Becoming an IFA?

xx_Law_Grad_xx · 8 June 2011 at 9:32PM

Over the last year or so I have developed a keen interest in investments.

I am therefore considering a career in financial advice and am trying to figure out how best to go about it.

I currently work as a pensions administrator for a life assurance company. I am studying for the Certificate in Financial Planning.

I understand that many financial advisors come from a background in tied financial advice with banks.

Would my current job as a pensions administrator coupled with the Certificate in Financial Planning be of any help in working with a financial advisory firm?

I was thinking something along the lines of working at a financial advisory firm in an administrative or sales support role then going on to become a paraplanner and then a IFA.

Thanks

Aegis · 8 June 2011 at 10:21PM

xx_Law_Grad_xx wrote: »

Over the last year or so I have developed a keen interest in investments.

I am therefore considering a career in financial advice and am trying to figure out how best to go about it.

I currently work as a pensions administrator for a life assurance company. I am studying for the Certificate in Financial Planning.

I understand that many financial advisors come from a background in tied financial advice with banks.

Would my current job as a pensions administrator coupled with the Certificate in Financial Planning be of any help in working with a financial advisory firm?

I was thinking something along the lines of working at a financial advisory firm in an administrative or sales support role then going on to become a paraplanner and then a IFA.

Thanks

Nothing wrong with the plan as it currently stands, however have you considered going straight to the R0x exams rather than sitting the CFx exams, as the 6 Diploma level papers will make you already qualified for an IFA role without also having to sit the 5 Certificate level papers. Should save you time and money!

After that you can expand your knowledge further with specific study into some of the J0x and AFx papers to get towards Chartered level.

Going down the admin/paraplanner route and converting into an adviser is certainly an option, though you'll need to be prepared for quite a long progression before most firms will allow you to sit in front of clients as a lead adviser. As it stands, firms generally prefer people who have proved that they can sell, as even giving independent advice you still need to sell your services to a potential client: knowledge and ability to write reports simply won't do in isolation.

Effectively you have the choice of learning either the sales skills first followed by the technical and report writing knowledge, or vice versa. The former means you have to pretty much sell your soul to a bank or other tied agency to learn how to deal with basic client needs and sell very restricted financial planning (which I personally think is an oxymoronic term). The latter is your plan.

You'll probably earn less going down the latter route, but as long as your company is genuinely interested in developing you rather than using you to do the work they can't be bothered with while keeping a stranglehold on the clients, you'll be fine.

Ignore the IFA bashers here, there are a few of them around, but most don't really seem to understand the idea that it can easily be a profession, not just a dodgy sales role.

mmctear · 8 June 2011 at 10:40PM

Hi LawGrad,

I am in a very similar position. I work for a pensions company and I have started studying for my Certificate in Life and Pensions (my current job has study support) and I have often thought of becoming an IFA or Paraplanner, but have found quite limited information on how to start to this career.

atypical · 8 June 2011 at 10:51PM

Aegis wrote: »

Ignore the IFA bashers here, there are a few of them around, but most don't really seem to understand the idea that it can easily be a profession, not just a dodgy sales role.

Just out of interest, how many of these do you think the job fulfills? Perhaps more telling would be how many the differing IFA and FA roles fulfill.

dunstonh · 9 June 2011 at 9:50AM

The certificate level is no longer adequate. If you do that level, you will then have to sit a further 6 exams whereas you go straight for those 6 by themselves.

The old career paths have largely gone. Working for an insurance company or investment house was one of the main routes but they dont have the volume and offices like they used to. Banks used to be a good way as they paid for all the training and it used to be very good. Plus, the roles in the bank used to be management level. However, they started dishing out bits of the role to normal bank clerks and downgraded their training standards (which has a lot to do with the problems the banks have). Plus, the banks are starting to pull out of the advice market. Barclays have gone. It's rumoured that Lloyds are going to follow if Scot wid is sold (which is expected). They cant afford to give fee based advice and have as many complaints as they do under the new rules as the cost of putting it right will be more than they earn on it. Currently, that isnt the case most of the time.

