Becoming an IFA

webmasterpolo

Hi all,

Now l've been thinking about this for a while now. It is a big career change for me, but l think l will really enjoy it.

I have done a little bit of research so far and l've been looking up some of the qualirfications you need to do to get a job as an IFA - the FPCs etc.

Now l know some of the people on here are already IFAs and l just wanted to ask if you have any tips about getting into the business.

Thanks.



(mods: I know this may not be the correct board for this, so please move if necessary, l just know IFA's use this board a lot)

payless

Hard to get set up yourself or to get anyone to take you on without qualifications/ experience.

Usual route in past was to go via a bank or insurance company to gain the experience before transferring to IFA status, although perhaps an alternative route now is the " non investment route"-

dunstonh

I agree that its hard to become an IFA directly. It wouldnt be advisable either in my opinion.

As payless suggests, you could look to start in the non-regulated part of the industry or look at a bancassurer. Banks tend to have a fairly good training process to get you through the exams plus they cover all the costs.

After you have spent a couple of years with a bank and realise that their poor products, limited product range and the sales environment get on your nerves, you can then look to become an IFA.

When becoming an IFA from a bank (or other insurer for the very few that are left), you would have the option to go directly regulated (very very unlikely due to costs and experience), join a network (although they normally expect you to have a turnover of at least a defined amount and some years experience as an advisor) or join a firm of IFAs (cheapest method to start as an IFA but expect the firm to take a chunk of your earnings).

Starting the non regulated route (life asssurance, house insurance and mortgages) is a popular route. Do a couple of years or that whilst studying your FPC exams. Ideally with a firm of IFAs so you can watch and learn what happens. Only negative with non-regulated side is that it does tend to be more sales than advice.

It is very very hard and not really advisable to go straight into being an IFA. Lots of things will work against you if you try that route.

payless

Non-regulated = areas of financial advice not regulated  by FSA ( although not without some guidelines)

FSA taking over regulation for much of this
Oct 04 for Mortgage advice
Jan 05 For "non investment insurance contracts" such as most life, Crit Ill  and general ( car, home ..) insurance

webmasterpolo

Great thanks for the tips guys.

I have been looking at the cost of doing the FPC's off my own back while still working full time in my current job.

I could look at getting a job at the bank that would provide the qualifications, but l think that would be difficult in my area (Durham/Newcastle) but l will look into it. I've looked at this a few years ago, but they all require degress just to get an interview - l don't have a degree, but l do have A levels and years of experience.

dunstonh

You will find that the banks are interested in sales experience rather than qualifications. If you have a sales background they will be interested in you.

Not all banks are equal either. Some banks treat financial advice as another clerical job that you do for 6 months before moving on to the next one (that is bad but it happens). Others bolt it onto an existing role because they dont do enough to be an outright advisor. What you need is one where the advising staff are apart from the clerical staff. So it is probably worth trying quite a few.

One of the single biggest costs an IFA has to face is PI cover (liability for future bad advice). This is based on your track record, type of business you transact and turnover. With no track record, you may find yourself penalised. PI cover costs me £3200 a year and I have never had a complaint and do not transact high risk business and thats with a 10 year history. God knows what it would be to someone going into the business with no history.

scap_uk

Hi

I have read some other information on the web and saw a careers article in the Evening Standard about 6 months ago about becomming an IFA. They made it sound really easy - which I now realise from reading your postings is not the case!
I don't particuarly want to join a bank to train in the finance sector as this really doesn't appeal to me. Does anybody have any other ideas?
I'm graduating this year with a Maths degree and was hoping that might help?
Any ideas or suggestions would be greatly appreciated.

Thank you

dunstonh

Just because it is an usual, doesnt mean it is impossible to go straight to IFA. The content of the thread isnt there to put off but to just highlight the average reality.

You perhaps need to decide how you want to be an IFA and that will give you a better idea on what you need to do to get there.

You can become an employee (or self employed but attached to a firm) where you take a very small cut of the commission/fees but do not have much or any of the expenditure. So positives are low cost, low worry and no concerns over the business side. Negatives are lower income potential, lack of involvement in business and no ownership on the renewals/trail fees so you are not building up a business value for yourself. The Partners of the business are quite happy though!

