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Where is the next generation of financial advisers coming from?

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Campbell Macpherson MM blog

‘Business-minded post-grads wanted for exciting career in financial advice. Requires ability to breeze through exams, sell ice to Eskimos, create long-lasting relationships and cover their backsides. Aptitude for using crystal ball

to forecast future regulatory changes will also be a plus. Preferably equipped with a bulging black book of wealthy contacts. Sense of humour mandatory.’

Where are our new advisers going to come from?

RDR, preceded by the lingering threat of RDR, has done its best to deplete financial adviser ranks with banks pulling out of the advice market and many advisers opting to retire earlier than originally planned. With fewer clients willing to pay for financial advice, adviser numbers are bound to decline even further over the ensuing years. We could argue about the speed of change and the numbers involved, but broadly speaking, few would disagree with the logic.

But financial advisers are the lifeblood of the life, pensions and fund management industries – so what is the industry doing to swell the ranks of this critical “distribution” channel? “Not enough” would be my Readers’ Digest summary.

The banks don’t seem to be that bothered. Most life companies are doing a great deal of talking on the subject whilst dusting off plans to augment the adviser channel with salespeople of their own. The networks (the vast majority of whom are strapped for cash) seem to be more interested in trying to poach advisers from one another than recruiting, training and developing a new generation of professionals.

A couple of notable exceptions. The first one is the Sesame Bankhall Group. Under the leadership of Lisa Winnard, the group launched The Financial Adviser School almost two years ago with the sole aim of bringing new blood into the industry, and I for one think they should be applauded.

Lisa and I tried to get this off the ground back when I was at Sesame in the mid-noughties but were unable to convince my fellow execs and the non-FS shareholder who owned the business back then.

“I have attended a large number of industry ‘new blood’ meetings over the years and whilst there was a great deal of talk on the subject, no one seemed to be actually doing anything!” Lisa remarked to me recently. “The direct salesforces of Pru and Allied Dunbar used to be the training ground for the industry. Once these sources had dried up, the banks stepped in to fill the gap for a while. Now that they too have stopped, the flow of new advisers coming into our industry had slowed to a trickle.”

“There are plenty of places where prospective advisers can go to obtain qualifications. However, no-one was providing future advisers with the practical, rounded business skills they would need to be a successful adviser – selling, marketing, service, day-to-day business management, interpersonal skills, and a realistic appreciation of what it means to be regulated.”

The FA School is supported by Zurich, Aviva, Friends, Aegon and Partnership. It offers different programmes to suit the needs of the sponsoring firm, including an 18-month diploma programme, an eight-month Mortgage and GI programme, and a seven-month “Competent Adviser” programme. The full diploma programme blends classroom learning with real-life experience within the IFA businesses that are customers of the Sesame Bankhall Group. The way that the curriculum is designed, students become value-adding and revenue-generating advisers very early on, starting with helping clients to meet simple needs such as term life and working their way into more complex areas over time. 60 students went through the school in its first eighteen months. A further 70 are due to start in 2013. Within three years, Lisa plans to have had brought 400 new advisers into the industry.

The other market leader who understands the value of new recruits is St James’s Place. The SJP Academy attracts self-motivated professionals who are looking for a change of career and wish to start their own business in wealth management. It is an incubator for new SJP Partners. New recruits are expected to take RO1 themselves before commencing the two year Academy programme during which time they will achieve the necessary qualifications, be trained in SJP’s propositions, learn how to build and run their own business and acquire advisory skills. After six months in the classroom, they are introduced into the field under the guidance and supervision of SJP mentors. Upon graduation they will then have access to the full range of firm’s acclaimed business support to help them develop their advice business within the SJP umbrella.

The SJP Academy is not for the feint-hearted, but then neither should it be. Financial advice is a profession, not a hobby. The SJP Academy has three intakes a year with 15-20 new recruits per intake and the average age is 38.

Recently, SJP have also launched their “Next Generation Academy”, aimed at assisting existing SJP Partners with succession planning – quite literally training the next generation to step up and take over the running of an SJP advice firm. The first intake last October saw 16 students with an average age of 24 (mainly sons and daughters of SJP partners) commence a one-year training programme. Two intakes are planned a year.

Other programmes do exist, but the vast majority of them seem purely to focus on assisting advisers to gain the qualifications they need – not in bringing new blood into the industry and transforming them into “competent advisers”. For example, the Aviva Future Adviser Programme provides a six week summer internship for ten graduates and last year gave a total of 35 graduates “membership of the Aviva Financial Adviser Academy”, Aviva’s vehicle for helping advisers to pass exams. I suppose it is a step in the right direction.

