Becoming an IFA and joining family business

pipninja

Thank you for all of your responses to my initial enquiry - it is very much appreciated.

My father would pay for the training element and my thoughts were to perhaps do a lot of the study foundation work part time whilst still being employed.

I am pretty unstatisfied in my current profession (I work in printing) so when this topic cropped up I was interested on face value. Doing a bit of background reading on the financial services industry I can see that there has been some pretty major reform , particularly the RDR. Entering the financial services sector as a new IFA is certainly a decision not to be taken lightly...

The reason I am looking into this more is that, primarily, I do like helping people. I spend a lot of my time coaching and managing staff but also providing a very high level of customer service. This has given me a lot of 'soft skills' such as listening, attention to detail, empathy etc etc. These are skills which I think are underrated a lot these days.

The idea of running my own business also appeals to me. It can also be slightly scary - if I don't work, I don't earn. This is probably my main impediment to moving into this job.

Again, from background reading, I can see that the IFA these days is mainly advising and assisting high worth individuals. The days of the basic financial advice are probably relegated to the mainstream internet comparison sites. Also, I don't suppose people understand why they should pay an IFA for professional advice as opposed to a lawyer/accountant when they have access to all this information on the internet. Whether they make the right decision based upon their own financial circumstances and risk appetite is obviously down to the individual though!

But...my thoughts are this. With the population aging and taking their lump sums instead of buying annuities surely there is a market for IFA's to fill this information gap and provide a highly professional service with regard to investments etc and getting the maximum return for these people with newly acquired cash?

With regard to salary/earnings - I currently earn approx 30k a year. How does this compare to an IFA salary/earnings roughly.

Again, appreciate all the honest replies

wjr4

dunstonh wrote: »

Because the industry is in a combination of decline and buy out and you wouldnt want someone young starting out into that. Bread and butter stuff will go robo-advice and that just leaves a smaller number doing the wealth side. Advisers that are 40+ with existing clients can see the older generations through. Those that are 20+ may find themselves having to retrain later in life.

I have to disagree with this. I'm 24 and just qualified (DipPFS), aiming for chartered within a few years. I think there is a large need for IFAs for the younger generation & also more female IFAs. I'd much rather go and see and IFA who was younger rather than a person who will be retiring in 5-10 years, but maybe I am biased. I also see it as more like helping people rather than selling people products. Robo-advice will help some people who want basic advice but not all - I prefer to actually see someone in person rather than complete everything online.

OP - have a look at the CII online - that is the route I've taken. It has taken me longer than most people but that was because I've also wanted a life & not to rush the exams, as well as normal life events such as moving/new jobs etc. It's definitely something that you need to enjoy though. Good luck

Malthusian

It sounds like you've got a pretty good handle on the state of the industry and are well on your way to making an informed decision.

pipninja wrote: »

With regard to salary/earnings - I currently earn approx 30k a year. How does this compare to an IFA salary/earnings roughly.

One to ask your dad. I would certainly expect to earn more than that but it depends on how profitable the business is. Someone entering the industry without qualifications would usually earn less than £30k (at least outside London) but a) you aren't your typical entrant, you have 20+ years' worth of work experience and "soft skills" b) your dad is not just hiring you for the value you would generate on day 1, this is a long term investment on his part. And he needs to make you a good enough offer to justify the gamble of changing careers.

You should ask him a) what salary he would start you off at and b) how much you could expect to earn when you take over the business. As he is hoping you will change career in order to inherit the business then you're entitled to know the answer to both.

dunstonh

Doing a bit of background reading on the financial services industry I can see that there has been some pretty major reform , particularly the RDR.

RDR didnt really impact on IFAs. Most IFAs were already running agreed remuneration for many years before that. So, it just formalised what had already happened naturally. However, FAs suffered big time. Most of the salesforces ended. However, they are beginning to return.

Financial services has continuous change. Every change is touted as being a revolution or will result in significant changes. Yet on the advice front, things are very little different today than they were 20 years ago in terms of what you actually do (get info, analyse needs, research and present). The steps themselves take a lot longer, standards and requirements are higher and technology is greater but what you do is still the same.

