April 2022
How to grow the advice community?
Introduction by Money Marketing Editor Katey Pigden
Smoothed funds have created a space for those with a low-to-medium risk appetite, in the form of multi-asset risk-rated funds designed to deliver lower volatility for investors. The concept is similar to that of with-profits funds, which were very popular in the 1980s and 1990s. Smoothing can remove day-to-day worries that arise from short-term market volatility, and tend to come with a long-term (five or more years) view. In this supplement, we take a comprehensive look at the role of smoothed funds and those they are most suited to. How advisers use them within a balanced portfolio for those at retirement can differ, so finding the right suitability and solution can be key. Volatility has been an issue over the past few years and it is something retirees would want to shy away from. We also look at how volatility needs managing, particularly for the low-risk client. A lack of product capability, particularly in technology, is something we take a closer look at in this supplement, finding out how it could make it difficult for clients to manage the challenging decumulation phase, and how changing propositions and having a coherent strategy can help as much as product choice.
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We need more advisers. If we ever hope to get a greater proportion of consumers to seek good-quality financial advice, the advice community needs to grow. Generally, as a society we are living longer. Advisers are primarily in the 45-60 age bracket. If they intend to stay in work longer to advise their ageing clients, perhaps there won’t be too much of a cause for concern. But we often see reports about a large number of advisers looking to retire in the next five years. If their career has been dedicated to helping others achieve their retirement ambitions, it stands to reason they may want to practise what they preach and hang up their boots to enjoy their later life, work free. So, at the very minimum we’re likely to need new advisers to replace those leaving the profession. But really it needs to go further. And we need a greater push to show why financial advice is an attractive career option. Anecdotally, I’ve had several people tell me they ‘stumbled’ into financial services. Now advice has such a professional standing, there’s more reason for more people to actively seek it as a path they want to be on. I’ve also heard several advisers suggest the current number in the profession is ample enough to cater for the demand for financial advice. Yet many advisers have between 100 and 200 clients to serve and may already be close to capacity without compromising on the quality of service. So, if potential clients get into a position where they could benefit from professional help – where should they go? When those advisers who plan to retire do so, who will look after their existing clients? At Money Marketing, we’re keen to attract new talent into the advice profession – whether young people starting out or those looking to change career and put their skills to use elsewhere. Several big advice firms also recognise the need and have dedicated academies to train the advisers of tomorrow. And, of course, we need those who already know the ropes to show the way before they decide to call it a day. Some advisers also tell me there’s no need for more consumers to seek financial advice because they don’t have enough money to invest. Or it wouldn’t be in the adviser’s interest to advise them. That may not always be the case. If would-be investors start out with a simple DIY approach, they may eventually have more complex financial requirements they want a human to help with. On the flip side, there are advice firms out there that recognise the need to grow their business from its existing level, and to achieve such goals a recruitment drive will be necessary. There are concerns within the profession about whether candidates have the suitable skills, experience, desire and attitude to support clients. How clients are treated when their adviser wants to retire is a big concern for many, and rightly so. This shows how important it is to get some new talent in to ensure clients will be in safe hands. This doesn’t necessarily have to mean recruiting existing advisers from elsewhere. It should be about keeping an open mind. Someone may have all the right soft skills but need more help with the technical side of advice. Experience from elsewhere is still worth having and may even encourage advice businesses to think about doing things slightly differently. There are opportunities out there for more people to get their finances in order and to benefit from the value advice brings. More potential should equal more advisers. A win-win situation.
Financial Challenges
Gemma Harle, Managing Director of Quilter Financial Planning
Features
We need a greater push to show why financial advice is an attractive career option
"
Now advice has such a professional standing, there’s more reason for more people to actively seek it as a path they want to be on
There are opportunities out there for more people to get their finances in order. More potential should equal more advisers. A win-win
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The adviser recruitment conundrum
Can advice firms achieve their growth ambitions?
How would you look to recruit new advisers to your firm?
Word of mouth / contacts
56%
LinkedIn / Social Media
43%
Advertise
30%
Recruiter
Qualification bodies/referrals from training organisations
21%
For more detailed analysis click here
Research shows most firms have limited capacity to grow simply by acquiring more clients, so what can they do instead?
