Financial advisers are great problem solvers. Just ask the thousands of customers who approach them every year needing help untangling complex estate and retirement planning scenarios.
But one problem the sector is struggling to find a solution for is how to attract the next generation of advisers.
In the 15 years I’ve worked in this industry - either giving regulated advice or writing about it - the average age of an adviser, which has always hovered around the mid-to-late-50s, has caused concern.
The premise for this is simple. If the number of advisers retiring outstrips those who are entering it will cause a supply crisis; the advice gap will get even bigger.
As such, many advisers I speak with continue to stress the importance of bringing new blood into the profession. It is of course essential to securing the future of face-to-face advice.
There is more to the argument than purely headcount. It’s widely accepted that younger advisers are best placed to identify how to attract younger customers, helping to narrow the advice gap rather than widen it.
But how bad is the situation becoming? And what should the profession be doing to change things given the apparent lack of progress for so many years?
Despite being dormant for a few years - with the sector primarily focused on supporting its customers through the pandemic - data published earlier this year saw the adviser demographic debate resurface.
In response to a freedom of information request, the Financial Conduct Authority (FCA) found that only 5.7 per cent of advisers in the UK are under the age of 30, whereas a third are aged between 50 and 59. Furthermore, around three-quarters (77 per cent) of intermediaries are aged 40 or over, and just 0.6 per cent under the age of 25.
These figures aren’t surprising – they confirm what many of us already know. But they also paint a somewhat worrying picture.
To provide a gauge of how pressing the situation is, we need some form of comparison. So, let’s analyse the age splits of other professions and examine any differences.
First, let’s look at solicitors.
According to data from the Solicitors Regulation Authority published in April this year, more than half (59 per cent) of lawyers are aged 25 to 44, with almost a third (30 per cent) aged between 25 and 34. What’s more, only 17 per cent of lawyers are aged 55 or older.
Interesting stuff. Now let’s examine the situation with accountants.
As the data here was collected by the Office for National Statistics in 2018, we must bear in mind that it’s slightly out of date. But in any case, any notable demographical shifts are unlikely to occur in four years.
The ONS found that 42 per cent of chartered and certified accountants are aged 39 and under. Perhaps more strikingly, some 15 per cent are under 30, almost three times the percentage of financial advisers. At the other end of the scale, only 18 per cent of accountants are aged 55 and over.
These figures suggest the accountancy and legal professions are finding more success than financial advice at enticing younger people.
Though not surprising, I’m sure many of you will find this incredibly frustrating, especially since all three frequently support clients with overlapping needs.
But if we were to think back to our time at school, the answer perhaps becomes clearer. If you asked schoolchildren to describe the role of an accountant or solicitor, some could give you a decent, basic description.
If you, however, asked them to explain what a financial adviser does then I’d imagine fewer hands would be raised. Those with a relative working in the industry may prove the exception.
This is important. Many children have their career mapped out while still in school, tailoring their future studies accordingly. That's not to say people can't and don't change path but attracting them down the line is far trickier.
It's worth mentioning that while there’s little to suggest the situation has improved, figures show it isn’t worsening, either.
In 2015, Vision Business Advisers surveyed over 600 UK investment advisers, and found that 30 per cent expected to retire within the next two years.
Four years later there was little change. Research, this time by Octopus, found that 20 per cent of advisers were seeking retire in the next five years.
Given that the adviser population has remained steady over the past seven years, the profession may perhaps be doing a better job than some may think at replacing those who are exiting. Regardless, this does little to diminish the challenge of attracting fresh talent.
One factor here is that while we typically consider the 'next generation' as those leaving education, that's not the only solution. Many firms are finding success recruiting career changers, such as retiring sportspeople, former members of the armed forces, and women who have taken time out to raise children. As these people tend to be in their 30s and 40s, it may explain, in some part at least, why the average age is barely shifting.
But to safeguard the profession's long-term future, the focus should be on working towards building a demographic mix close to the professions mentioned above. The question is how do we achieve this?
Academies have a leading role to play – they have become the main route into advice for budding planners. Pre-RDR, this space was largely filled by banks, but the removal of commissions caused most to either abandon or heavily dilute their advice propositions. Trainee adviser roles in banks have largely become obsolete.
St James’s Place graduated 229 advisers from its academy last year, while Quilter celebrated the 400th graduate from its adviser school in September 2021.
While many of these newly-qualified planners will kick-start their careers as restricted advisers, some will inevitably switch to independent in the future.
And indeed, we’re seeing some positive developments on the IFA front, too. Ascot Lloyd recently announced that it will be launching an academy in early 2023, offering a direct route into independent advice.
For smaller advice firms, with less scale and resource, this is clearly harder; more support, most notably from the government and the regulator, is needed.
As those of you working in the sector will attest, a career in advice can be hugely rewarding, both financially and emotionally. But this message is struggling to reach younger people who still favour careers in other professions.
Perhaps advice is still shaking off its sales culture label, and as such isn’t held in the same esteem as the other two. If so, this is a shame. The profession has come on leaps and bounds in the past decade. The increasing number of advisers attaining Chartered status offers a case in point. Moreover, millions of peoples’ financial futures wouldn’t be secure if not for the skills and expertise of financial planners.
In addition, academies and adviser schools can only go so far; it’s crucial for the industry to ensure the benefits of a career in financial advice are communicated to those in education. With the combination of cost-of-living crisis, rising interest rates, and turbulent stock markets and sterling, people need advice right now more than ever.
Financial education can also make a difference, though notable change isn't going to happen overnight. Last month, charity Redstart launched a seven-year project to offer money lessons to children in almost 50 schools. This is an encouraging development, as those who appreciate the importance of money management are more likely to recognise the value of becoming an adviser.
Let's hope so. A career helping people to solve life's biggest financial problems is one to be immensely proud of.