More people in the UK will fail to get the financial advice they need as the advice gap looks set to widen, according to a new report, Bridging the Gap, from Octopus Investments. Six in ten financial advisers had to turn away prospective clients in the last 12 months, while more than 60% of advisers polled said they intended to retire by 2030, highlighting the urgent need to attract more people into the industry.
The report looks at key drivers behind the advice gap while also outlining some steps to help turn the tide. These include recruiting new talent to the industry, and encouraging more firms to adopt technology-driven business models to enable them to spend more time with existing and prospective clients.
The report draws on original research polling 255 advisers1, as well as the views and opinions of numerous industry figures from organisations including NextGen Planners, CISI, Openwork, and Quilter.
- Six in ten (60%) advisers turned away clients in the past 12 months
- Rise in advisers planning to retire within 10 years – now at 62%3
- Significant increase in advisers struggling to find talent – 67% now cite this as an issue4
- Twice as many students would consider becoming an adviser if they understood the role2, 5
- Admin burden is cited as the main reason why advisers can’t serve more clients6
Ruth Handcock, CEO of Octopus Investments, commented:
“The report’s findings are worrying, especially at a time when many people find themselves in a period of financial uncertainty as a result of covid-19 and need advice. We need more not fewer financial advisers in the UK, but the good news is this is a problem we can solve. The evidence suggests that if we raise awareness of the profession and help more people understand what the role actually involves, the talent will follow. Becoming a financial adviser offers a rich and varied career, and an opportunity to help people achieve their life goals. We just need to get that message out there.”
Rohan Sivajoti, co-founder of NextGen Planners, added:
“The classic line from those who work in financial advice is that people say, ‘they fell into it’. We want to get more people who actually choose it as a profession because it is hugely rewarding work. As a financial adviser you help people achieve their hopes, dreams and ambitions. You make a difference and help to improve lives. That’s why we’re saying to advice firms, if there’s a university near you that you want to work with, let us know, and we’ll set up a bootcamp for you. From an employer’s perspective, you can go and meet all these candidates and cherry pick the best people from the day – and from a recruitment perspective it doesn’t get any better than that.”
What needs to change
The report identified three key areas where there is a significant opportunity to tackle the advice gap:
- Changing perceptions and attracting the next generation of talent
There is a lack of awareness of financial advice as an attractive career path. The report highlights that an outdated perception of the profession still exists and there is an urgent need to address this, as well as highlighting the critical role of paraplanners within the advice industry. Almost two thirds of financial advisers (64%) said financial education would help, while a similar number (62%) said more awareness generally was needed. The report also outlines the benefits of recruiting younger talent to support more experienced members of the team, while also highlighting the need to promote diversity to attract not only talent, but clients as well.
Jackie Lockie, Head of Financial Planning at the Chartered Institute for Securities & Investment, commented:
“The profession itself should be reflective of the society that it serves. We’ve got this advice gap already, if we don’t have a diverse population of advisers and paraplanners to serve the public, then the advice gap is only going to get bigger rather than smaller.”
- Harnessing the power of technology
Increase investment in technology to improve efficiency and automation. Used in the right way, existing technologies can have a transformative effect, freeing up hours of time for advisers and their colleagues. Crucially, this lowers costs and enables advice firms to service more clients.
Ruth Handcock, CEO of Octopus Investments, added:
“Investment in technology is another huge area of opportunity that could transform the efficiency of advice firms helping to reduce costs, lower barriers to advice and ultimately free up the adviser to spend more time with clients. Technology could also facilitate much greater access to ‘light touch advice’ and guidance services for those with more straightforward planning needs, but that’s where there is a need for engagement with the regulator to consider how that might work in practice.”
- Collaborating with the regulator to find new ways of working
The report highlights the need to work with the regulator to enable a more flexible approach to providing advice and guidance. Many potential clients have relatively uncomplicated needs, and would benefit from some basic, low cost guidance from an expert. A reappraisal of where the line is drawn between what is and is not regulated advice could free up advisers to provide lower cost services of genuine benefit to less wealthy clients whose financial needs are relatively straightforward. It should be possible for advisers to provide such services without fearing that they will fall foul of the regulatory regime.
Rohan Sivajoti, co-founder of NextGen Planners, comments:
“We should remember that not everyone needs ‘full fat’ financial planning. Sometimes people just need an arm around the shoulder, telling them that they are doing the right thing. That’s where the development of light touch and guidance services could help an awful lot too. In partnership with the regulator, we need to find new ways of working that enables more people to get the guidance they need, which ultimately helps them to make the most of their money and live the life they want.”
Click here to read the full report along with extended interviews from the report’s contributors.
Notes to editors:
1) Research conducted by Opinium between 29 April and 5 May 2020. Sample: 255 financial advisers in the UK.
2) Research conducted by Opinion Matters between 27 April and 4 May 2020. Sample: 1000 students in the UK aged 18-21 who are currently studying for, or have studied for A-levels and higher education.
3) Six in ten (60%) of financial advisers polled said they had turned away clients in the last 12 months. When asked about their future plans, 29% said they intended to retire by 2025, rising to 62% by 2030, equivalent to approximately 15,000 advisers leaving the profession. This is slightly up on last year, when the same figure stood at 58%.
4) By far the most common problem faced by firms trying to recruit fresh talent was a difficulty finding quality candidates, with over two thirds (67%) of adviser citing this as an issue, up from 46% last year, followed by associated costs of recruitment (33%) and a lack of structured pathways (33%).
5) 1,000 students were also asked whether they had considered a career in financial advice. Initially, 22% said they had considered it as a career. However, when students were given more information about what the profession involves, such as problem-solving, working flexibly and making a difference to people’s lives, twice as many (45%) said they would consider it.
6) Advisers were also asked whether they are serving more clients compared to 5 years ago. Encouragingly, almost half (48%) said they were serving more, but a quarter (25%) still said they were serving fewer. When asked why, the most common reason was the administrative burden (48%), followed by a focus on serving higher value clients (38%) and the time taken up by review meetings (32%).
For journalists in their professional capacity only. The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest. Personal opinions may change and should not be seen as advice or a recommendation. We do not offer investment or tax advice. We recommend investors seek professional advice before deciding to invest. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. Issued: August 2020.