Your IndustryMar 20 2019

Training the next generation

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Training the next generation

Ever since pensions freedoms came into effect in 2015, the pension and investment industry has experienced a tidal wave of transformation. 

One of the inevitable consequences has been the increased need for financial advice: gone are the days when the vast majority of people chose an annuity to live on for the rest of their lives.

Now people have a choice. While the ultra-rich always had more complicated affairs and were used to seeking ongoing advice with drawdown schemes, it is the mass affluent who are suddenly needing more assistance.

It’s self-evident there are now only 10 per cent of the advisers that there were 30 years ago Ken Davy

Their pension funds might be more modest, but there is now more choice for these people too, and advice is needed throughout their retirement.

The number of advisers has increased marginally in recent years, to 26,311 in 2018 from 25,611 in 2016, but in 2011 there were around 40,000, according to the Financial Conduct Authority.

Ken Davy, chairman of SimplyBiz Group, says: “It’s a problem now because the number of advisers in absolute terms has reduced as a result of regulation, and many people would say that regulation has gone too far.

“I think that it is the overall thrust where the reaction of the regulators to every situation is to increase regulation rather than looking at how you can regulate more effectively.

“No one is saying, ‘We don’t need regulation’; it has an important role to play, like the Financial Ombudsman Service and the Financial Services Compensation Scheme, but it is the way in which it is being put into practice.

“It’s self-evident there are now only 10 per cent of the advisers that there were 30 years ago.

“The process to recruit an adviser is significantly more difficult than it used to be. I’m not saying we should relax the regulations, but we need to spread the message about what an excellent career financial services is.”

How to find the best advisers

So what do advice companies do, wanting to take advantage of an increased need for demand and respond to market forces?

In the past, the sector was typically staffed by tied salesforces – advisers trained by product providers to go out and sell products, which may have meant that customers might not have ended up with the right product.

Few would see this as a way to recruit advisers of the future, with many seeing the IFA (or relatively independent – restricted – advisers) as a far stronger model.

But with fewer advisers in circulation, (and with the same CVs coming up time and again), how are adviser businesses recruiting?

Some adviser companies are taking it upon themselves to do their own training – either from scratch, with apprenticeship schemes, or individuals who are some way along the route, for example, holding paraplanner status.

A few advisers are lucky to be well-known enough to be approached or to know of well-qualified people to work with.

Helm Godfrey, a 27-strong adviser business, operating an employed and self-employed model, has sought to take matters into its own hands.

Graham Cross, managing director and chief executive at the company, says: “The only way we’ve found [to do it] is to effectively train our own advisers, through our own academy, bringing staff through from paraplanners to advisers.

“We have three or four advisers [who have gone through it this way] and one or two going through the process of being trained.

“We have a lot of paraplanners who have a desire to move to being advisers. That creates its own problem. 

“We want to find some career paraplanners, but it does also give us the opportunity to train up new advisers.

“Younger people coming in are better qualified than advisers used to be [in technical standards], but they don’t get the same level of training as to how to listen to clients as the more experienced advisers.

“Our process is to take them on a year’s training, spend the year shadowing experienced advisers to give them the skills.”

The individual can then decide if he or she wants to become a fully fledged adviser, or stay as a paraplanner – many are quite happy keeping the technical role.

One option that has been suggested is to make financial advice as a profession easier to get into.

Mr Davy says perhaps exams could be staggered so that someone starting out could take a protection qualification, for example, operate as a protection adviser and then train up to more complicated qualifications, relating to pensions, for example, or inheritance tax.

He says: “It would be good to see a way that the new people coming into the sector could develop more quickly through a graduated approach – perhaps starting with certain areas of business that they’re able to advise on more readily and easily so that more complex cases can be dealt with by an adviser who has a higher qualification.

“That would be particularly important and helpful to the mass affluent.

“Perhaps if you had a staging system, someone who was working in a practice on their way to become a fully qualified financial adviser could do a role advising the less well off – but nonetheless affluent – proportion of society.

“There simply aren’t enough advisers to fill that need.”

Work your way up

Keith Richards, chief executive of the Personal Finance Society, advocates the use of apprenticeships, to train people up from scratch, while still getting some use from them in the process.

The CII operates the Aspire Apprenticeship programme, which allows employers to take on youngsters keen to get into financial services, who learn both on the job and off the job. The employer receives some funding as part of the programme, to pay for the training and the basic salary for the apprentice.

He says: “A couple of years ago, when we launched apprenticeships we had 300 firms sign up in the first week.” The initial arrangement had to be put on hold because of funding issues.

“The way in which professional advice has moved to a more service-based proposition means there is greater demand for back office staff. Bringing future advisers into a role that contributes to the business from day one is far more valuable.

“They can contribute to the day-to-day running of the business, and put them on a clear path of professional business complete with shadowing [qualified] financial advisers.”

Work that apprentices can do from an early stage are things such as providing client updates, helping with research and back office operations.

Perhaps it is a whole lot easier if you have an industry profile like Alistair Cunningham, chartered financial planner at Wingate Financial Planning.

He says: “People know of me and approach me and say ‘I would like to join a good firm’.” One, for example, had a role handling financial advisers for Standard Life Aberdeen.

Key points

  • Pension freedoms has created an increased demand for advice
  • It is more difficult to recruit financial advisers
  • Adviser companies are using a variety of ways to source new adviser recruits

He was qualified to chartered level, and was a fellow of the PFS, but had never been client-facing. Nonetheless, with a bit of training, it has worked out.

Some have not worked out so well, for example someone who followed Mr Cunningham on Twitter, and he does not take on people who move jobs frequently.

The company tries many different approaches, and people with different backgrounds. “It is more important they have the right personality type and right behaviour; the fact that someone cannot do carry forward calculations is less important than whether they’ve got the aptitude to pick up cash flow planning,” he said.

Regardless of the way adviser companies try, many are using their ingenuity to take the industry forward to the next generation.

Melanie Tringham is deputy features editor of Financial Adviser and FTAdviser.com