Bridging the Succession Gap
Much has been written about the current demographic challenges facing the Financial Services Profession. We know that there is an ageing adviser population with the average age of an adviser estimated to be north of fifty, and survey after survey stating that at least one third of advisers are looking to retire in the next five years.
This chronic situation threatens both the consumer and the profession, and is recognised as a significant threat by Government, Regulators, Consumer Groups and Professional Bodies.
A dwindling adviser population will lead to fewer consumers being able to access financial advice and financial planning and, without action, the segment of the market that is currently disenfranchised will increase.
Action is being taken in the form of The FCA’s Project Innovate, the launch of Financial Services Apprenticeships, and the availability of guidance through The Money Advice Service, but if the profession is going to reduce the impact of the demographic imbalance that we are currently faced with, a realisation that it is the responsibility of the whole profession is needed.
Until the late 1990s it was relatively easy to enter the profession. The large institutions supported direct sales forces and invested heavily in training. As the regulatory regime began to tighten, these institutions became concerned about liability issues, and the cost of investment in developing new talent, and, bolstered by the fact that there were an estimated 200,000 Financial Advisers, more than enough to meet demand, the institutions gradually reduced their development programmes.
Fast forward to now and the lack of investment in new talent, coupled with changes in the market and regulation has resulted in the situation we have today. Those who entered the profession in the 1990s as part of the last large cohorts supported by the institutions are beginning to look at their exit options and these are not looking good.
Investment in new talent must be the collective responsibility of the profession. Standing on the side-lines applauding, whilst others do the heavy lifting, simply won’t be enough.
We have a very short time window to address this challenge. Twenty years from now we could be looking at a vibrant profession with innovative companies of all sizes serving consumers’ needs at all levels. Alternatively, in twenty years, the average age of a financial adviser could be pushing seventy, with the only hope of exit being to sell to a consolidator at a time when the supply of businesses up for sale significantly outstrips demand.
Succession planning requires strategic thinking. It isn’t simply about filling that empty desk in the office with someone who is qualified. It takes effort to break away from the day to day operational needs and to look to the future and, more importantly, it requires investment.
About the author: Adam Owen freelance learning and development specialist and member nominated Director of the Personal Finance Society