Opinion  

This country needs another 20,000 financial advisers

What would it take to double adviser numbers? For years, we have seen a decline, albeit not as precipitous as many feared. Yet despite official figures standing well north of 20,000, some advisers believe there may be fewer than 20,000 actually giving advice.

Imagine if we had 40,000 advisers instead. It would be much better for society and would provide an incentive for some investment advisers to move further down the income scale.

It might even produce a little more competition – advisers again tell me there is more than enough business to go around at the moment – while giving a further boost to efficiency.

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There would be a downside to this, in terms of business. But the compensation, surely, would be that firms would not have to spend so much time and effort trying to find decent advisers to recruit.

I would, however, include a few caveats in what I mean by ‘adviser’ for the purposes of this target. It isn’t a title to bestow on any resurrected bank-based salesforce, for example – unless such teams had gone through a long probation.

Regardless, a bold target could also provide a framework for debating other adviser goals – such as the obvious, much-needed reforms to compensation scheme and the acceptance of a longstop. Advisers might even get that ever-elusive regulatory dividend after years of facing increased demands in this area.

It would enable the advisory sector to be an important part of the solution in terms of closing the advice gap, and even address some of the fears about pension mis-selling doing the rounds in political circles.

To meet the target, industry trade bodies and big firms might consider what steps need to be taken in terms of training, and to determine what other incentives might be required.

It would also help advisers become a more important part of the economic and social infrastructure of the country, which might make ministers more careful about looking after the sector, too.

When it comes to targets, they might even aim to include a healthy geographical spread, though it is inevitable that most advisers will set up where the money is.

Admittedly, there may be some issues with designation. Would a ‘cyborg’ adviser, meaning one who partially relied on a series of algorithmic processes, work? Maybe, depending on the quantity and quality of advice being delivered. But delivering guidance probably wouldn’t work so well.

We would also need to consider the target date. Would 2020 be too soon? Is 2022 more realistic?

At the very least, a target would clearly mean that the adviser population would be very unlikely to shrink. While growth may concentrate mainly on robo-advice and/or guidance, surely a non-shrinking advice sector is the minimum the Financial Advice Market Review should aim for.

Yet imagine if the FAMR team was much more ambitious and set out a solid, credible, deliverable plan to double numbers. It would certainly be a radical departure from the past 20 years of regulation. But the benefits could be enormous.