Working in an IFA office is coming back to being an option but the typical path there is for you to get your mortgage advice exams first and then work as a mortgage and insurance adviser and then learn the designated investment role and pass those exams on the job as a mortgage/insurance adviser. There is a problem with that though and that is many FAs and IFAs are dropping to that role before the end of 2012 (around 1/3rd are expected to leave or drop to that level). So a new recruit with no track record vs someone that does is going to make the new recruit look unattractive to employ potentially (although an old school rep can bring different issues).

The role itself can be very hard work in the early years. Once established, it can still be hard work and long hours but financially rewarding. The problem is getting there. Over half of new advisers leave within 2 years. Most in debt as they couldn't survive. Most common failure reason is lack of clients.

Aegis · 9 June 2011 at 11:24AM

atypical wrote: »

Just out of interest, how many of these do you think the job fulfills? Perhaps more telling would be how many the differing IFA and FA roles fulfill.

No worries. To save me some time, I'll give a pair of yes/no answers where the first one will relate to IFAs in general and the second will refer to tied agents in general. The format will therefore be Yes/Yes, for example. After which I will try to add some commentary.

Skill based on theoretical knowledge: Professionals are assumed to have extensive theoretical knowledge (e.g. architecture, medicine, law, scripture) and to possess skills based on that knowledge that they are able to apply in practice.

Yes/Yes.
At present there are exam requirements going into place for financial adviser which will force all existing and new advisers to qualify up to a minimum of a QCF level 4 Diploma. These exams are highly theoretical and for the most part require more knowledge than necessary for the day to day business. I would suggest that these are much more likely to be of use to IFAs, while tied agents will mostly find the information useless for their own roles.

Professional association

: Professions usually have professional bodies organized by their members, which are intended to enhance the status of their members and have carefully controlled entrance requirements.

Yes/Semi-yes
Most advisers are members of the IFS or the PFS, but this is largely down to the exam discounts you can get for these. I would suggest that individual memebrship in this area is more likely to indicate professionalism than salesforce-wide negotiated membership for those discounts. Membership to an IFA-only body is probably more indicative of this criterion being met, though this is far from required.
Chartership or other level 6 qualification memberships to the main bodies is likely to be the best measure in this case (e.g. APFS, FPFS, CFP)

Extensive period of education

: The most prestigious professions usually require at least three yearsURL="http://en.wikipedia.org/wiki/Talk:Profession#obsolete"][I][U][COLOR=#0000ff]dated info[/COLOR][/U][/I][/URL at university. Undertaking doctoral research can add a further 4–5 years to this period of education (for example, architecture generally requires 5 years of study, 2 years work experience and a further year of work related study before one can apply to become a chartered member. Architects generally become chartered in their late 20s early 30s and earn between 22 - 24k before tax in the United Kingdom).

Yes (with reservation)/No
This currently depends on whether the IFA in question treats his role as a job or a profession. However, the ones who take it seriously will continue to learn through to Chartered status and beyond. Tied agents will typically take the bare minimum possible, as did many of the older IFAs. Hopefully this will be a thing of the past and all future IFAs after RDR will take their ongoing education a lot more seriously.

Testing of competence:

Before being admitted to membership of a professional body, there is a requirement to pass prescribed examinations that are based on mainly theoretical knowledge.

Yes/Yes
Membership requirements for designatory letters all require minimum standards within the various qualifications offered. Evidence of higher levels of membership is much more common in IFAs than tied agents.

Institutional training: In addition to examinations, there is usually a requirement for a long period of institutionalized training where aspiring professionals acquire specified practical experience in some sort of trainee role before being recognized as a full member of a professional body. Continuous upgrading of skills through professional development is also mandatory these days.

No/no, both with reservation
Both roles require a period of supervision under a qualified adviser before being signed off as competant to see customers, however the supervisory requirements do not seem all that stringent (largely down to the regulator).
If you treat this as development through to Chartered status, then the answer would be Yes/yes, though again proportionally more IFAs than tied agents will bother becoming Chartered.

Licensed practitioners: Professions seek to establish a register or membership so that only those individuals so licensed are recognized as bona fide.

Yes/yes
"Authorised and regulated by the Financial Services Authority"

Work autonomy: Professionals tend to retain control over their work, even when they are employed outside the profession in commercial or public organizations. They have also gained control over their own theoretical knowledge.

