When the journey of regulating the UK financial services industry began 30 years ago with the 1986 Financial Services Act, little did those in the industry expect that the number of financial advisers would shrink from 300,000 then to the some 22,000 registered today.
The demise of the adviser workforce, a decline in choice for ordinary people and increasing charges have all been side effects of the costs and burden of increased regulation. The good news is that the exodus now seems to be over, and numbers are starting to stabilise.
However, across the country, there remains a real shortage of talented professionals who can provide the personal financial advice and investment service that clients deserve to receive. Numbers have declined a further 15 per cent since the advent of RDR and one large acquiring firm recently told us they were ‘desperate’ for experienced advisers able to win the trust of clients.
The 22,000 IFAs left in the UK should feel confident – while RDR has doubtless been a headache, it’s left the career prospects of those who have stayed the course looking much stronger. Yet, there remains a genuine lack of new talent entering the industry, which is of real concern. As the average age of an IFA remains 50 plus - and with approaching half of IFA business owners planning to exit the industry in the next five years - the ‘adviser gap’ is growing ever wider.
The IFA community needs to focus on where its fresh talent is going to come from – and the effect this will have on their own businesses.
There remains a genuine lack of new talent entering the industryThe regulator encouraging banks to re-enter the advice marketplace and close the advice gap, and high profile announcements from Santander and RBS, could be just the thing to turn the tide and breathe much needed life into the industry.
Here’s my thinking - the banks will have to educate and qualify this new adviser workforce and develop their own training schemes. This will encourage young, capable, technology-savvy fresh advisers to think about financial advice as a career.
Market demand will lead more universities to launch courses with industry-specific qualifications, enabling graduates to come out qualified to level four. One or two already offer meaningful training, delivering graduates qualified up to level six.
This will create a virtuous circle and provide a much needed boost for the Independent Financial Advice sector too. Once newly qualified financial advisers cut their teeth working for a bank, the logical career move will be to retrain to offer a more holistic ‘financial planning’ led approach to advice.
The current adviser force of just 22,000 serving a population of 65m and rising is not sustainable, particularly as pension freedoms further fuel demand for financial advice. The IFA industry should see the banks re-entering the financial advice market as a positive move and embrace this potential source of new talent to meet the exponential growth in need for financial advice in the UK.
Brian Spence is managing partner of consultancy Harrison Spence