By Amanda Newman Smith
Owners of advice firms often talk about how you cannot stand still in business – if you snooze, you lose. Something always needs to be happening in terms of developing the business, whether that is making plans for growth or exiting the business, refining systems and processes, improving customer service or a combination of any of those. Research from Quilter Financial Planning in conjunction with Money Marketing provides an interesting snapshot of where advice firms are currently positioned and their future plans. It surveyed 326 advice firms, with respondents ranging from business owners to those in financial adviser/planning roles. The main ambition for advice firms will inevitably vary from firm to firm, depending on where they are in their journey and what the owners want to achieve. Not everyone aspires to ‘world domination’ – some people just want their business to make a decent enough living to support their families and there is nothing wrong with that. The vast majority of firms surveyed – 70.38% - want to grow their current levels of business. Among the rest, selling the business and exiting the market was the primary aim of slightly more firms than sustaining existing levels of business – 12.89% and 10.1% respectively. With most businesses focused on growth, you would expect to see advisers at those firms having plenty of spare capacity to take on new clients or the firms planning to recruit lots of new advisers, if not both.
Are firms likely to achieve the growth they aspire to if their recruitment plans are fairly modest?
Bringing more advisers on board will be a more likely avenue for growth
Ensuring clients were treated well in the future and not shoehorned into an offering was a concern for half of respondents
How to grow the advice community
Aspirations
Sufficient resources
The survey shows most participating firms have limited capacity to grow simply by acquiring more clients. Almost two-thirds already have at least 100 active clients per adviser in a typical year. Of those, 27.3% have at least 200 clients. We know from elsewhere in the survey that advice firms value their existing clients. Understandably they would not want advisers to overstretch themselves in terms of client numbers, because the quality of service to existing clients would no doubt suffer. Therefore, it appears that bringing more advisers on board will be a more likely avenue for growth. Just under a fifth of firms surveyed are planning to recruit six or more advisers in the next 12 months. Most firms that are planning to recruit in this time frame are looking to hire between two and five new advisers (29.75%) - roughly on a par with firms who are not planning to recruit at all (30.11%). Having no plans to recruit is fine for firms who are not trying to grow their businesses, but others will need to take on more clients, hire more advisers or both, as doing nothing is effectively the same as those businesses standing still. The question is, are firms likely to achieve the growth they aspire to if their recruitment plans are fairly modest? Not only that, respondents also shed light on the difficulties they face in recruiting advisers, from remuneration expectations to a lack of suitable experience. Given that firms may have experienced a huge gap in expectations relating to what they need and what candidates are bringing to the table, it is understandable if they are taking a cautious approach to recruiting advisers.
The ability to grow current business levels will also depend on a firm having enough support staff and/or paraplanning resources to cope with that growth. Most advice firms surveyed – 30.23% - have at least 11 support staff, although a sizeable 28.57% of firms have between two and five. Good paraplanners are worth their weight in gold to advice firms, but recruitment in this area is fraught with similar problems that firms experience in recruiting new advisers – namely, getting the right skills and experience at the right price. Luckily, most firms – 55.28% - already have in-house paraplanning resources. Just under a fifth - 19.92% - of firms rely on outsourced paraplanning services, while virtually the same number (20.73%) do not have paraplanning resources. However, a sizeable chunk of firms – 23.98% - intend to recruit a paraplanner or more paraplanners, which should put them in a good position to support future growth. Almost half the firms surveyed - 48.16% - are directly authorised to give advice. This is more than double those who are a member of a network – 23.01%. Just 13.5% of firms said they are members of a service support provider. These results show that most firms are ‘masters of their own destiny’, but in ‘going it alone’ they will need to take care of things like compliance and business development themselves. In contrast, networks and service support providers often lay on these services for their members. However, networks charge a percentage of the fees advisers receive from clients and there may be admin fees on top.