Yes/No
IFAs typically manage their own time and client banks. Tied agents are typically managed by sales coordinators.

Code of professional conduct or ethics: Professional bodies usually have codes of conduct or ethics for their members and disciplinary procedures for those who infringe the rules.

Yes/yes
The PFS certainly has this, and I believe the other professional bodies also have them. I'd say they are less adhered to by tied agents, but that's only down to their employers not allowing them to act within the code of conduct (i.e. when it comes to always giving the best advice, this is impossible if you don't have access to the right investments and wrappers).

Self-regulation: Professional bodies tend to insist that they should be self-regulating and independent from government. Professions tend to be policed and regulated by senior, respected practitioners and the most highly qualified members of the profession,

No/no
Financial advice is caught up along with other forms of finance, so there's never going to be self-regulation. That said, IFAs are more likely to take care of their own compliance matters by working directly with either a compliance officer or an outsourced company, tied agents are likely to again just do what their employer tells them to do.
That said, the FSA is technically independent from government, though whether that is a good thing is a matter of heated debate!

Public service and altruism: The earning of fees for services rendered can be defended because they are provided in the public interest, e.g. the work of doctors contributes to public health.

Yes/yes, arguable

Saving people money on taxes they don't need to spend is in their interest, and providing more for them at various life stages reduces the burden on the state, so this is arguably done by both types of adviser. I'm skeptical of this requirement, though, as not all professionals act in the public interest.

Exclusion, monopoly and legal recognition: Professions tend to exclude those who have not met their requirements and joined the appropriate professional body. This is often termed professional closure, and seeks to bar entry for the unqualified and to sanction or expel incompetent members.

Yes/yes - largely pending
Done by the exam requirements and the FSA rather than the professional bodies, though the professional bodies can exclude members based on their conduct, which may effectively exclude them from the profession altogetehr after 2012, as a Certificate of Professional Standing will be required for all advisers from one of the professional bodies. Failing to have this in place will result in exclusion from being able to advise.

Control of remuneration and advertising: Where levels of remuneration are determined by government, professional bodies are active in negotiating (usually advantageous unless where the RIBA is concerned) remuneration packages for their members. Though this is sometimes done in good intention but can be proven good when the partner, family or mentor recommend something contrary to the general norms. This was further buttressed in the world bank essay paper written by Idiaro AbdulazeezPaper Challenges and associated solutions for companies working together in collective action to fight corruption. This has caused for global audience and even the worldbank launched an international competition in it people are used to Some professions set standard scale fees, but government advocacy of competition means that these are no longer generally enforced.URL="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed"][I][U][COLOR=#0000ff]citation needed[/COLOR][/U][/I][/URL

Yes/No
The government has no say over fees charged for advice. As such, IFAs are fully responsible for setting their own fee scales up, while tied agents have to use those set out by their employer.

High status and rewards: The most successful professions achieve high status, public prestige and rewards for their members.URL="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed"][I][U][COLOR=#0000ff]citation needed[/COLOR][/U][/I][/URL Some of the factors included in this list contribute to such success.

Unsure/unsure
There are potentially some very high salaries available, which can lead to high status and rewards, but I doubt this is quite what they meant when they set this requirement up. There are industry awards for the supposed best advisers, but I gather these are largely advertising opportunities rather then genuine awards.

Individual clients: Many professions have individual fee-paying clients.URL="http://en.wikipedia.org/wiki/Wikipedia:Disputed_statement"][I][U][COLOR=#0000ff]dubious[/COLOR][/U][/I][/URL][I] – [/I][URL="http://en.wikipedia.org/wiki/Talk:Profession#Dubious"][I][U][COLOR=#0000ff]discuss[/COLOR][/U][/I][/URL For example, in accountancy, "the profession" usually refers to accountants who have individual and corporate clients, rather than accountants who are employees of organizations.

Yes/No
IFAs in the truest sense have their own portfolio of clients for whom they are the sole adviser. With tied agents, typically the clients belong to the employer and are merely serviced by the employee who comes across those clients.

