Why advisers should mind the generation gap

The need for an infusion of fresh blood into financial planning has taken on added importance in recent years in the wake of developments brought about by the implementation of the Retail Distribution Review (RDR). This has become so marked, in fact, a new group has been launched with the specific aim of providing support and encouragement to younger advisers and planners.

One of the brains behind NextGen Planners is Adam Carolan, a director at Cheshire-based financial advisers Xentum, who says he co-founded the group with Rohan Sivajoti, a director at Wetherby-based Postcard Planning, on the premise not enough was being done to support the younger generation of financial planners.

"We are hoping at NextGen Planners that, by sharing best practice and by being more transparent, we can start to build an emerging group of younger planners who will hopefully be able to show you can trust a financial planner," he explains.

An injection of younger talent into the financial planning sector is long overdue, believes Barry Horner, the chief executive at Paradigm Norton, a Bristol-based financial planning firm. The average age of financial advisers today is in the late 40s or early 50s, he points out, meaning a yawning generation gap has opened up between them and the younger graduate trainees and newly-qualified planners.

For Horner, the shockwaves that continue to emanate from the introduction of the RDR is the main culprit. "It is the nature of the changing model," he says. "Previously, before RDR, advisers were more sales-led - it was less of a profession."

According to Horner, the psychometric profiling the firm has employed since 2012 has confirmed that the type of people working in financial advice pre-RDR was very different from those needed in the post-2012 landscape. "The financial planners and the sales guys were very different," he says. "That is what RDR uncovered. A whole set of people simply didn't want to take more exams. They left the profession altogether. A significant amount left the industry post-2012 - it was in the thousands not the hundreds."

One of the new generation of advisers is James Wetherall, who formed his own Manchester-based financial adviser company two years ago. He agrees the industry has been reshaped in the past four years, adding: "RDR really shook the tree. A lot of the sales-led guys left the industry - the kind of people who cut their teeth in life assurance sales, just selling product. It was very transactional. There has been a shift towards more personalised services and relationship building."

But RDR is just one factor behind the lack of a younger cohort of advisers and planners. The extra layers of qualifications now needed has played a part both in deterring people entering the profession and ushering less qualified advisers towards the exit. Barriers to entry have been raised and this has had an effect on levels of recruitment. "In the wake of all that, the partnerships, the lifestyle businesses - they don't want to tied down with graduate schemes that potentially take up all their time," says Wetherall.

Here's to you Mrs Robinson

Yet graduate schemes are exactly the area where the advisers Professional Adviser spoke to agree more can be done to entice the next generation of financial planners and advisers. Carolan says NextGen Planners was formed partly with the aim of convincing new entrants that financial planning was a worthwhile career and not, as many might characterise it, as a job simply helping the rich get richer.

"The majority of consumers don't trust financial advisers so how can we expect younger employees to trust the profession with one of the most important decisions of their lives - their career," he points out. "We need to make a good career seem attainable to younger generations. We also need to make it clear that we will support the new generation by linking them with like-minded people and build a community around this."

The dearth of young talent is apparent from the efforts Carolan and Sivajoti have already made via a NextGen Planners Facebook group that has so far attracted just 80 members. "I am afraid this could represent a large percentage of the overall younger adviser population," says Carolan. "If this is true, then we have really failed as a profession."

The remedy, says Paradigm Norton's Horner, is properly supported graduate schemes that, over time, can help to rebalance the profession. His firm has had a graduate scheme in place for more than a year and is thus now onto its second cohort of trainees. He says his firm sees these graduates as the future: "That is where the next generation will come from."

Horner adds that the company also has a university outreach programme that looks to recruit economics and finance graduates, offering them a five-year career plan that would take them all the way to being qualified as a Certified Financial Planner.

The ‘Me' Generation

The aim is to make financial planning as enticing as a profession as the law or accountancy. Yet Carolan says financial planning has some way to go before it can command the same level of graduate attention. "Not enough has been done to raise the profile of financial planning among a wider audience," he says. "As a profession, we are often infighting, opaque in our communications and not open enough in our dealings. This filters through to graduates, many of who don't even know financial planning exists."

Wetherall suggests (with all due modesty) the advice sector needs to attract people who are more like him to the profession - that is to say, thirtysomething and ambitious - while at the same time understanding the value that younger talent brings with it. "We are more keen on engaging with younger people, looking at graduate schemes as part of our long-term plans," he says. "We see graduates as a value-add. Having previously been a trainee adviser myself, I want to find more people like me."

Wetherall himself takes part in various efforts to encourage more participation in the sector, including training at Metropolitan University in Manchester and a mentoring programme. In a similar fashion, Horner suggests it needs to be understood the next generation of financial planners might not be motivated by salary alone.

"This is the Millennial generation," he says. "There are lifestyle issues for them - money is not the main driver. With us, there is really no ceiling to how far they can go within the organisation. And location counts - something like 70% to 80% of graduates from Bristol University stay in the city after graduation." Carolan is similarly enthusiastic, arguing: "Graduates bring lots of energy and enthusiasm to companies and the bigger, more commercial organisations can see this."

The hope must be that, over time, the various graduate schemes - and the work being done by the more forward-thinking firms in terms of using social media, university outreach programmes and so on to attract more people into the profession - will steadily transform both the numbers of the advice sector and its reputation.

Change will come gradually but the long-term view is positive, believes Horner. "Generationally it is changing," he says. "At the moment there are around 1,000 certified financial planners in the UK but, on a five-year view, I would like to see that number increase substantially to something nearer 5,000."

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