Whatever set-up firms choose, there will always be a finite amount of time and money available to invest in growth, so firms need to deploy those resources wisely. Having the right advisers in place to service existing clients and attract new clients is a significant concern for most respondents when thinking about the future of their firms – 49.18% and 40.98% respectively. This is important as some people running advice firms will be thinking of retiring in the near future, so will want to ensure their businesses are in good shape for a potential sale and that existing clients will be in good hands. In fact, the research highlights that ensuring clients are treated well in the future and not shoe-horned into an offering is a concern for 49.59% of respondents. It seems that advice firms are truly following their mantra of putting the clients first, as a smaller percentage of respondents are worried about issues that impact themselves. Handing on a legacy or protecting their reputation is a concern for 29.1% of firms, while 27.46% are worried about exiting without fear of future liabilities and tax. Overall, the picture is of businesses that want to build on what they have but are perhaps finding themselves hampered from fully realising their ambitions. Financial advisers tend to be resilient in difficult circumstances so it will be interesting to see how they fare.
Home
Are you looking to grow your firm by recruiting more advisers in the next 12 months?
Yes, I am/we are looking to recruit one other adviser
Yes, I am/we are looking to recruit 2-5 advisers
Yes, I am/we are looking to recruit 6 or more advisers
19%
No, I am/we are not looking to recruit
Although these days there are more routes into the advice profession, research highlights a mismatch between what employers need and the skills and expectations of the talent pool
Spotlight on the adviser recruitment conundrum
The seeds of the recruitment challenge that advice firms face were sown a long time ago. Even before the Retail Distribution Review took effect at the end of 2012, a ‘lack of new blood’ was a common complaint. In recent years, the focus on professionalism, with the requirement for advisers to be at least level 4 diploma qualified, seems to have increased its appeal to younger people but there is still work to be done on awareness. The development of different routes into the profession, such as via paraplanning and training schemes run by big advice firms, is also showing second careerists they can build a career in financial planning. It is not uncommon to see ex-military personnel and former sports professionals retraining as advisers. Research from Quilter Financial Planning in conjunction with Money Marketing shows the ‘recruitment conundrum’ still remains for advice firms. But the problems go beyond simply attracting new talent to the profession.
Years of failing to bring enough ‘new blood’ into the industry has created a gap between experienced advisers who are perhaps looking to retire in the next five to 10 years and younger advisers coming through. Without that gap, arguably there would be less pressure on firms now as they try to recruit advisers for roles they are not ready to fill. When recruiting new advisers, a candidate’s attitude and cultural fit dwarfs all other attributes. On a sliding scale between 1 and 5 – with 1 being not important and 5 being extremely important, 63.2% selected 5. An additional 16% opted for 4 in terms of how important it is to them. Firms know they can work on factors such as experience and qualifications if a candidate has the right attitude and cultural fit. But it is difficult to do the reverse. In relation to other attributes - experience, qualifications and broadening the diversity of advisers in the firm - most respondents opted for 3 on the sliding scale, indicating a neutral position. Are they missing a trick in not giving greater priority to drawing advisers from wider backgrounds? However, responses were far from neutral in relation to how many years of experience firms look for in an ideal candidate. Just 13.25% are happy to mentor and develop the right person with no experience – most respondents (38.96%) want someone with two to five years’ experience who can ‘hit the ground running’.
Survey results show many advisers are finding it difficult to recruit due to the time and effort of ‘bedding in’ new joiners; a lack of candidates with suitable qualifications and/or experience, and the remuneration expectations of potential candidates. Overall, the picture which emerges is one of a mismatch between what employers need and the skills and expectations of the available talent pool. The research gauged opinions from 326 respondents, ranging from business owners to those in financial adviser/planning roles. They were asked how challenging they are finding various factors when trying to recruit advisers. Responses were scaled from 1 to 5, with 1 being not challenging and 5 being extremely challenging. Overall, a lack of candidates with suitable experience stands out as the biggest challenge for advice firms. Nearly two-thirds of respondents rated this as either 4 or 5 on the sliding scale (36.11% and 22.22% respectively), indicating that firms are finding this extremely challenging. Remuneration expectations are close behind in the ‘extremely challenging’ stakes, with 53.36% of respondents rating it as either 4 or 5 on the sliding scale. Results were similar in relation to the time and effort it takes to onboard recruits. A total of 52.78% of respondents rated this as either 4 or 5 on the sliding scale.
