The decline of life offices offering adviser training programmes raises questions about who will educate the next generation of advisers, experts say.
More than a third of advice businesses are looking to recruit untrained staff but few have the resources to handle such a process, warns support services firm Threesixty.
Out of 127 respondents, its survey found 38 per cent of firms are looking to hire inexperienced staff.
Threesixty managing director Phil Young says: “To take on someone inexperienced and supervise them and train them to be a competent adviser is an onerous task.
“What used to happen was that everyone had worked in a life office previously, where they had big training regimes that would also be quite technical.
“But there’s no longer the life company positions to get those people trained up because many firms have shut all that down.
“So now advisers are trying to train their own, but very few firms are geared up for that and there isn’t really a breeding ground for new people coming in to the industry. “
Mattioli Woods consultant Doug Ryan agrees. He says: “The normal flow of people coming in from insurance companies has reduced, mainly because insurers are looking to provide their own advice in future.
“So if you have firms that are wanting to grow, then they need to put in place strong training programmes, but its difficult to get that structure correct and not many firms have that.”
Paladin Financial Services managing director Tim Purdon adds that small advice firms, in particular, don’t make enough money to employ staff unable to generate income.
He says: “It’s going to be some time before that individual will be able to charge fees for his or her services and during that time they will be a loss to the business, and there’s a further cost to having someone in your office to supervise that as well.
“Most of us in the industry are of a certain age where we are approaching retirement, so suddenly there is going to be quite a gap in the market and providers might want to think about the problem themselves.
“Maybe they could be training people specifically so that they can then transfer into the adviser sector relatively easily. They are the only establishments that have the margins within the business to enable them to do that.”
There are new routes into the industry which are already being explored, not least the apprenticeship and graduate schemes and the emergence of roles like paraplanners. These allow people to contribute to the business at an earlier stage and some of those, but not all, will stay and develop further rather than moving on.
But it’s fair to say the intermediated advice sector is made up predominately of small firms who don’t have the resources to invest in developing groups of people in the same way as banks or insurance companies.
Within planning they cannot take that kind of broad approach and therefore need to be more restrictive with how many new entrants they can induct into their business.
That has been the case for the last two or three years but we are starting to see some more positive signs of new entrants coming into the market, and half of our new members last year were trainees to financial services.
There are a lot of firms that are looking at how they can bring new people into their respective processes.
The Personal Finance Society also has some apprenticeship schemes that are just in the process of being formally finalised, including one about to be completed around paraplanners.
We are one of the key sponsors for that and there is combined support for from across the planning sector because we need to find mechanisms to support both large and small firms.
It is as much a challenger for small firms to understand and to put some time aside, and we and some of the larger firms can play a role in setting the standards.
So while this has been an area of concern, it is something we are tackling, including talking to the Government about whether the costs and risks associated with giving advice are barriers to bringing new entrants into the market and deterring new firms from launching.
Keith Richards is chief executive of the Personal Finance Society