Will the industry be facing a staffing crisis in a few years, asks Jon Hopper, commercial development director, Openwork?
Everyone knows that the average age of financial advisers in the UK is the wrong side of 50, yet as an industry we seem incapable of bringing it round to the right side. The problem is that the solution costs.
Only those with their heads deeply embedded in the sand can fail to see that the method of recruiting adopted by most of the industry has a limited shelf life. In fact I would go so far as to say that it is well past its sell by date.
Back in the 1970s and 1980s, recruitment was largely from a pool of non-industry sources, such as the services and the teaching profession. Once onboard, the non-industry recruits would go through an intensive induction and training programme to get them on their feet and advising as quickly as possible. Although many recruits dropped out in the initial months and years, margins were fat enough for the industry not to care too much.
Into the 1990s, as margins were squeezed and the costs of regulatory compliance rose, there was a shift away from what was deemed to be a prohibitively expensive method in favour of recruitment from within the industry. Poaching and sideways moves became the order of the day.
The upshot of this shift was the old ways of induction, mentoring and a focus on developing talent fell by the wayside.
Swallow the cost
However, by its very nature industry poaching can only ever be from a finite stock. We have got to the point now that the industry is in danger of cannibalising itself into oblivion. New blood is urgently needed. Yet very few companies seem prepared to bite the cost bullet associated with training and mentoring non-industry recruits.
It is hardly surprising when you consider that the average cost in year one of training up a non-industry recruit is in the region of £10,000. By anybody's standards that is a significant outlay and one that could benefit your competitors if the recruit moves on just when they are starting to pull their weight.
The cost is magnified for smaller firms, for whom an outlay of that magnitude with no guarantee of being able to recoup the cost further down the line has the potential to cripple the business.
As a network it is always tricky when discussing recruitment issues not to make what you write read like an advertisement for joining up. But for discursive purposes, given that Openwork is a network of 2,200 RIs, of which most are operating within small and sole trader firms, I hope I will be forgiven for using what we have been doing to tackle the recruitment crisis as an example.
When setting up Openwork we realised that in order to build and maintain a healthy advice network we would have to put our hands in our pockets and stump up the development and mentoring costs for each new non-industry recruit.
But it is not simply a case of a large network digging deep into its deep pockets. Every single one of our adviser partners has a vested interest in the success or failure of each new recruit because Openwork is 67.5% adviser-owned.
The recruitment process
We had to devise an induction regime that had the best possible retention rate. For us that meant it had naturally to include, but at the same time mean more than, just pre-course training, foundation courses and supervision. The recruitment process does not end once a new potential adviser has signed up. That is just the start of a three-year training and development process that will ultimately see the new recruit absorbed into the mainstream advice sector as a productive addition to the network.
In the past the focus has been on compliance at the expense of competence, we needed to strike the right balance otherwise we would be in danger of throwing good money after bad on recruits who fail to come up to scratch. Justifying that to our adviser partners would not be an easy task, nor is that a situation that we would be prepared to try to justify.
When one of our firms takes on a new recruit, they are expected to work in the field with the recruit, provide clients for them as well as sales and marketing training - in addition to providing a mentor.
The relationship between mentor and recruit is critical for early success and one that requires continuity if it is to be productive. Unfortunately, mentoring skills fell by the wayside along with induction courses, which is why the industry as a whole needs to train managers to fill the role again.
This should be a serious consideration for every network and every business that is serious about growing through recruitment. For our part, we have just started rolling out a manager training programme and this month 150 Openwork managers across 22 regions will be going through their paces while being trained as effective mentors.
We will continue until we are satisfied that we have a solid foundation upon which to build a sound induction process.
As an industry we need to build the confidence not just to attract people, but to help them fulfil their potential and be willing to stay in the industry. In order to achieve that the focus needs to be on mentoring, training, developing and retaining to get the best out of new recruits.
An ambitious objective
'Something completely new'
'Illusion of control'
Reasons to be cheerful
Total investment reaches £9m