Although fewer respondents found a lack of candidates with suitable qualifications extremely challenging, the numbers are still significant. A total of 43.87% rated this as either 4 or 5 on the sliding scale – more than double those who found it not challenging. Additional comments provided by respondents shed light on the problems they come across with potential recruits. Younger advisers were said to have unrealistic expectations around employment – wanting to ‘work part-time hours for full-time pay’ and not knowing how to take instructions or feedback in the workplace. Post-lockdown, advice firms are also having to accommodate candidates’ preferences for flexible working hours and the ability to work from home, plus recruits having no client bank to initially support them. However, some factors, like increased regulation are beyond the control of advice firms and potential recruits. This is illustrated by comments from one respondent: “If the adviser has ever worked in a firm/for a provider that has advised on DB [defined benefit pensions], even if they have not themselves ever been involved in DB, it is taking up to nine months for the Financial Conduct Authority to authorise.” Delays like this inevitably hit small firms hardest. These firms already struggle to find the time and resources to train or ‘bed in’ recruits, so do not need further complications.
Mismatch
Pressure
A lack of candidates with suitable experience stands out as the biggest challenge for advice firms
When recruiting new advisers, a candidate’s attitude and cultural fit dwarf all other attributes
Post-lockdown, firms are having to accommodate candidates’ preferences for flexible working hours
Responses highlighting the main barriers or concerns when recruiting newly qualified advisers emphasised the need for experience. Most respondents – 40.73% – pinpointed lack of financial advice experience, closely followed by not having the time to coach recruits (34.27%). Comments made by respondents in relation to this issue are revealing. One refers to newly qualified advisers having ‘excessive expectations with little experience or proof of aptitude’, and there are concerns employers will be used as a ‘stepping stone’ to a bigger salary elsewhere. Firms have their own financial considerations when hiring newly qualified advisers who have no clients to bring with them. Firms have to meet the initial hiring and training costs until that adviser has their own client bank. It is a big ask for firms that are worried about others poaching the person they have invested time and money in and obtaining the finished article. Perhaps these concerns explain why most respondents – 56.5% – would look to recruit new advisers through word of mouth or contacts. As well as saving money on advertising and recruitment costs, there is perhaps a feeling that people linked to someone you know are more likely to be suitable candidates. However, a substantial proportion of firms prefer to leave it to the professionals, with 43.9% opting to use recruiters. This brings the issue full circle, as being able to specify their requirements is challenging if the talent pool falls short.
Experience
Younger advisers were said to have unrealistic expectations – wanting to 'work part-time hours for full-time pay'
How many years of experience are you looking for in an ideal candidate?
No experience - I am/ we are happy to mentor and develop the right person
13%
< 2 years – I am/we are happy to support the right person
23%
5+ years – I am/we are needing someone with extensive experience
2-5 years – I am/we are needing someone who can hit the ground running
38%
There are just over 26,000 advisers and around 15 million people who could benefit from advice. How is the profession going to fill the gap?
By Gemma Harle
A major challenge we all face is that the advice profession is generally not very good at attracting the next generation of advisers. Other professions such as accountancy do significant amounts of promotion to school leavers and graduates to outline what a career in their discipline can provide. As a result, they are very successful at encouraging large numbers to join. To become a financial adviser, you do not need to have a degree to have a successful career. It’s the softer skills – for example, being able to build a rapport with clients, understanding their needs and showing true empathy – that have been shown to be the most important. But the profession could make this clearer, and thereby attract people who do not take the traditional academic route. Another perception is that financial advice is ‘only for the middle class’. Increasing diversity within the profession can only help remove this preconception and could actually have the additional advantage of sharing the benefits of advice with a much wider audience. It’s been well documented that the profession urgently needs an injection of new talent to bolster its numbers or else we face the advice gap growing ever wider. With the cost-of-living challenges everyone is facing, on top of the uncertainty following Covid, consumers are increasingly worried about their finances and will be turning to advisers to help them. The UK needs professional financial advisers now more than ever. People need help to make the best choices, which means there are plenty of opportunities for current and new advisers alike. Social and demographic changes are also contributing to a need for financial advice, with an ageing population and differences in working patterns combining to increase the complexity of financial decisions. There is an urgent need for young talent to join the financial advice profession. In the UK there are just over 26,000 financial advisers, while there are around 15 million people who could benefit from receiving advice. The average age of those advisers is around 58 and retirement is very much on the horizon. The result is that over the next three to four years the financial adviser community is set to lose around 7,000 advisers to retirement, which just adds to the pressure on the profession to identify and recruit younger talent.