The Financial Skills Partnership is a much bigger leap in the right direction. Their Graduate Foundation College provides new advisers with a ten week induction course designed by the industry that sees them “graduate” with the financial services, regulation & Ethics module of the industry qualification, currently provided by the CII or Calibrand.

It is hoped that the graduates will be encouraged to continue with their studies and it is the responsibility of the adviser firms to transform them into functioning, revenue-generating financial advisers. After the initial ten weeks, the unemployed graduates are put through a robust assessment process which allows the firms to take new talent into their firms with no recruitment costs and minimal risk. Firms are then given a range of training support to assist with the internship including a year’s free membership to the FSP, an internship toolkit, a learning management system from Redland, apprenticeship toolkit, work experience toolkit and an interactive T&C scheme toolkit.  

Operating out of Birmingham, Cardiff, Leeds, Edinburgh, Manchester, Bristol and London, the Graduate Foundation College processed 187 potential advisers in its first intake and hopes to have had 750 potential new advisers through its programme by the time the pilot ends next April.

Building a career as a professional financial adviser should be an attractive and rewarding option for a large number of people; and not just for graduates but also for people looking for a change of career, those leaving the Armed Forces and swathes of people who are being made redundant from life companies and banks. The recession and the changes being forced on this industry should be providing the rich source of the new blood that we badly need.

Whilst the Financial Skills Partnership is doing an admirable job, I cannot shake the feeling that we need the providers to do much more than tutor advisers to pass exams and we need many more networks, service companies, nationals and advice firms to follow the lead of Sesame and SJP. Surely the future of the industry depends upon it.

Campbell Macpherson is managing director of Campbell Macpherson & Associates. His career has included executive roles in Openwork, Zurich and Sesame

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Comments

There are 25 comments at the moment, we would love to hear your opinion too.

  1. Spot on! A question I’ve been asking for the past ten years. As someone who joined a tied sales force straight from University (age 22) eighteen months before the provider in question got rid of it’s salesforce, it’s noticeable that even twelve years later and now at the wrong end of my thirties I am still one of the youngest advisers in any professional gathering.

    While this is probably good for me over the next twenty years as the competition continues to retire, it does raise the prospect that at some point the adviser “channel” may become uneconomic and be abandoned by the providers.

    It is seems to me therefore that the adviser community needs to take responsibility for developing it’s own rather than relying on providers/banks/etc. This is clearly going to be a challenge is today’s world of wafer thin margins, but it does need to be done otherwise those retiring are going to struggle to find anyone to sell their businesses too…

  2. Wesley Haslett 1st March 2013 at 2:17 pm

    The answer to the question is – escapees form mental hospitals

  3. Good article and a lot of valid points are made however, I dont know about the rest of you but I would not encourage anyone to join this industry. No matter how well we try to do our jobs for clients, some bureaucrat at some point in the future only has to judge that we did not have every t crossed and I dotted and so must pay up compo to someone. How can anyone with an ounce of decency (which 99.9% of advisers have lots of) even contemplate bringing anyone into a business who from the very first sale that he or she makes, takes that liability to the grave. Possibly 50 years into the future? The answer is No one can do this. The industry is totally screwed in a couple of decades time unless the regulator winds its necks in on using retrospective regulation to judge cases from by gone years. They also need to act within the laws of the land. We need some protection from a lifetime of liability and until these and other issues are resolved our once great industry is headed for the toilet. The next huge FSA drive on unsuitable advice is going to revolve around Capacity for loss and we can all bet our houses that teh CMC’s will be on clients like flies. Until last year none of us had ever heard of this. In time advisers will be getting sued when the markets take their next big tumble and complaints come flooding in with people saying I lost 30% and if my advisr had discussed my capacity for loss I would have never agreed to take his advice. Mr FSCS man give me my money back with interest please. We will get sued for something we did before this issue was ever dreamed up by the regulator. This industry is a really sh*t one to be in now and has been for 6 years. If I was younger I would leave it and if I was able to I would retire, but I am at an age where I can do neither so short of the numbers coming up on a Saturday or Wednesday I am stuck in purgatory. Whilst I earn a reasonable living, its hateful doing it. Where did I leave the stanley knife???????? Its time to slash the wrists, but will maybe go for a beer first. Enjoy your weekend chaps and chapesses.