Looking forward, you have robo-advice. Nearly all IFAs will be offering this. A small number will try and drive it as their core model. Most will see it as a supplement to their core model of full advice. Post RDR, IFAs increasingly turned away smaller cases. With robo-advice, they can put the smaller cases onto that and get some income, albeit not much. Although the work wont be much either. Long established IFAs will find that is fine for them as children of family members will be referred to them from the parents and robo-advice will fit the tech side as well as a continuing family relationship. A new IFA starting from scratch wont have that. You will have your father's goodwill though and time to become known to the clients. So, most, if not all, will see you as a continuation of their existing service.

when they have access to all this information on the internet.

You will realise when you come to study that they do not have access to all the information on the internet. You will also realise some years after studying, that most people don't need to the bulk of what you learn. For example, when transitional reliefs came in, it was estimated only 50,000 in the UK needed them. IFAs needed to know the ins and outs but most IFAs probably only had a couple of clients that utilised them.

But...my thoughts are this. With the population aging and taking their lump sums instead of buying annuities surely there is a market for IFA's to fill this information gap and provide a highly professional service with regard to investments etc and getting the maximum return for these people with newly acquired cash?

Annuities have not gone away. I have done more annuities this year than drawdown. Certainly, more drawdown than previous years (the ratio of annuity to drawdown would have been higher historically). It is not uncommon for people to say they dont want an annuity, yet when you ask them what they want, they describe an annuity with death benefits. The pension freedom changes didnt just change the drawdown options. The legislation also changed what annuities could offer. yet you didn't see that covered in the media and you dont really see it mentioned on the internet.

With regard to salary/earnings - I currently earn approx 30k a year. How does this compare to an IFA salary/earnings roughly.

It depends on your status as an IFA. Director/owner IFAs who have an established practise would likely be in 6 digits. If they have employees/attached advisers, then well into that (as they earn from the employee/attached adviser). Employee or self employed but attached advisers tend to earn the least as they have to pay the employer/firm they are attached to.

An employed IFA maybe 30k but I would put that at the bottom end or an adviser on wind down (I do have an attached adviser working for me who earns less than that but he is in his 60s and just deals with clients he has had for over 30 years. So, he doesnt need to work full time.

Now, I will say that I speak from the position of a rural firm. City firms will have a different type of client and business set up. We still get given jams, tomatoes, runner beans etc from clients. We have clients that make us sandwiches for lunch or bake a cake for us. The business relationship is what many would many would consider old fashioned but that reflects the location and generation that we mostly deal with.

Your father will be able to give you info on what the firm is like in that respect.

Pincher

PeacefulWaters wrote: »

What commission?

You mean there is no trailing commission, or anything for setting up pensions, these days? Poor dunstonh, he must be starving.

dunstonh

Pincher wrote: »

You mean there is no trailing commission, or anything for setting up pensions, these days? Poor dunstonh, he must be starving.

No. There is no commission. Hasnt been since 2012 on advised distribution. I am fine thanks. I was agreed remuneration for many years before it became required.

Pincher

I thought old products set up years ago just keep on giving.

The Mighty Yellow River, you can divert it, but you can't stop it.

dunstonh

I thought old products set up years ago just keep on giving.

Not quite. Platforms went clean in the lead up to the sunset clause. Also, disturbance events could also turn off commission based ongoing or require a fee offset. Some providers have also turned off legacy commissions keeping the money for themselves (not reducing charges).

There are some that continue to pay but they are in continuous decline as you do things like bed & ISA (bond and ISA) and fee offsets and bring people on to modern contracts. We do have a high number of commission based pensions that are cheaper on commission than fee (0.235% p.a. which includes platform and fund charge). So, no justification for switching those to fee basis.

A lot of the old plans that paid renewals tend to only pay figures like 12p a month.

I just took a look at the ratio for year to date for us and the commission paid on retail investments was 1.68% compared to 98.32% on fee.