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Reasons to be cheerful

Kevin O’Donnell

Kevin O’Donnell

I am going to resist the temptation to tell IFAs they have never had it so good, because it is not quite true, but there is strong evidence that this is a relatively good time to be a financial adviser. Please do not start complaining to me all at once.

Why do I say this? Well, for all its challenges, the signs are that IFA businesses are increasingly being sought after, in some cases fought over, by suitors. IFA businesses are in demand. There is rarely a week that goes by without Succession, Fairstone or another consolidator announcing it has taken over an IFA business or even several businesses at a time as Succession did recently.

Financial advisers are increasingly being headhunted too and finding themselves in demand. Salaries for some financial advisers and wealth managers are going up and up, with expectations of £50,000 or £60,000 a year now a starting salary in some areas and salaries of £100,000-plus increasingly common. Compare that to the rest of the economy with its zero hours contracts and people struggling to get by. The contrast is huge.

Paraplanners are also being hunted by the recruiters with a zest never seen before. A decent paraplanner would not find it hard to command a salary of £40,000 or more in London. For a graduate in their 20s that is not too shabby.

At the corporate level I doubt there is a successful IFA firm in the UK of any reasonable size that has not been approached. What we now take for granted in the IFA sector is not how it always has been. Just a few years back some IFAs were struggling to find an exit strategy or a buyer. So what is behind all this frenzied activity?

In many ways I believe it comes down to the growing maturity, size and professionalism of the financial advice sector and the potential for the future. Firms are better run, better regulated and increasingly profitable. They are simply worth buying.

Robo-advice potential is also attracting interest and this sector is poised to grow. Last night I watched a TV commercial for a robo-advice business offering an easy way to build an investment portfolio with the help of online guidance. Robo has made the financial advice sector even more attractive to investors.

IFA firms are no longer just one-man bands struggling to get by. Consolidation is driving mergers, greater investment in businesses and more focus on client satisfaction. Many IFA firms are bigger and better run than firms of old.

I was reminded of all this recently with news that St James’s Place, arguably the UK’s largest wealth management business, now has more than 3,000 advisers – almost as many staff who work at the FCA. 

St James’s Place is not popular with everyone, but there is no denying it has prospered by delivering good customer service and giving clients what they want. In many ways, it is the model for a successful wealth management company. It has more than half a million clients and in 2015 client numbers grew from 484,000 to 525,800.

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