  4. While I agree with the sentiment of the article the point surely is that small IFA businesses cannot, and one could argue never could, afford to train somebody up.

    The cost of the Sesame programme when I last looked was way too expensive particularly in a recession to even consider. Basically a new IFA has to hit the ground running and be able to produce business income from the work go. Bigger business with deeper pockets can afford the luxury of a more relaxed approach but it is inevitable that the real go-getter will go. It has ever been the case. Do I want that expense – no.

    In short we need the direct sales forces to keep the industry going like it or not otherwise the industry is dead.

  5. You pose a good question and I can see no logical answer.

    I find the IFA / SME fit perfectly together. It is purely about personal good service, quality advice and growing relationships. The long term need for quality advice is there and only going to increase. My question is ‘would I recommend my carrer choices to my growing up children?’ Sadly I would not.

    The reason are complex. However when I look from where I am now and I consider the future of the IFA / restricted or other role, then I have to view the rise of the compensations culture, no long stop, regulators judging me retrospectively, dubious judgements by the FSCS, Rising PI and the general lack of commerical SME experience of our regulators and politcal leaders – all quite frightening.

    It is not going to change anytime soon I fear, so in that way Mr McPherson is correct – a sense of humour is manitory.

  6. Encourage someone to join an industry where you are held responsible for every piece of advice until you die, where you write protection business see it come off a couple of years later and don’t even cover your time cost. Where providers claim to support the intermediary channel but leave you hanging on the phone for up to an hour before answering. Where trying to place mortgages for someone means you’re actually in competition with the provider themselves who offer dual pricing, where the cost of regulation and compensation is borne by those that never caused the problem in the first place. I could go on and on but you get my gist. If I was asked about a career in financial services I would tell them about all this and if they still decided to follow this as a career path I would have them sectioned…

  7. After 25 years I have seen just under 90 insurance companies leave the industry and now the banks.
    I would not recommend anyone to become a financial adviser/Ifa/ restricted/ tied/ sales person/ whatever they wish to call us(it matters no because it will all change within 5 years).
    This is a dead end job with little prospects and stifling regulation. Danger keep out if you want to have a happy career.

  8. sufferin succotash 1st March 2013 at 4:28 pm

    JF is right. Anonymous @ 2.19 is right. James is right. Sufferin’ Succotash – everybody’s right! It’s time to reinvent the wheel, folks! It’s time for the direct sales forces to be resurrected.

    Only they won’t be because of the regulatory, compensatory and compliance costs coupled to that oh so draconian liability without time limit but with a touch of the revisionists’ paradise.

    Remember the children’s story about the woodman who found the devil hiding behind a tree in the forest? The woodman chopped down the tree, only to see the devil had moved to another. So the woodman chopped that one down. But the devil – you guessed it! – had moved to another tree. Soon all the trees but one were felled and the woodman could see the devil’s tail peeping from behind it. Swiftly the woodman hacked it down and there, before him, smiling and licking his lips was the devil itself!
    Only the woodman now had nowhere to hide …

    So if, in other words, the baby goes out with the bathwater, a new baby will have to use a shower: the internet where the customer chooses what they want to secure and the way they want to secure it. Hang on! That means educating the public en masse and that’s something the “powers that be” scrapped because of costs.

    There’s no solution to this one.

    Oh well, it’s back to the lotto!

  9. MAS and it is Free with full training given to its “advisors”
    That is the future

  10. Who knows?
    Who cares?
    Will NEVER encourage anyone young old or otherwise into FS. It would be akin to sending them to a Gulag.

  11. I would not advise anyone to work in financial services. Without doubt I have met more smiling crooks in this industry than in any I have worked in.

    Leave it to decision trees and the internet. This will protect the vast majority of customers from the scumbags of the industry.

  12. As one who worked for Bankhall for many years and spent many of them banging on about proper training for new trainee IFA’s and even presented several papers about the way it should be done I have to admire Lisa for achieving this much.

  13. John Constable 1st March 2013 at 6:51 pm

    The first thing I thought when reading this piece was that there was no mention of the lack of a ‘long-stop’.

    It would be cruel to induct some naive, enthusiastic youngster into this trap.

    I wonder if it is a co-incidence that around the area where I live, the guy living in the poshest house with the flashiest car and the very big permanent grin, owns a CMC.

    I suspect not.

