Advisers looking to join up with a national firm should be less focused on searching out the highest possible basic salary, according to Money Wise IFA managing director Malcolm Coury, who emphasises the capital adequacy hit businesses could be taking to compete in “bidding wars”.
Mr Coury said his firm has lost advisers at the recruitment stage because they refuse to be drawn into competing over basic salary. He said instead that Money Wise offers a generous bonus system that allows “successful” advisers to earn more overall while limiting the firm’s fixed costs.
Under proposals by the regulator advice firms would have to hold more capital in reserve to protect clients in the event they had to wind down. The rules were meant to be phased in from December this year, though they have now been postponed for a further two years.
The first phase of the rules would require advisers to up their minimum capital reserves from £10,000 to the greater of a minimum of £15,000 or one month of fixed costs. This will then increase in the second phase to the greater of three months of fixed costs or £20,000.
In an interview with FTAdviser, to be published later today (4 October), Mr Coury revealed that the plan for the firm over the next 18-24 months is to grow adviser numbers from the current 15 to 20.
He said: “A firm will offer an adviser £50,000 and another firm will offer £55,000 but we are not interested in all that.
“We know if the guy is successful they will earn the money through their bonus structure. We have never lost any existing advisers. Once on board they stay because our bonus system means they have the opportunity to earn above average for the industry.
“We feel very strongly that if you are confident in your ability and you can deliver, it doesn’t matter if your basic salary is a little bit lower than someone else. It’s about your actual total earnings and some advisers don’t look at it like that.
“I can understand that they just go for the highest possible basis salary but the problem with that of course is all that pushes up one’s capital adequacy requirements.”
Mr Coury added that the company’s recruitment drive will not see it bring in graduates or acquire rivals and that it is instead focused on hiring experienced intermediaries that he believes can add more value.
“We are not looking to do acquisitions – as ultimately you don’t know what you are buying until you have bought it but also you need to be able to raise the money to do it and a firm of our size can’t go out and spend £1m or £2m as we are just not big enough.
“We find the best acquisition is a good recruit. I mean we have individuals who work for the firm who are producing more and have more recurring income than a lot of the practices that I get details of that are for sale, so it makes more sense for us to get a really good recruit than go and fork out £100,000 on buying some business.”