The UK needs professional financial advisers more than ever
Spread the message to family, friends and neighbours that becoming a financial adviser can represent a great career
Who better to advocate the profession than those already in it?
Managing Director, Quilter Financial Planning
The need for advice
Young talent
The events of the past two years have had a huge impact on people. Lockdown has given everyone the opportunity to look at their life and their career and re-evaluate what they want from it. There are many reasons why the advice sector could be perfect for those thinking about a different career. Financial advice is a career rich with professional development opportunities as well as work-life balance. Flexibility and autonomy are becoming more and more attractive to these ‘second careerists’. Any financial planner will tell you one of the joys of the role is being able to set one’s own hours. There may never be a better opportunity to welcome budding advisers to the profession.
What a career in financial advice can offer
1 - If there's someone you know who is thinking of changing their profession and is looking for more flexibility in their working life, why not encourage them to consider a career in financial advice? Spread the message to family, friends and neighbours that becoming a financial adviser can represent a great career. Who better to advocate the profession than those already in it? 2 - Share links to educational resources such as the Quilter Financial Adviser School, which provides training programmes for people from all walks of life looking to start or progress their career in financial advice. We’ve had ex-sports professionals, ex-members of the forces, mothers returning to work and paraplanners who have decided to become advisers all study with us and forge successful careers. 3 - Are you making the most of social media and local promotional opportunities? Whether talks to local groups, advertising with local organisations or offering your expertise to help young people learn about money, all of these can both promote your services to new clients as well as raise the profile of advice as a profession to those who had maybe never considered it before.
The role you can play
Gemma has been in the financial services industry for over 30 years with experience at both mortgage lenders and distributors. She was Head of New Business at Mortgage Trust for 12 years before moving to Mortgage Next, becoming Managing Director in 2005. In March 2010, Gemma joined the Tenet group as Managing Director of TenetLIME, sitting on the Tenet Group board. In October 2017 she joined Quilter Financial Planning and is now Managing Director of the Network Advice Business. Along with her roles within the industry Gemma has also been on the board of the Association of Mortgage Intermediaries for over 7 years and sits on the FCA Small Business Practitioners Panel. Most recently, Gemma’s work and achievements throu ghout her career have been recognised by Professional Adviser who have awarded her ‘Woman of the Year: Mortgages’ in both the 2019, and 2020 Women in Financial Advice awards.
To find out more and to contact us please visit us at www.quilter.com
analysis
How many active clients does your firm work with per adviser in a typical year?
Fewer than 25
3%
25 - 49
10%
50 - 99
100 - 199
33%
200+
27%
None of the above
7%
What is the main ambition for your advice business in the next 3-5 years?
Sustaining your existing levels of business
70%
Selling the business and exiting the market
Growing your current levels of business
12%
What would be your main barriers/concerns to recruiting newly qualified advisers?
I/we don’t have any concerns
22%
I/we don’t have the time to coach
34%
Lack of financial advice experience
40%
Lack of trust from clients
Lack of life experience
Do you currently have paraplanning resource available?
I/we outsource paraplanning
55%
I am/we are looking to recruit a paraplanner / more paraplanners
20%
I/we do not have paraplanning resource
I/we have paraplanning in-house
What worries you most when thinking about the future of your firm?
Having the right advisers in place to service my existing clients
49%
Having the right advisers in place to attract new clients
41%
Exiting with confidence, without fearing future liabilities and tax
28%
Ensuring my/our clients are treated well in the future and not shoe-horned into an offering
Other
50%
Handing on a legacy/protecting my reputation
29%
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