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Recruitment drive: Why a good IFA is hard to hire

Race for talent hots up but top planners are still at a premium

Advice firms are searching for ways around barriers to recruitment as the pressure to bring fresh blood into the industry hots up.

While many firms are paying lip service to the benefits of youth, most still prefer to recruit experienced, qualified advisers, according to Chase de Vere head of communications Patrick Connolly.

While Chase runs a training programme to support entrants from administrators and paraplanners through to giving advice, Connolly notes most firms want veterans who can “hit the ground running on day one”. He says: “Since the RDR, the level of qualifications required has increased so if you take on someone new, there is a longer running time before they can start generating business.

“If you bring in someone with experience you have not only got them at a higher level than they would have been pre-RDR but as a business you will get a return on your investment much quicker.”

However, there are still major barriers to recruiting an experienced adviser. Wetherall director James Wetherall says one of these is cost.

He says: “Basic salaries seem to be increasing and you then run the risk of taking them on. Potentially they might not be able to take their clients with them, therefore any return on investment for employing an experienced adviser – for a small practice – is a couple of years down the line. So from a pure commercial standpoint, I’m not sure that makes sense.”

Wetherall has opted for the home- grown route. He is involved with Manchester Metropolitan University’s business school and mentors young people to encourage them towards financial services and advice as a profession.

He says in developing his own graduate trainees, he can “play the long game”.

One of his intake “innately takes to the professional side of financial planning” and “demonstrates a commitment and excitement for the job with no preconceptions”.

“As they start to transition from a paraplanner into an adviser – which they will, and I believe they will become very good, very quickly – I will bring on another graduate trainee.

“My plan is to slowly grow organically rather then take on the big financial burden of an experienced adviser who expects a £60k salary upfront, plus bonus, plus benefits…then what is their incentive?”

Those opting for the long game might not have to wait that long to reap the fruits of their labour.

According to specialist financial services recruitment firm BWD Wealth Management client director James Woods, while new self-employed advisers will not have much of a salary to start with, they might relinquish that in favour of greater control – and commensurate reward – further down the line.

He says in the high-net-worth market in London, for instance, financial planners with as little as one or two years’ experience can still enjoy rapid pay increases.

“These days it’s not unusual to find up-and-coming chartered planners in London with two or three years’ advice experience earning a basic of £75,000 to £85,000, such is the demand for this type of individual.”

The path of least resistance 

At Openwork, the restricted business model dictates a different route. Mortgage director John Cupis explains that mortgage, protection and general insurance intermediaries have driven the network’s 17 per cent rise in advisers to 3,521 this year.

Because mortgage advice has lower barriers to entry than pensions and investment advice, Openwork can draw in advisers easier, and more quickly. The idea is they can then train them up in time to become fully-fledged wealth advisers.

Cupis says: “When you are dealing with funds under management, especially with a model like ours where transferring funds is more complicated, because we only have our own fund range, there are more issues to manage.

“You have to speak to every client individually and that’s a much bigger barrier. We genuinely see this as an opportunity for advisers to up-skill, grow their professional status and improve on their qualifications.”

Adviser view
Martin Bamford
Director
Informed Choice

There are several factors why hiring advisers is difficult, but unreasonable salary and timescale expectations are an issue at the moment for trainees. For experienced advisers, it is about baggage. It can be difficult to teach an old dog new tricks.

He says the alignment of interests is no coincidence, noting that the mortgage customers of today will become the wealth customers of tomorrow.

“Your at-retirement market customers are retiring with mortgages with equity and also have pensions with tax benefits to consider; when you are approaching 55-plus over the coming years you need more options. Because the RDR and Mortgage Market Review polarised the advice market, customer demand now needs to bring that advice back together.”

But does the lure of a simpler route like Openwork’s mean advisers will naturally gravitate towards restricted status?

BWD says it sees little evidence of this in the regions but it can be a feature of the larger financial centres.

Woods says: “These days the majority of candidates generally don’t seem that bothered if a firm is technically restricted, so long as the proposition is a wide one and the opportunity for themselves is a good one.

“Incidentally, we do actually notice geographical differences in this attitude towards restricted versus independence.

“Advisers in the regions where the market is, and has always been, made up of smaller, traditional IFA practices, are often  more preoccupied with retaining independence than those in London or the main financial hubs.”

Chase de Vere believes its independence is a major attraction when recruiting advisers.

Connolly says: “Most large advice firms are restricted and a lot of the smaller ones are struggling with regulatory costs and so being bought by consolidator firms, who want to then turn them restricted.

“So we tend to be approached by advisers either looking to move from restricted to independent or that want to remain independent and think moving to a bigger, more established company is the way to
do that.”