Middle-class occupations: Traditionally, many professions have been viewed as 'respectable' occupations for middle and upper classes.[19]
Male-dominated: The highest status professions have tended to be male dominated although females are closing this gender gapURL="http://en.wikipedia.org/wiki/Talk:Profession#obsolete"][I][U][COLOR=#0000ff]dated info[/COLOR][/U][/I][/URL Women are now being admitted to the priesthood while its status has declined relative to other professions.URL="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed"][I][U][COLOR=#0000ff]citation needed[/COLOR][/U][/I][/URL Similar arguments apply to race and class: ethnic groups and working-class people are no less disadvantaged in most professions than they are in society generally.[20]URL="http://en.wikipedia.org/wiki/Talk:Profession#obsolete"][I][U][COLOR=#0000ff]dated info[/COLOR][/U][/I][/URL
Ritual: Church ritual and the Court procedure are obviously ritualistic.URL="http://en.wikipedia.org/wiki/Wikipedia:Avoid_weasel_words"][I][U][COLOR=#0000ff]who?[/COLOR][/U][/I][/URL URL="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed"][I][U][COLOR=#0000ff]citation needed[/COLOR][/U][/I][/URL

Terrible requirements, I'm going to ignore them altogether.

Legitimacy: Professions have clear legal authority over some activities (e.g. certifying the insane) but are also seen as adding legitimacy to a wide range of related activities.URL="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed"][I][U][COLOR=#0000ff]citation needed[/COLOR][/U][/I][/URL

No (with reservation)/no
Tied agents certainly can't be seen as having legitimacy, however IFAs arguably could. They must sign off on certain activities, such as transfer out of an occupational final salary scheme, but present (as seen on this forum) they are still held in a position of distrust by a significant proportion of society, something I hope will change as the RDR and subsequent changes "force" the minimum knowledge levels and ongoing CPD upwards. I use quotation marks because I believe that most advisers staying in the industry are happy to continue learning, however this is all about public perception rather than necessarily fact.

Inaccessible body of knowledge: In some professions, the body of knowledge is relatively inaccessible to the uninitiated. Medicine and law are typically not school subjects and have separate faculties and even separate libraries at universities.URL="http://en.wikipedia.org/wiki/Talk:Profession#obsolete"][I][U][COLOR=#0000ff]dated info[/COLOR][/U][/I][/URL

Yes/no

This forum is a classic example of how difficult it can be to grasp many of the concepts around financial planning even with the available knowledge on the web. Much of the research on investment choices is only available with paid subscription for those working in the business.

I’ve ticked "no" for tied advisers because they typically only know enough about their products to sell them, rather than actually having a detailed technical knowledge of their recommendations and the reasons for their suitability.

Indeterminacy of knowledge: Professional knowledge contains elements that escape being mastered and communicated in the form of rules and can only be acquired through experience.URL="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed"][I][U][COLOR=#0000ff]citation needed[/COLOR][/U][/I][/URL

I’m going to question the validity of this one as a professional criterion as well. After all, most knowledge for most jobs comes from experience, not book learning.

Mobility: The skill knowledge and authority of professionals belongs to the professionals as individuals, not the organizations for which they work. Professionals are therefore relatively mobile in employment opportunities as they can move to other employers and take their talents with them. Standardization of professional training and procedures enhances this mobility.[21]

Yes/yes

However, I again think this is pretty common for most jobs in the UK as long as you’re happy to stay within your sector.

In summary, I think it matches most of the relevant criteria, though it's somewhat depressing how many of the criteria the tied agent also hits!

atypical · 9 June 2011 at 8:46PM

I was expecting two numbers for the amount that applied to IFAs and FAs, not the very comprehensive and helpful reply you gave. Thanks.

Aegis · 9 June 2011 at 9:57PM

atypical wrote: »

I was expecting two numbers for the amount that applied to IFAs and FAs, not the very comprehensive and helpful reply you gave. Thanks.

I may have gotten a little carried away!

xx_Law_Grad_xx · 13 June 2011 at 10:51PM

Wow, thank you the replies everyone. I will have a read over them properly when I have more free time but they have been very useful.

My reason for doing the Certificate first is my employer will pay for everything so will give me a good grounding in financial services. Hopefully it will make me more appealing to potential IFA employers and once in employment and getting industry experience can do the diploma.

