Most people would say the biggest issue for the financial advice industry is keeping up with the burden of regulation.
Admittedly, this is a constant worry.
But one of the most pressing concerns for the sector in the longer term is how to reverse the decline in the number of IFAs.
In August 2019, service provider Octopus Investments surveyed 205 IFAs and found 58% will exit the sector within the next decade.
This is equivalent to more than 15,000 financial advisers leaving the profession, out of the roughly 26,677 who currently work in the intermediary space.
In a bid to understand the recruitment stumbling blocks the sector is facing, International Adviser spoke to three people at different stages of the Chase De Vere paraplanner-to-adviser training scheme.
Remove the negatives
Matt Beck, an IFA in the firm’s Bath office, told IA one way that the industry can tackle the decline is to “try and improve the reputation of financial advisers”.
Leeds-based paraplanner Lily Bell concurred, adding: “We are sometimes still affected by a pre-retail distribution review ‘salesy’ stereotype.”
Negative portrayals of financial advisers can be very off-putting for someone looking for an industry to join – a situation that isn’t helped when only 48% of advisers would actually recommend it as a career, according to an August 2019 survey from network Openwork.
United against poor practice
The industry could stand to benefit from a PR-type campaign that would highlight the growing professionalism and benefits of becoming a financial adviser.
But there are too many different financial advice bodies for one to be able to take charge and work to remove these stereotypes from the mindset of the public.
IA reached out to the Chartered Insurance Institute (CII) and the Chartered Institute for Securities & Investment (CISI) to understand what needs to be done to eradicate the negativity.
“Yes, I think stereotypes do play a part,” Jacqueline Lockie, head of financial planning at the CISI, told IA. “I think everyone should play a part in tackling this, including professional bodies.”
Keith Richards, chief executive of the Personal Finance Society, told IA: “Public perception of the profession is tainted by past mis-selling, the British Steel pension transfer scandal and the fact that commission driven salesmen pushing products have called themselves financial advisers.
“While it is generally a small minority who are guilty of bias and poor practice, their actions impact the whole sector.
“Factual or perceived, unfortunately, perception is reality and must be addressed. It is important for the profession to be more united against poor practice and equally increase consumer awareness of what to expect from a financial adviser committed to the highest professional standards.”
Improve engagement
The Octopus survey in August 2019 reached out to 2,061 adults and 1,002 UK students aged 18-21 and found just 9% would consider a career as a financial adviser.
With the presistent negative stereotypes, how is the industry advertising itself to people looking for a career?
Chase De Vere’s Beck, Bell and London-based administrator Chelsea Knowles were all asked whether they had any help from professional bodies to get into the sector.
They all replied no.
But Knowles, who wants to become an IFA, added: “When it comes to the exams aspect, I have found the CII very helpful. There are many chances to attend learning and networking events and I enjoy meeting other people in the industry.
“I’ve been able to get some good guidance from some of these events.”
These similar experiences the Chase De Vere trio faced highlight one of the key problems.
It is all good and well trying to help those already in the sector, but failing to reach out to potential recruits who are unaware that being a financial adviser is a possibility is not going to help reverse the dwindling number of IFAs.
Schools are the key
Awareness of the advice sector needs to come come before ages 23, 34 or even 45.
Education and schooling can introduce people to the industry at a young ager and help provide a pathway to tackle the recruitment gap.
The CISI’s Lockie said: “I think, as a nation, we need more basic financial education in schools, colleges and universities to help the next generations really understand and get to grips with their own finances.
“This would then have a positive effect on the profession, in time, as those individuals grow to become adults.”
Whereas, the PFS’ Richards believes that neither age nor gender should be a barrier to entering and achieving success in the financial advice profession.
“It is vital that our profession ensures it is inclusive and encourages greater diversity in order to encourage a wider array of individuals to pursue a career in financial advice where you can make a huge positive difference to people’s lives.”
Positives of the sector
Some of the key messages that professional bodies like the CII and the CISI need to put out to potential financial advisers are the positives of joining the sector.
Bell, who is close to achieving chartered status, said that the pros of becoming part of the advice industry are “credibility in delivering valuable, life changing advice and having a real impact on clients’ quality of life”.
“Our industry attracts dynamic, intelligent, interesting individuals who make fantastic colleagues and mentors,” she said.
Knowles added: “The idea of being able to build my own career is definitely something that attracts me to financial planning.”
Beck, who became a fully-fledged independent financial adviser in July 2019, said: “It can be very rewarding, when I speak to new clients.
“They are often a bit nervous about what kind of financial position they are in, [but] after a couple of hours it is often possible to have the basis of a plan to help them reach their goals.”
What it takes to be an IFA
In a bid to reach out to as many people as possible, the advice industry needs to illustrate that it is not all about knowledge.
Having technical proficiency is paramount, however, people skills are also a key component to being a financial adviser.
“I think the most important qualities are being empathetic, listening to clients and helping them understand what their goals and objectives are,” said Beck.
“It is very much a people business, without the people skills having strong product or industry knowledge still isn’t going to help too much.”
Bell said that “tenacity, compassion and the ability to put yourself in the client’s shoes” are three qualities advisers need.
“The most impressive advisers that I’ve known are those who know everything there is to know about their client and are therefore able to develop a trusted and open relationship,” she added.
The sector also needs to demonstrate that someone looking to enter the industry does not need to be the perfect IFA at the start because they are going to learn and improve along the way.
Knowles said: “I think the qualities that advisers need are to be personable, trustworthy, good listeners, willing to solve problems, have technical knowledge and compassion.
“Some of these qualities I have, others I will be improving.”
