to governace.

  10. As said before most IFA’s are small businesses and for the most part cannot afford to take this on. From a personal point, it will be no different now to the old days of direct sales recruiting lots of people to have only a few stay long term. Why would any adviser firm (small of not so small) desire to have the lifetime of liability for the advice given from new advisers who, on the whole will not be round for the long term?????? That would be sheer madness.

  11. It is incredibly time heavy to train a new recruit from scratch to at least level 4, never mind train them to be able to go out and complete an appointment without any support. Have most small firms got the time or money available to do that? No is the short answer.

    I am yet to meet an adviser who wanted to be an adviser from the start, most people are in the industry by accident or chance. Banks & life offices provided the training for that chance change of career and therefore a steady supply of already trained advisers for advice firms to poach. That supply has all but dried up.

    I guess I am lucky that my chance change of career happened when I was so young. At 34 and having had my FPC’s for 12+ years I am looking forward to being the only IFA left in the north of the country in 10 to 20 years.

  12. Christopher Petrie 20th May 2016 at 1:05 pm

    I simply don’t get this “lifetime of liability” some people bang on about. When you sell the shares of your Company, or liquidate it (for whatever reasons!) then your liability ends.

    That is the purpose of Company Law in any industry.

    Only a sole trader IFA has no protection and I can’t believe any financial adviser would be so foolish as to advise themselves to go that route. Now that really would be bad advice!

    • That’s not strictly true Christopher, although there are measures that you can put in place to better ensure your protection in retirement

    • I am afraid you are sadly mistaken Christopher. As a business owner and a “selling adviser” you are personally responsible for the advice you give/sales you make for ever. Even if the company is wound up you can still personally be hounded to the grave.

  13. Tyrone Murphy 20th May 2016 at 1:06 pm

    “That said, in the past couple of years I have met one or two stunningly good paraplanners in their early 30s who were, in my opinion, far more knowledgeable and skilled than the advisers they worked for.”

    Paraplanning is one thing. But attracting clients who are willing to pay you for providing them with financial advice is another. This is where the gap between being a paraplanner and a successful adviser appears. Most firms expect advisers to generate business without providing them with leads. If you are a paraplanner, how do you go from that role to being in a position to be able to self generate enough leads to keep yourself busy? Unless the firm you work for provides you with potential clients to see, it will be a difficult transition from paraplanner to successful adviser. That is why a lot of firms were recruiting bank advisers. As the banks were no longer providing advice to the mass market the advisers could approach former clients without fear of being accused of poaching.

  14. I met a young newly qualified adviser yesterday. She joined the FS industry as he father was already practicing and gave her the perfect leg up to qualify and join the family firm. This was her third career after the NHS and Police.

    What struck me is the comments about the risks in being an IFA – no long stop, bizarre FOS decisions, FSCS compensation culture. She commented that although there was similarities in the way you protect yourself with layers of bureaucracy in the Police and NHS, the risk to an IFA are far higher than to Police officers or medical professionals as you have little or no protection as an IFA. So much so they can hounds you into retirement. Even then the compensations and costs comes out of your pocket one way or another.

    …… and we wonder why there is no new blood.

    I have three children all grown up and I would not advise them to join the FS industry as although a rewards and gratifying career the downside risks are too high personally.

    • I find this very hard to believe – As an IFA you are not physically handing abusive or unwell people and potentially injuring them, yourself or others. The liability issues in these professions is huge and you can easily demonstrate this throught the amount of cases that are taken to the courts.

  15. Julian Stevens 30th May 2016 at 1:21 pm

    A colleague of mine who is one of the principals of a small-ish (but not tiny) advisory practice in S. Wales told me the other day that they’re currently advertising for a new adviser and are simply receiving no applications, at least not from anyone remotely suitable in terms of experience or qualifications. Would they consider taking on somebody with no experience and training them up from scratch? Absolutely not. The required investment of time, money and supervision would be prohibitive. And I know of no one or two man practices who are contemplating taking on a potential successor. When they retire, they’ll (hopefully) sell their client bank and its recurring revenue stream to another firm and that’ll be it.

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