A few further questions which have been leading me to question a career in financial advice are: -

1. How is job security within the profession? I know that soon it will be required that IFAs have the diploma in financial planning but prior to this was it considered a stable job? Is there quite a high turnover of staff?

2. Are there many IFAs in London? I have always aspired to work in London whilst I am young and then switch to the home counties.

3. Typically how many people do you work with? Are they mainly one-man operations or large offices? In my current job we deal with a lot of IFAs and it seems a fair few are just someone working from home.

4. Will the profession be affected by the availability of information on the internet?

5. If I wanted to gain sales experience how would I go about doing so if retail banks are going to get rid of their sales force? Would phone sales in say insurance or life products be viewed upon favourably?

dunstonh · 14 June 2011 at 9:39AM

My reason for doing the Certificate first is my employer will pay for everything so will give me a good grounding in financial services. Hopefully it will make me more appealing to potential IFA employers and once in employment and getting industry experience can do the diploma.

The problem is that the certificate level became obsolete in June 2010 for new advisers. If you do the certificate level, you will still have to do another 5 or 6 exams on top of that.

1. How is job security within the profession? I know that soon it will be required that IFAs have the diploma in financial planning but prior to this was it considered a stable job? Is there quite a high turnover of staff?

There is no job security. It has never been considered stable other than for those firms that are more established and run a servicing model rather than a transactional model. Most advisers are self employed but attached. Over half of new advisers leave the industry within 2 years. Those that make it can go on to make a very good living out of it.

2. Are there many IFAs in London? I have always aspired to work in London whilst I am young and then switch to the home counties.

You would think so. Even small rural towns tend to have many there.

3. Typically how many people do you work with? Are they mainly one-man operations or large offices? In my current job we deal with a lot of IFAs and it seems a fair few are just someone working from home.

The IFA side is still referred to as a cottage industry. Working from home is very common. Mainly due to the costs of running an office nowadays.

4. Will the profession be affected by the availability of information on the internet?

Bits of it have (mortgage and insurance). However, the internet is not a good place to get anything other than basic information. To look up more detailed information, you need to know if you need to look up that more detailed information. Then you need to understand it. There will always be those that like to DIY and good luck to them. There will always be those that don't have the time or inclination.

5. If I wanted to gain sales experience how would I go about doing so if retail banks are going to get rid of their sales force? Would phone sales in say insurance or life products be viewed upon favourably?

The whole thing is moving away from sales apart from the salesforces. Sales knowledge can come from any sales environment. It doesnt need to be financial. You either have it or you dont. As an IFA, your product is advice, knowledge and administration. If you want sales, then look at a salesforce FA.

xx_Law_Grad_xx · 28 June 2011 at 7:10PM

dunstonh wrote: »

The problem is that the certificate level became obsolete in June 2010 for new advisers. If you do the certificate level, you will still have to do another 5 or 6 exams on top of that.

There is no job security. It has never been considered stable other than for those firms that are more established and run a servicing model rather than a transactional model. Most advisers are self employed but attached. Over half of new advisers leave the industry within 2 years. Those that make it can go on to make a very good living out of it.

You would think so. Even small rural towns tend to have many there.

The IFA side is still referred to as a cottage industry. Working from home is very common. Mainly due to the costs of running an office nowadays.

Bits of it have (mortgage and insurance). However, the internet is not a good place to get anything other than basic information. To look up more detailed information, you need to know if you need to look up that more detailed information. Then you need to understand it. There will always be those that like to DIY and good luck to them. There will always be those that don't have the time or inclination.

The whole thing is moving away from sales apart from the salesforces. Sales knowledge can come from any sales environment. It doesnt need to be financial. You either have it or you dont. As an IFA, your product is advice, knowledge and administration. If you want sales, then look at a salesforce FA.

Sorry for the late reply. So much to do and too few hours in the day.

Your advice has been very helpful and is much appreciated.

I think the best course of action is to see how the financial advice sector will be affected by the increased requirements placed upon IFA's and go from there. If alot of IFAs switch to paraplanners it may make things alot harder for me to get my break.

Becoming an IFA?

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