Will Schroders be a ‘breeding ground’ for independent advice?

Many successful IFAs started their careers in banks

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A platform consultancy has argued the recruitment drive at Schroders Personal Wealth could be a “breeding ground” to train up the next generation of advisers, although some in the industry remain weary that banks re-entering the industry will simply encourage new recruits to push products.

Schroders’ financial planning joint venture with Lloyds launched in June with 300 advisers and plans to potentially more than double that figure as it grows. Portfolio Adviser understands it has been hiring advisers qualified to level 4 and beyond at first, but will look to train people new to advice at a later stage.

Platforum highlighted in a blog published this month that large City firms returning to advice could address the problem of too few new advisers qualifying and entering the profession in relation to the demand for advice.

“Pre-RDR, banks were well-known breeding grounds for advisers starting their careers, many of whom went on to run successful IFA firms,” wrote analyst Mariam Pourshoushtari. “Schroders Personal Wealth plans to hire a significant number of advisers over the next five years, with the recruitment drive already underway.

“Whether it is successful in this initiative, and whether other banks will follow suit, remains to be seen. But it does provide a long-term answer to the shortage of advisers – not that the banks will necessarily see it quite like that.”

Half of firms with over £1bn assets under administration rank recruitment as one of their top five business challenges, according to Platforum research, UK Adviser Market: Size and Structure.

The recruitment struggle was also highlighted in the latest FCA latest on the retail intermediary market. That showed growth in the number of advising staff slowed to 1.4% for 2018 from 2.7% in 2017. Only the largest firms with over 50 advisers were successful in attracting new advising staff with 4.6% growth in 2018.

‘Glad I did it and wouldn’t go back’

Darren Cooke sees value in honing advice skills at a bank. Cooke started at Midland Bank (HSBC) in the mid-80s and is now chartered financial planner at Red Circle Financial Planning.

“Starting there was good for me as it gave me a really good grounding, lots of clients and meetings to practice and hone my knowledge and skills and a good formal structure for a compliant process,” he says. “While there, I grew into a more senior IFA role with fewer clients but generally more complex requirements.

“By the time I left, the jump in terms of dealing with clients was easy but clearly I had to build my own way of working and admin. As I’d already been an IFA with the bank for a good few years it wasn’t a big a leap as many others who had only sold bank pensions and investments.”

He adds: “Glad I did it and wouldn’t go back.”

Life companies encouraged staff to go independent

Others point to life companies as a good training, but view banks as a step too far.

Thameside Financial Planning director Tom Kean started out as a sales consultant at Equity and Law, which was later bought by Axa. He went on to become an independent financial adviser three years later.

“It was an amazing opportunity for me, and it was how we all seemed to start,” Kean says. “It was well accepted as the thing to do, and the life companies even encouraged it as you’d become an IFA later on probably and were more likely to use that firm because you were more familiar with their products and ways.”

But, when asked if he’d ever be an adviser at a bank, he says “not a chance”.

“You are only taught the things you will need to know, so there are subject areas that you won’t get taught as it’s not on their menu of products and services. Presume that is why we need exams.”

Banks are too narrow and formulaic

However, Fundscape CEO Bella Caridade-Ferreira argues large banks and financial services firms are not a particularly good training ground for solid independent financial advice “especially if it’s a restricted, mass-market or mass-affluent advice model”.

Caridade-Ferreira says: “The scope is generally too narrow and formulaic; advisers are taught to follow rules and apply frameworks, but they’re not taught the true basis of their craft, how to think independently and proactively and the soft skills needed to really help people achieve their end goals.”

Plan Works director Nathan Fryer agrees banks encourage advisers to recommend a product and extract a fee over taking a holistic approach.

“Regardless of the client’s situation, this notoriously results in the sale of a product, whether it is suitable or not,” Fryer says. “Don’t get me wrong, I am not saying that an adviser should not get paid for what they do, I just think you can still add value to a client’s financial wellbeing without the need to always recommend a product.

“So, do I think firms such as Schroders are a good training ground for advisers? Yes, because it teaches them how not to do things and pays for the next generation of advisers.”

He adds: “The banks seem to dip in and out of financial advice, with the likes of Schroders looking to dip its toe in the water, we could see others want to join them.”

A restricted approach

Rohan Sivajoti, co-founder of NextGen Planners, which was established to address the lack of holistic training in the industry for recent recruits, says while it’s great banks might create more jobs and introduce more young people to the industry, they can be fickle.

“Basically, there is this merry go round that happens, where banks dip into advice and then dip out of advice and then go back out. It’s a bit like ‘hokey pokey’ but with advice really.”

Sivajoti reckons banks are helpful in terms of putting people through exams, but not necessarily in terms of creating “a real outstanding adviser who is looking at actual important areas to clients”.

He adds: “A lot of people I know who have gone from banks to run IFA firms say they have learnt how not to do things, rather than how to do it which I think says a lot about the kinds of training they receive.”

Bright lights of the City

While the industry seems to remain largely sceptical, Kean acknowledges the bank route is “better than nothing” and better than how it used to be done even if it does have its flaws.

Fryer pointed out that rarely do people in financial services set out to be advisers and this is down to a lack of awareness.

“Many young graduates join banks as a result of internships, the bright lights and high salaries of London usually attract them, so perhaps they might not have explored financial services if it wasn’t for the banks.

“I guess we need a good box-set staged around a UK advice firm to promote it as a career aspiration.” 

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