  14. Having just left the industry because of over-regulation with no Long Stop, 20:20 hindsight accountability, I was unable to recommend to my children, in fact when one child lovingly said “I want to do what daddy does”, I accidentally ‘snapped’ NO! Hand on heart I couldn’t recommend that life to anyone. I really enjoyed my time of helping people and seeing them blossom over the years but with no long stop and guilty until proven innocent, poor regulation and openly visible, corrupt revolving doors between the banks and regulator couldn’t go on. If you or someone you know are thinking if a career in financial advice – D O N’ T !

  15. Why do some people above suggest a newcomer would have lifetime liability?

    One presumes they would be joining a practice which is incorporated with Limited Liability. The liability thus lies with the Company, not the individual.

    Unless the comments above are suggesting a new IFA set up as a sole trader? And why would anyone do that? That would be madness. I simply cannot understand why anyone would still continue to trade that way these days.

  16. This is the problem with our industry.

    The large costs (a large proportion of which are regulatory) of taking on an in-experienced adviser on an employed basis outweigh the risks. Whilst anyone entering the industry straight into self employed advising would look at the costs, rewards and open ended risks and say no thank you.

  17. @ IFA 11.02. Technically you are right however having previously owned an limited company I can tell you that you are wrong in practice. The company will protect themselves by the contract the “employee” has. ie they can persue the individual to the grave. No good firm is going to leave itself open to this type of liability. If it does the directors/partners need to be removed forthwith as they are as big a potential liability.

  18. Re Anon @ 6.03
    Another good reason not to join FS
    Everyone thinks they can call you a scumbag and treat you like the scum of the earth and all without ever having met you or knowing anything about you.

  19. What a daft question !

    They are seeking other jobs rather than get mired into this industry’s unlimited liability culture for alleged past mis selling.

    The fsa and its RDR strategy has destroyed any sensible debate as to who is going to take over from retiring IFAs and those who have had enough

    It took me 23 yrs to build up my practice to find that at a stroke it is going to be virtually worthless in the near future when the next step to destroy the IFA sector is to ban trail commissions already in force.

    You heard it here first folks!

  20. Most of the comments in relation to this article appear to paint a depressing picture. There are honest people out there who are making a good living out of being advisers. The inference from most of the comments, is that the only way you can make a good living in the business is by being a crook. It would be true to say that it has become harder to make a good living over the years. However, it is not impossible.

    It has become harder to get into the business over the years and with the higher academic requirements potential recruits may well feel that they would be more successful by going into accountancy or law. Ultimately there is no easy way to be successful in life and if potential recruits have good people skills and want to succeed in this business they can still do so despite what the doom merchants say.

  21. I have mentioned it before but think it is worth repeating : the bureaucracy (FSA/FCA) is NOT scaleable.

    That means it is weighted towards the big industry players who can afford the overhead of compliance.

    The SME’s struggle to cope and IMHO are being overwhelmed by it.

    Ther is a future but realistically only for the big boys as things stand … unless you are that very rare individual who can somehow overcome the bureaucracy, such as the now famous Dave Fishwick aka ‘Bank of Dave’.

    However, individuals like Dave are very thin on the ground, most will just rollover.

  22. Anonymous | 1 Mar 2013 6:03 pm

    No doubt you think anyone who earns a living from providing a non tangible service is a scumbag.

    You are one of these people who has been duped into thinking an investment is a good thing due to your greed when being promised double digit returns.

  23. Why should we even care?

    This question actually highlights what I think is wrong with this industry.
    1. The very assumption that people leave full time education and then enter financial services is in my view a completely fatuous notion. Who wants to be told by some spotty impecunious youth how to handle ones financial affairs? It is all very well having the academic qualifications, but they are completely useless unless you have some first-hand life experience of running money, a business or otherwise having made your way in the world. Please don’t tell me that they will start their careers as planners – that doesn’t really make a difference to this dialectic. I find the notion that someone has spent their whole working life only in Financial Services highly unappealing.

    2. Quite simply if there is a living to be made in the sector there will continue to be advisers, if not there won’t and people will either have to rely on their own acquired knowledge, their accountants, stockbrokers or solicitors as they did up until the mid 1970’s when financial advisers were invented by Mark Weinberg.

  24. Harry is correct.
    Why should we care?
    Leave this problems to the regulator.
    No doubt, they will have a solution.
    Perhaps not a suitable one but who cares?
    It is not our problem where the next generation of advisers come from.

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