Ex-Almary Green advisers form new advice brand

Sense Network agrees. Chairman Steve Young says it is rarely approached by people leaving other networks and it begs the question as to whether network practices are allowing advisers to join and leave freely.

Locked in

Networks have been accused in the past of refuting novation agreements when appointed representatives leave, withholding commission and fees beyond contractual terms and in some cases penalising the clients directly if they follow a departing adviser.

Others have told tales of IT systems that are shut down immediately after an adviser hands in their notice to their network, rendering them unable to access their client files.

These days the majority of candidates generally don’t seem bothered if a firm is technically restricted, so long as the proposition is a wide one 

Young describes one scenario where three individuals who had set up a firm together and approached Sense Network to become appointed representatives had three different contracts because they had joined their previous firms at three different times.

He says: “We generally direct them towards seeking good legal advice on these matters. Advisers usually have to observe a period where they don’t contact their old clients but they are usually able to start trading.”

Young adds that the networks with the greatest levels of restriction are some of those that have the tightest deals on advisers leaving.

“They have paid an awful lot of money to get these people through the door so they have to ensure a longevity that allows them to continue to make money from them.

“We are seeing a lot of new startups from people leaving consolidators. So their boss sells up, the top advisers are not happy with the new arrangement so they split off and set up their own firm. At least half of our recruitment over the past 18 months has been from that source.”

Young says some of the reasons advisers find it tough to move can be much simpler though.

He says: “For a lot of our new starters it can be as basic as how to set up an adviser contract, or how to deal with their clients, how to find a website developer.

“Our model is for experienced people who know what they are doing on the advice side, but they might need help with putting the structure around it in terms of running a new business.

“It is rarely back-office systems or office cultures that put people off.”

Wetherall adds that adapting to a different underlying philosophy may be a challenge for some.

“For some advisers moving firms, they may have worked with a firm that was in favour of actively managed funds and then moved to a firm with a completely different investment philosophy.

“Where there is a clash it can be difficult. But then if people genuinely find a better way, then it is up to them to subscribe to that.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. David Brent (Ricky Gervais) had a strategy when hiring that went like this: –
    “Take half of the CVs and throw them straight into the bin because you should never employ unlucky people.”

    In my experience, the large financial companies work their advisers on a ‘numbers’ game, with no regard for the ‘soft’ skills required to develop long-term Client relatonships. They set ‘targets’ without reference to the actual adviser and then speak about “your target’. Word has gone around by word of mouth and that is why few intelligent and worthwhile candidates bother with Financial Services.

  2. Many years ago I took on an adviser who came to us via a recruitment agency which charged us a handsome fee but then, after just a couple of months, he quit because he’d found the position he’d really been after right from the start (working from home for a provider with lots of leads) and the agency refused to refund any of its fee. After that, I decided never again to consider any candidate presented to us by an agency, on the grounds that firstly they charge far too much for doing far too little and secondly anyone worth his salt would do his own groundwork and contact us directly on his own initiative.

    That aside, the investment required to get a new recruit up to the required standard to let them loose on clients is certainly a deterrent. Openwork’s strategy seems to make sense.

  3. Hard to hire? In my experience impossible to find. As many know I was a sole trader. For years I knew that I needed a succession plan and in 2013 tried to put a plan in place. Adverts with a specification for someone to joint me to whom I would have actually GIVEN the business eventually. (for an ongoing modest cut). How many responses did I get? NONE. Why? Well I don’t really know. Perhaps the specification was too rigorous. Perhaps possible candidates didn’t want an uncertain income or to be their own boss. Maybe the location was wrong. Personally if I was an employee I would have jumped at it. In the end I was bought out – thanks heavens by a reputable firm and not by a consolidator.

  4. I often help IFAs find advisers but it isn’t getting any easier, particularly when the the IFA is a dinosaur and the people looking for a role can be green round the gills. Boy have times changed since the days the sales people walked round with a few props in their pockets while propping up the bar.

  5. Cherie-Anne Baxter 24th October 2017 at 11:14 am

    Hence why at our business we set up our very own in-house academy called Unicademy. Launched nearly three years ago we have 8 on the academy at various stages all working towards becoming a Chartered Financial Planner. Three will be graduating from Unicademy in December, of which one will become a senior technical specialist and the other two have chosen to become financial advisers. We also have another Chartered Financial Planner who is in his first full year of advice, doing very well for himself. It may be a long game but those training can work as very competent paraplanners supporting the business. Its a cycle that is working and growing our business. More importantly it is fueling a better service for our clients, who can be rest assured that our business can support them for the rest of their lives and the lives of their children.

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