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Lyssa Barber of specialist financial recruitment company Allemby Hunt explains the growing importance of a staff retention strategy.
After a UK Treasury select committee recommended a one-year delay implementing RDR, cautioning a potential ‘stampede’ of advisers from the investment industry, it is easy to see why the road to 1 January 2013 may be anything but smooth.
A casual glance at the financial press shows plenty to stir concern; the same Treasury select committee recommends an opt-out option for HNW clients, 53 IFAs actively downsize staff numbers in the past month and lingering questions remain over how beneficial the review will genuinely be for client choice.
A significant amount has already been written around RDR, its implementation and the effects it will have on the industry as a whole. One area which seems as yet to remain unexamined is the direct impact RDR will have on the number of advisers who choose to – or are able to – remain in the industry.
On the face of it, the numbers are being pitched as reassuring. As many as 49% of advisers are already qualified to the correct level and, according to recent stats, at least 82% expect to remain as retail investment advisers. Hold on – let’s flip that around. We could expect an 18% reduction in the overall advisory workforce?
That’s huge. Even if we assume that 82% figure to be accurate, it still does not take into account the fact a proportion of the 51% yet to take the exams may not make the grade or indeed want to remain in the industry at all.
Putting aside the employment law ramifications of dealing with staff who have failed to qualify to the new standards, there remains a not insignificant number of highly experienced IFAs and senior advisers who – given their vintage – were ‘grandfathered’ into their current roles and likely last took a written exam when they were at school.
Will these individuals really be motivated and able to put in the 400 hours of study to achieve the minimum Level 4 qualification prescribed by the FSA? It would be easy to see a gentler path might lie in selling up one’s assets and taking an earlier retirement. Reinforcing this, a number of specialist broker firms have sprung up expressly to assist in the sale of smaller IFA firms and their assets.
According to recent data, in 2009 the number of IFAs in the UK was estimated to be around 21,000. So let’s take a dim view of the numbers and ask where the industry is going to make up a potential shortfall of around 3,700 client-facing staff? Without significant, imaginative hiring strategies, it is hard to envisage how this gap will be satisfactorily bridged.
Larger institutions already have ongoing hiring needs, which they struggle to meet due to the paucity of appropriately qualified client advisers in the UK marketplace. Add into this a need to cover significant attrition connected to RDR and you are left with a major human capital headache.
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Who says?
Ken, What makes you think that providers will do it for free? they do nothing for free! and if i've missed your point and it's you doing it for free, why would you work for free?
Posted by: Nigel Barker-Smith
industry loss
I dont really understand where this article was going. Take the adviser out of life and pensions and we take a quantum leap backwards so far as advice and acheiving a better future for everyone. RDR will wreck our industry and regretably many jobs will be lost. The biggest loss will be to the public at large. 1000's of years of experience are saying stop and listern but sadly our regulator blunders on. Most IFA's are now striving for diploma some more fortuitous are already there but the diploma wont chage a thing as it comes down to the integrity of the adviser and thats what counts. Those who dont get there will loose their business's and staff will loose their jobs, yet worse than that is the loss to clients. With 25yrs in the business lm doing as required and hope to make the grade, 25 yrs of unblemished service never turning anyone from my door fee or no fee same staff of 15yrs with potentially no future. But on a brighter note l will acheive diploma but wont make any money.
Posted by: D
Same again
D Why won't you make any money?
Posted by: Nigel batrker-Smith
Unsustainable (part 2)
In order to get a product to the consumer it has to be marketed and distributed. IFAs do this for product providers, and product providers pay them a fee for doing it. This fee is currently called "commission". If IFAs continue marketing and distributing the product when this fee is banned, the IFA will be doing that particular work for product providers for nothing. Product providers will not complain. But as a business idea for the IFA, it is unsustainable.
Posted by: Ken Durkin
Once again...
........why will YOU be doing this for nothing? Yes, the only thing that is unsustainable is you doing something for nothing. Why will you not be charging for your advice? Clients ask, value and are prepared to pay for advice. Charging a fee to find a product is the bit they distrust, especially as they can do it them selves. The internet not RDR has made distribution an unsustainable model. The life office doesn't need the IFA to distribute and more importantly nor does the client. Whether we like it or not the value is in the advice not the "find a product" fee You make commission sound like the provider pays for it. Whilst logistically this may happen, it comes directly from the clients product and therefore money. There is absolutley no difference, other than one is hidden and the other is not. Whilst RDR isn't perfect this element will certainly enhance enhance your business and trust in general. Anyway why would anyone want to be at the beck and call of a life office to be paid? Isn't the relationship with the client? Independance has nothing to do with "whole of market" but who pays you.
Posted by: Nigel Barker-Smith
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Unsustainable
This blog misses the main point and the reason why post RDR staff will disappear. Qualifications are not the main issue. The problem is that RDR as a business idea is a non-starter. You cannot build a business on the basis that product providers will be able to market and distribute their products through the IFA channel free of charge. It is unsustainable.
Posted by: Ken Durkin