A system of apprenticeships first developed in the late middle ages. Since then, it has come in and out of popularity. At the beginning of May, the government launched a new apprenticeship levy, which has the capacity to give apprenticeships a new lease of life. With the need for face-to-face advice at a high, the scheme offers a potential opportunity with a history too powerful to be ignored.
The levy requires all employers in the UK with an annual wage bill of more than £3m to pay 0.5 per cent of it towards funding apprenticeships. This money will be invested in quality training for apprentices and double the annual investment in them in England to £2.5bn by 2019 to 2020, compared with 2010 to 2011 levels.
While the government has taken strong steps with the implementation of the new levy, it has not been an easy road and has hit a stumbling block. The government has announced that it needs to revisit how it will distribute funding and many training providers may not receive funding until 2018. This will impact new learners and providers alike. While a massive hiccup, this does not destroy the merits of the initiative and the incoming government has the opportunity to ensure it gets it right.
As the world of apprenticeships becomes more popular, the financial services sector can use it as a tool to address some of the key issues plaguing personal finances in the UK. These include the advice gap, the savings gap and the pensions gap.
These gaps could be addressed through an increase in financial advisers. According to research from Association of Professional Financial Advisers (now merged with the Wealth Management Association, to be called the Personal Investment Management and Financial Advice Association), there was one adviser for about every 2,300 adults in the UK in 2015 when there were 23,864 advisers.
This is down from 27,080 advisers in 2009. In comparison, there are about 150,000 legal professionals and 330,000 members of accountancy bodies.
The apprenticeship scheme could help build the next generation of financial advisers. Through a scheme, a provider can recruit a variety of students including those who had left the armed services and others from outside the financial services industry.
Apprenticeships can also help reduce the average age of the current adviser workforce. At the moment the average age of an adviser is 45, and just 7 per cent are under 30.
The millennial generation is continually depicted as having a different mindset and priorities to those generations that came before. By bringing young people into the industry we can harness that new mindset and see how our industry can benefit and develop in the future.
Apprenticeships offer a useful route in. Statistics from a House of Commons briefing paper last year on apprenticeships show that in 2015-16 more than half of those in such schemes were 24 years old or younger.
Under-25s are not the only fresh perspective the industry could benefit from. We also need more women as there is a very low number of them in the industry. Recent research has shown that only 23 per cent of advisers are female. While this has gradually increased since 2013, when it was 10 per cent, it is still too low.
Apprenticeships can also help this lack as more than half of apprenticeships in 2015-16 were held by women.
By growing the diversity of financial advisers, people from different background will be able to find a financial adviser they can trust and relate to. This, in turn, can help the growing savings and pensions gaps in the UK.
The apprenticeship model could provide us and all advisers with a great opportunity to offer financial education alongside recruiting and training new advisers to ensure the prosperity of the generations of today and tomorrow...but it needs your help.
Darren Smith is head of the Financial Adviser School
