Capacity Crunch

What are the institutes doing to help?

For advisers to be able to operate they need to have obtained a Statement of Professional Standing from any FCA-accredited body.

These bodies run level 4 diplomas (and above) for people to become financial advisers.

But while they have a good number of people qualifying each year, it is not enough to plug the gap left by people leaving the profession.

For example, for its level 4 Diploma in Investment Advice, which was specifically developed to comply with the examination standards of the RDR, the CISI has seen 902 people qualify over the past five years.

Whereas, according to the CII, between June 2019 and July 2022, 583 members achieved Fellowship of the Personal Finance Society, 117 members completed the Advanced Diploma in Financial Planning during the same period and 1,081 achieved Chartered status.

Caroline Stuart, president of the PFS, re-emphasised the need to attract more people to the profession as vital for its future, given the number of those expected to retire in the coming years.

Stuart said: “One of those priorities must be around attracting more people of all backgrounds, ethnicities and ages with the goal of creating a profession as diverse as the public we serve. 

“It is the job of myself, the board, the leadership and our members to show that a career in financial planning is worthwhile, fulfilling and can deliver progression for anyone.”

The CISI said it was trying to make financial planning more visible to the next generation via events such as ‘Change’ which the institute runs in partnership with Next Gen Planners, and which aims to share career opportunities with students and graduates.

CISI head of financial policy and engagement Chris Morris said: “Making the financial planning profession more visible to the next generation is paramount.

“Events like Change will put financial planning as a career on the map for many students, as will partnerships with schools and universities.”

But some in the profession think these bodies need to be doing more.

Andy Payne, head of academy at St James's Place, said the institutes and big players in the industry should be working together.

“We all need to show a little bit more patience and thinking if we're going to invest in younger talent,” he said. “The professional bodies and the big players need to present what this business is about and highlight that it is about positively changing people's lives.”

Ella Faulkner, who is studying to become a qualified adviser with Openwork, agreed professional bodies needed to do more as young people were not being exposed enough to advice as a career path.

Faulkner said: “A lot more can be done within schools and at universities. Whether it's having ambassadors from companies like Openwork or from the CII or other professional bodies to talk to students.

“At university I was just told about accountancy and law and standard professions like that. But when I joined Openwork, I was opened up to advice and it's not just about being a financial adviser, because there are also roles such as paraplanners and administrators.”

But the academies themselves have admitted more needs to be done.

Tom Hegarty, partnership director at M&G Wealth, said one of the main issues was that smaller IFA firms, of which there are still many, struggled to grow their business with trainees.

He said apprenticeships should work in tandem with academies so that both smaller and larger firms were training and bringing new talent to the profession.

He said: “The challenge for these firms is how do they train? How do they train that individual and get them up and running? They can't always go to the academies because the academies would not necessarily offer training to an IFA firm, but this is where apprenticeships come in.”

Back in 2016, the CII said it would support the government in making apprenticeships a viable alternative to graduate trainees via its apprenticeship levy. Introduced in 2017/18, this is a UK tax on employers which is used to fund apprenticeship training. 

It was hoped this would help get more trainees into the profession as advisers can access this government funding and take on an apprentice. 

Dennis Hall, chartered financial planner at Yellowtail Financial Planning, said he was a fan of the idea of apprenticeships but in practice it was often hard to find apprenticeship providers, particularly in the south west of the UK where he is based.

Hall said: “Even when we have looked at doing it remotely, providers have said ‘we are not taking on as we do not have the capacity’. 

He added local colleges did not cover financial services and universities did not offer advice as a subject, which was an issue that needed to be addressed so that more people could know about, and therefore enter, the profession.

Stakeholders say there is no one solution to getting more people to join the advice profession but several things could be done by firms, professional bodies and trade bodies to promote the benefits of a career in advice.

Firstly, it is hard for young people to want a career in advice if they do not understand what an adviser does, or that this vocation even exists.

Therefore, it one solution should be for more advisers t0 go into local schools and colleges and give talks to students, both about money and the value of advice. 

Some advisers already do this, according to the Personal Finance Society, but more could follow their example. This way, students across the UK could see first hand what it is like to be an adviser, and can see this as a genuinely attractive route to go down when they finish their school exams.