You can get into one of the banks that has an IFA arm. They tend to like experience on the tied side and will sell themselves as dealing with higher net worth clients. Expect long hours, much driving, better bonuses than on the tied side but much bigger targets. Positives. Occ pension scheme maybe, bank training (which isnt too bad for those starting out). Negatives. Long hours, lots of driving, high sales targets and income heavily backed by bonuses.

IFA sole trader or small partnership. With this, you are responsible for everything. The advice, the compliance, the business and everything that goes with it. Positives, you are the boss. The renewals/trails are yours and build value onto your business. highest earning potential of all the options. Negatives. All the costs are yours as well as is the liablity for the advice. In the event of a complaint being upheld, you will be financially liable for the excess which is typically £5000. (good incentive not give bad advice!). You need experience before you can get here. (you may grow the business to employ other IFAS so you can earn off them like the first option)

You then have specialists that work in certain areas linked with insurance companies, networks or parts of certain firms. These often require higher qualifications. Experience would almost certainly be required as you dont get those qualifications quick and easy.

There are other types but they are the main ones and there will of course be differences in each area. To get to the one you want to be at, you may need to spend time doing one of the others to get yourself there. Different personalities suit different roles.

I know IFAs in all the above and each thinks they have the best option as it suits them and thinks the other ones have got a raw deal.

Which option do you want for yourself as it would let the IFAs here give you guidence on whether "straight to IFA" is sensible and likely?

scap_uk

Many thanks for your response! I have cut and pasted th e bit of your reply I wanted to comment on:

You can become an employee (or self employed but attached to a firm) where you take a very small cut of the commission/fees but do not have much or any of the expenditure. So positives are low cost, low worry and no concerns over the business side. Negatives are lower income potential, lack of involvement in business and no ownership on the renewals/trail fees so you are not building up a business value for yourself. The Partners of the business are quite happy though!

This is the was I thought I could get into FA and the way which I wouldn't mind doing. Is it possible for me to start off in this manner and then after taking the relevant exams etc. either opt to move to another company or to set out on my own. I accept that pay will probably be quite low to begin with and I accept that I just can't quite imagine myself working for a bank for several years!
Do you know of the kind of companies to take on people in this manner or possibly how to go about finding out?
Thank you once again for your advice

Sarah

Robert_Sterling_3

Hi Webmasterpolo
Welcome to the interview room.

Sit down please.
Would you please tell us why you have decided upon this career change?
Why exactly do you wish to be an IFA?
Is it because you wish to help people to make the best use they can of their money?
Do you think that it a cushy number or a very stressful undertaking?
What Qualities should we look for in an IFA.
Why did you leave your previous job.

dunstonh

The option you want for starters is possible.  However, if you try a couple of local firms you will probably get the following responses

Do you already have the exams?  as you don't what can you offer the firm that would want to take you on?   ie, any financial services experience at all.

If they are impressed with you, they may take you on in the clerical side initially, moving through to general insurance and maybe mortgages (once qualified on those) whilst you take your FPC1 & 2 (which you will probably have to pay for yourself)  and then move you slowly onto to the advice side.  You will then sit your FPC3 around 11 months after passing your FPC2.

That is if you are lucky and you can persuade the interviewer of your abilities.

This is beginning to sound rather negative but you have to remember that you would be a cost burden to the company for the first 12-18 months.   You are another user licence on the software, another cost on the PI cover and there are registration fees with the FSA and network (if applicable).   Your income ability is going to be zero for some months and limited for some time after that.  In addition a compliance officer would have to shadow you quite heavily in the early months and again, that is a cost.  Even after 12 months. you would still have heavy monitoring.

In the last 5 years, many insurance companies have closed their direct sales forces and a glut of FPC3 qualified advisors with track records flooded the market.    They can be up and running in a very short time, bring many clients with them and cost a lot less than you.   I'm afraid this is what you are up against.

With all the old direct sales companies closing down and the old routes to IFA going, it really leaves the banks as the main route.    Being a bank advisor doesnt make you a bank clerk.  Indeed, with some of the banks it makes you an outsider who can walk in and out of the bank as you wish and operate with a degree of freedom that many older bank staff resent.   The banks which treat the advice role as any other role within the branch are the ones to avoid.

Sorry to sound negative but i thinks it is the reality of the situation at present.  I am hoping a couple of the other IFAs on the board will chip in with suggestions or maybe the mortgage/general advisors who work with IFAs or are working towards getting IFA themselves will offer some suggestions.