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The Inconvenient Truth of Financial Planning

Much has been written about the demographic challenge faced by the financial advice profession. The financial planning market has been neglectful of succession planning over the last 15 years.

There is a lost generation. The average age of a financial adviser is fifty-five. When you attend a financial planning conference there is a clear generational divide. The majority of people in the room are forty five and above, generation X. There is then a small cohort of generation Y, but these are mostly below thirty. There is a gap of fifteen years.

As with geologists who can look at layers of rock and see the point at which the global climate changed or determine when major cataclysmic events occurred, the demographic split at a financial planning conference can point to the moment when the generational drawbridge was raised, when as a profession, we stopped worrying about new talent.

We didn’t realise it in the mid 1990s but the subsequent lack of investment in new talent would be the catalyst for the fear that we see today. You may think that fear is a strong word and maybe it is. But there is an emotional anchor holding the profession back. Many business owners who once thought that their own futures were set, are beginning to see their plans slowly crumble.

It is worth at this point reflecting on the old thinking in terms of the life span of a small financial advice business. The accepted wisdom was that you would grow a client bank over twenty years or more, increase funds under management to a significant level and then sell the business for a multiple of the income.

This model pre-supposes an adequate balance between supply and demand. Had the profession continued to attract and develop new talent at the required rate between the late 1990s and the advent of RDR this model would hold true today. However, this was not the case and the profession is now faced over the next ten years with a glut of financial services firms being put up for sale with too few buyers.

The resultant oversupply could mean that those previously anticipated high multiples of income will not materialise, consolidators are ideally positioned to hoover up firms at rock bottom prices and the profession will be faced with the ignominy of financial planners not being able to afford the retirement they had once planned.

Of course, all is not lost. There is still time to correct this but that time is short. Surveys suggest that thirty percent of financial advisers plan to retire in the next five years. That is almost eight thousand people. If we assume that half of these would be retirees are simply responding optimistically, then the profession has five years to recruit, train and plan the succession for around four thousand people. This may be a conservative estimate and there will be some attrition but whatever the numbers are, it is clear that we need a co-ordinated plan.

For training and developing new talent, professional training contracts like those from NextGen Planners make high quality technical and skills training available to small businesses to nurture new talent. Apprenticeship schemes can also be an option if the bureaucracy can be overcome, along with in-house academies from some of the larger firms.

Alongside these, innovative methods of succession are being developed such as employee ownership trusts to provide options to be compared against the more traditional sale methods.

So the tools are in place to build the next generation of the profession and avoid the tragedy of seeing a large proportion of a profession dedicated to planning the retirement of others not being able to retire themselves. It will be challenging and it will require trust, collaboration and at times compromise but if we are to avoid our inconvenient truth, we must act now and we must act together.

Adam Owen is a Director at NextGen Planners and founder of The Financial Planning Development Hub. Details of the NextGen Planners training contract can be found at

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