Secondly, the perks of a career in advice need to be promoted by the profession. 

A great work/life balance, being able to work whatever hours suit best, meeting people day in day out, and a good salary are all things which could tempt younger people to the profession.

SJP's Payne said financial education had a huge part to play because it was a natural route to presenting the profession as a ‘vocation’.

If more people knew about money, naturally more would know about the financial advice profession and could see it as a viable career path.

Payne said: “We can all help younger generations be more savvy with finances now, and then suddenly the industry becomes more interesting and relevant. 

“Then the whole idea of getting into this profession becomes much more appealing, when they realise there is a possibility for it to be a rewarding career on a number of levels, not just financially but also in terms of what they can get out of it.”

Others think more needs to be done at an earlier age, for example in schools, colleges and universities to promote advice as a career alongside other professional service careers such as law and accounting.

Karen King, programme director of management and professional development at the Openwork Partnership said financial advice should be promoted not only as a career but also in terms of how important it is for the general public’s financial wellbeing. 

But King said she understood how becoming an adviser could be daunting for the younger generation as they are often sitting in front of a client who has much more experience of life, which is why soft skills are just as important as qualifications.

“I think the beauty of what we offer is very much around not only giving them credibility and having qualifications, which is obviously needed anywhere in the industry, but some of the professional skills so that they can feel much more competent and confident having conversations and that's a key part of building that trust,” King said.

“If you can come across confident in what you do and feel empowered now to be that individual that you want to be in 10 years' time, this actually goes a long way and we have a lot of support in place to help with that.”

For example, Openwork has just introduced a programme using actors to replicate client adviser scenarios so that less experienced advisers can practise their skills before facing a real client.

Julian Hince, head of the Quilter Financial Adviser School, agreed the solution to adviser shortages had to be found in a combination of things.

He said while some students could make a transition into advice sooner rather than later because they had the life skills and experience, others might come across more green faced and some clients may not want “a kid with no grey hairs” advising them.

He said: “Clients want people who have bought a house, who have experienced bereavement, who have had kids, because that's what they will be advising on - stuff that happens in life.”

However, Hince added this did not mean that those of a younger age, perhaps closer to school leaving age, should be excluded from entering the profession.

He explained that paraplanning was the most obvious answer to this issue.

Hince said: “[Through paraplanning] young advisers can learn their trade behind the scenes first to understand how all the moving parts work - liaise with providers, write reports, do all the research and understand how advice works, and what is appropriate, while working closely with a more experienced adviser.”

Hince said these paraplanners could then go on to be the advisers of the future or stay in paraplanning, whichever took their preference.

Whereas, Continuum’s Brown said a succession scheme could be used to bring in more advisers.

He said: “At Continuum, we are finalising our succession scheme (My Continuum Succession) that we are excited to be able to launch later this year. This will allow Continuum to offer a home for life for advisers, clients, staff and future generations to come and importantly clear pathways for those advisers at various stages of their business cycle.

“We also believe that a partnership model can be very attractive for younger advisers.

“A national partnership model enables younger advisers to tap into the knowledge, experience and specialisms of others within the business without losing control of the strong individual relationship they have with each of their clients. They can be as one behind one brand and identity while maintaining a sense of ownership.

“We have a constant steady flow of high-quality young advisers looking to join our partnership, and our advisers tell us that they feel much closer to the business than they have in previous roles.”

It is clear there is not one simple solution and, despite these various efforts, a capacity crunch could be on the horizon for advice if more young advisers do not join the profession soon.

But for anything to work there needs to be systemic change and some proper, joined-up thinking across the industry.

Adviser firms need to be more willing to invest in and train young advisers, and the big academies need to help these smaller firms by assisting them with their training needs. 

Networks need to avoid poaching young talent from smaller firms with the offer of larger salaries, to encourage more training to happen at a lower level.

And the accrediting bodies need to really promote advice as a career and all the perks that come with it, so the profession becomes more visible among school leavers.

Clearly, more young advisers are needed to plug an ageing profession. But, as with everything else in life, it will take some time. Whether the industry has that time is another story altogether.