The number of financial advisers in the UK is on the wane.
Recent figures released by the FCA revealed that there has been a 2 per cent fall in the number of financial advisers from 21,881 in January last year to 21,496 in October. This picture is corroborated by Ken Davy on page 36 of this newspaper.
The number of RDR advisers in the country is down by more than 1,500 since July 2013.
What is more, the advisory marketplace is saturated with ageing advisers who are expected to retire in their droves within the next decade or so, with very little young blood entering the industry to take up the reins.
As the industry braces itself for an influx in demand for professional advisers in the immediate future, especially with regard to the changes in pensions, it begs the question: Should advisers get serious about finding and training their prodigies?
“I think the answer has to be yes,” said Colin Low managing director at Kingsfleet Wealth in Ipswich, adding: “But the difficulty is identifying whether we should train them up from graduate level or at an even younger age.”
However, Mr Low noted: “Young people often look to go into law, accountancy and even IT at degree level, but a course in financial planning is often overlooked because very few have a clue what we actually do, which is a shame because there are a lot of opportunities in this sector.”
It is unlikely to be the salary which is deterring youngsters from entering the trade. The typical annual salary at trainee adviser level ranges from £20,000 to £30,000, while senior financial advisers can earn in the region of £60,000, according to recruitment and careers advice website Prospects.
Beyond this, the sky is pretty much the limit when it comes to wages. Wealth managers and private client advisers based in the wealth division of major retail and private banks can earn in excess of £100,000.
Not that money should be the sole motivation, according to Rebecca Aldridge, managing director at Nottingham-based Balance: Wealth Planning, who said: “It is about making a difference in a person’s life. We are there to motivate, answer questions and relieve clients of their worries, to enable them to concentrate on what it is they want to do. If you like helping people solve problems then it is a brilliant profession to enter.”
Traditionally, financial advisers have started their careers at a bank and life office, where they learn the tools of the trade before leaving to join an advisory firm or even start up their own practice.
The RDR brought about the requirement for advisers to have a level four diploma qualification at least, replacing the old qualifications and credit framework level three qualification. This caused a drastic dip in adviser numbers from around 40,000 at the end of 2011 to 31,000 by the start of 2013.
Adviser networks have since sought to attract and develop the next generation of financial advisers by launching training schemes. Openwork, for example, launched a training academy in October last year, aimed at getting college or university graduates aged between 19 and 27 to level three or four within a year.
Openwork chief executive officer Mary-Anne McIntyre said: “We believe this is a great opportunity to support the long-term future of our member firms as well as the industry in general.”
Many have lamented the dwindling number of intermediaries, often predicting a future ‘advice gap’, but perhaps the fall in numbers is directly correlated to the rise of a relatively new job role which has taken the financial industry by storm: paraplanning.
In the last five years there has been a significant growth in the number of paraplanners, with around 2,500 currently operating in the UK today, according to Kim Bendall, director at Oxfordshire-based The Paraplanners.
The role of a paraplanner varies, and depends on skill and experience, but could involve undertaking some of the more time-consuming parts of an adviser’s traditional role and even delivering personalised recommendations. Interestingly, there is currently no minimum or maximum qualification for paraplanners.
Paraplanning could prove to be a good point of entry into the sector for young people because it takes less time to become a paraplanner than an adviser, according to Jonothan McColgan, director and chartered financial planner at Bath-based Combined Financial Strategies.
He said: “It could be the case that young people are entering the role, which teaches the individual key aspects of the services financial advisers are required to provide, with the aim to one day secure a level four qualification and emerge as a fully bona fide financial adviser.”
Training a graduate up to become an adviser requires time, patience and money, which many advisory firms are often too small to provide, according to Ms Aldridge. She added: “I think a lot of advisory businesses like to take on young people as paraplanners, and keep them as paraplanners because there are not a lot of them out there.
“Ultimately it is the young person who misses out because they are not able to develop in that business.”
Advisers may be reluctant to offer training opportunities in fear that the young person would leave the company upon receiving the all-important level four diploma to start a rival advisory firm of their own.
Mr McColgan, who revealed plans to offer work experience and internships at his firm, said: “I think there is a small element of this, but companies cannot expect to hang onto talent. Instead of being bitter, firms should be proud when a person leaves to start up their own business because it is a testament to their quality training.”
Despite the supposed threat from DIY investing, demand for advisory services shows no sign of abating. We are living longer, which means that more people will be able to make use of the pension pot they have spent their working life accumulating, and sound advice on which option suits them best.
In a survey of 963 financial advisers from across the UK, conducted by Skandia, two-thirds said they have seen an increase in demand for their services since pension and Isa changes were announced in George Osborne’s 2014 Budget speech.
This rise in demand comes as welcome news. But with the average age of financial advisers often cited to be in the mid-fifties, whether there will be enough advisers to satisfy demand in the future hinges on the outcome of a drive to train a new generation of them.
Having recently won the Young Financial Adviser of the Year award at the unbiased.co.uk Media Awards 2015 at the age of 38, Mr McColgan noted: “It clearly shows the demographics of the industry if I’m winning such an award at my age with 15 years’ worth of industry experience.”
Myron Jobson is a features writer at Financial Adviser
Key Points
There was a 2 per cent fall in the number of financial advisers between January and October 2014.
Few young people consider qualifying as a financial adviser, very few having a clue as to what they do.
Companies cannot expect to hang onto talent indefinitely.
