As the baby boomers edge ever closer to retirement there is near universal agreement of the need to bring some young blood into our profession. That said, the recruitment of bright young things has proved a challenge. Why?
It is hard for me to believe I have spent 30 years in financial services, although easier when I consider all that has changed in that time. When I joined the industry, one of the accepted entry points was through the many graduate recruitment programmes offered by 80-odd insurance companies that operated in the life and pensions arena. Their approach was to train graduates as salesmen to service the many accountants, insurance brokers, solicitors and estate agents that sold financial products.
The second route was represented by the legions of direct salespeople in the old industrial companies. “Dad, it’s the man from the Pru” was the familiar cry that echoed up and down thousands of hallways once a month.
Thankfully, as financial services evolved through the 1980s and 1990s and regulation became more stringent, this business model steadily became obsolete. The big insurers ditched their direct sales forces, along with companies like Allied Dunbar, Abbey Life and Royal Life, and the dozens of providers condensed to a handful.
Whatever the view about this demise, the proving ground for many entering financial services was no more. A lot of current advisers were recruited from the ranks of these providers. They were trained and put through their exams and, as companies bowed to pressure, either shutting up shop or culling their numbers, many stayed in the industry by joining a firm of advisers or establishing their own business.
So history helps clarify how we got to this point but it does not explain why there is a dearth of fresh faces in our profession. One significant reason is due to the size of firms and how fragmented they are.
According to Apfa, there was a total of 23,640 CF30s in 2014, at an average of 4.53 per firm. This is important because large numbers of firms are micro businesses (less than nine employees). The backdrop against which most of these businesses function is one of margin pressure and greater regulatory costs, coupled with declining interest among consumers to seek and pay for advice.
The knock-on effect is that many firms choose to soldier on or try and cash out. As a consequence, taking on a graduate and providing an exciting career path, while absorbing the costs of salary, training and exams is prohibitive for many. This is especially true if there is no guarantee that once the trainee has achieved the cherished CF30 status and starts to pay the employer back, they find it impossible to resist the siren call of a bigger firm.
The knock on effect is that advisers are an ageing population, as many firms will only take those with an existing client base and a proven track record on.
So, what is the solution? It is encouraging to read the Government’s plans to strengthen its apprenticeship programme with £2.5bn of funding. Although the details of the levy on large businesses, which will in part finance this funding, are still being worked out, I am sure most big companies will recognise the benefits of increased skills and innovative thinking that a new generation of apprenticeships brings. Apprentices could play a major role in increasing access for consumers to high-quality professional advice.
The other benefit, ironically, is provided through 30 years of regulation. We now have a much more professional industry with a higher level of focus on supporting consumers rather than an industry dominated by opaque practices where good customer outcomes were a secondary consideration.
A more professional industry has a better chance of attracting the right calibre of person committed to providing quality-led advice and supporting their clients in achieving their goals. The chance for an apprentice or graduate within an adviser practice to learn and develop these skills, while helping the practice grow, presents every firm with a significant opportunity.
Tim Sargisson is chief executive at Sandringham Financial Partners