IFAs need a boost

Kevin O’Donnell

Kevin O’Donnell

As we enter 2016, one of the major obstacles standing in the way of growth in the financial advice sector is a sheer lack of the raw material – financial advisers themselves.

Despite recent statistics showing welcome growth – with adviser numbers up by just over 1,000 in the past year from 21,496 to 22,557 after years of decline – the overall number of advisers remains woefully inadequate to meet future demand.

There is already a shortage of paraplanners, with recruitment agencies crying out for qualified paraplanning professionals, many of whom are finding their salaries soaring as a result. Financial planners, wealth managers and well-qualified financial advisers are also in demand.

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Comparisons with recent growth in other professions is not good. According to the Solicitors Regulation Authority, the number of practising solicitors rose from 115,487 in 2009 to 136,940 in November 2015.

The number of accountants working across the various accountancy bodies stands at more than 327,000 in the UK and Republic of Ireland (2014 figure). The Institute of Chartered Accountants in England and Wales had 114,468 members in 2009. In 2013 it had 120,513.

According to the Architects Registration Board there are now over 34,500 registered architects, and the term ‘architect’ is protected in law. The term ‘financial planner’ is still not protected by law in the UK.

Across the professions, despite the impact of the 2008 financial crisis, the picture is one of growth, and many have seen strong increases in numbers in recent years as consumers and businesses have sought professional advice from well-qualified and regulated people.

The same cannot be said – at least not yet – for UK financial advisers. Indeed the dismal current number, hovering just over 20,000, is undoubtedly one of the single biggest barriers to future expansion.

There are some green shoots. Numbers are up a bit; firms are employing more apprentices; there is a greater focus on graduate recruitment; paraplanners are being taken on; and so on, but the changes are glacially slow compared with other professions which are powering ahead. Financial advice is being left behind.

Some will say the issues are down to the ‘cottage industry’ nature of the financial adviser sector, but many solicitors also work in this way, in relatively small firms, and it has not held them back. It is a lame excuse.

One factor which may have helped other professions such as the legal profession has been their ability to add new services. Many have prospered on rapid growth in claims and accident litigation handling. I know some have expanded into estate agency, and divorce work has been a major boost for many firms. They have also grasped the opportunity to advertise. If you pick up your local newspaper I doubt you will miss the advertisements for local legal firms. This was unknown 20 years ago.

Financial advisers, on the other hand, have gone backwards. Seen any adverts for financial advisers lately? I doubt it. I am old enough to remember the days of Camifa (the Campaign for Independent Financial Advice) advertising on TV back in the 1980s. It seems like a different world.