Career as IFA?

Graeme7777

Hi,

I am considering a career change within the financial services industry and one of the options I'm investigating is re-training as an IFA. I'd really appreciate it if some experienced advisors could help this process by answering some questions:

(1) Is this a career you'd recommend to a loved one?
(2) What are the future challenges to the profession?
(3) Has the availability of information on the internet helped or reduced the need for IFA's?
(4) How does one go about qualifying as an IFA?
(5) Is there any other advice you can offer?
(6) As a trainee and then as a newly-qualified IFA, what sort of earnings are typical?
(7) Is being a self-employed IFA potentially lucrative?

(sorry if the last 2 questions sound greedy but I have a family to feed!)

Thanks for any info!!!

homer_j_3

Hi Graeme,

You will find lots of info on this topic if you search the mortgages board. To answer your questions:

1 - It depends on the person. You need to be personable, able to explain complex issues simply and have the hunger to sell at the start.

2 - The retail distribution review is probably one of the main things that will impact on this role.

3 - IFA's cover a wide range of products and topics. The internet is no more of a threat than a solicitor would find it to their profession imo.

4 - You need to pass your exams. Look up the CII on google. (Chartered Institute of Insurance)

5 - The hours are long and you will need to be a tied FA before anyone will consider you as a IFA.

6 - I would hope 20-35k.

7 - Without a client base, it is suicide. Spend 5 tears employed and build relationships up and yes it can be a financially rewarding career.

DunstonH is a fountain of knowledge and will answer in more detail i am sure at some point. Hopefully, my brief answers will help.

dunstonh

(1) Is this a career you'd recommend to a loved one?

Depends on the personality of the individual.

(2) What are the future challenges to the profession?

An increasing move to fees and specialistation and further qualifications required. Those that can cope and adapt to that will be fine. Indeed, the earnings potential for them will increase.

(3) Has the availability of information on the internet helped or reduced the need for IFA's?

It hasnt made the slightest bit of difference on investment business. You get a lot of people who have tried DIY and have made a right pigs ear of it (or at least realised that they cannot keep up with it) who then go to IFAs to sort it out. Good IFAs are in demand. Greedy IFAs and tied agents and the less professional are more likely to suffer here. I do fear for mortgage advisers a bit as I can see mortgages going the way of home and car insurance. However, most of the professional IFAs I know have dropped mortgage advice already.

(4) How does one go about qualifying as an IFA?

This is where it is much harder nowadays than it used to be. There are 5 exams required initially. It used to be the natural career path to start with a tied salesforce, such as bank or insurance company, get the exams, experience and clients before upgrading to IFA by either joining an IFA firm or starting your own. You cannot start your own without experience and you wouldnt want to.

Oh, those 5 exams are just for investment business. If you want to include mortgages thats a further 3 exams.

The FSA has proposed that from 2009 the qualifications for being an IFA will be raised above that of tied agents. It has been suggested that the what used to be called the advanced FPC will be the new standard. That is 4 further exams which are obviously harder than the initial exams. Indeed, their pass rate is closer to 50% with a few modules less than 50%.

Nowadays, the realistic career path is to go to a bank first and do your time.

(5) Is there any other advice you can offer?

Think hard about it. Its a great career, brilliant earning prospects but more fail than succeed. Main reason is due to lack of clients and poor business sense. In the early days it will be a sales role. If you are not sales minded you will not succeed. As you get more experienced and your reputation and standing increases you will find that the sales side virtually disappears and you end up a professional adviser. Some remain sales orientated and it is these that the FSA are hoping to push out with the increase in qualifications.

(6) As a trainee and then as a newly-qualified IFA, what sort of earnings are typical?

I managed 6 digits in my first year as an IFA but then I had spent 15 years in a bank as a insurance broker (when banks used to do that), mortgage adviser and then tied agent.

If you go to straight to IFA with a local firm I would estimate that you are reducing your chances of success and likely to earn less than £30k which is probably not going to be enough to survive due to costs.

Costs are important. Mine are heading over £70,000 this year with two weeks to go. Approx £20,000 of that exists before you get out of bed. If you want to cut to the bone then you are looking about £10,000 but you would be at the stage where your advice would potentially be compromised. Good enough to pass minimum standards but thats about it. Thats the own company option. However, if you go employed or attached to a firm then expect them to take as much as 70% of what you earn (typical model is 70/30 on self generated business and 30/70 on stuff they give you).

(7) Is being a self-employed IFA potentially lucrative?

If you get it right, yes very. However, dont expect to walk into that sort of earnings for a good few years.

The single biggest issue with new advisers is how to get clients. Remember that advertising is regulated and you cannot cold call on mortgages or investments. If you dont have clients, you dont have an income.

Graeme7777

Thank you all for the sound advice. Dunstonh - Homer_j is correct when he said you're a fountain of knowledge.

Once last question if I may...

Do some IFA's specialise in advising on investments (building a unit trust portfolio, for example) and not get involved in the assurance/insurance business. If so, does one need to follow the same path to qualify?

Thanks again!

homer_j_3

You are probably thinking at the moment - this is going to be a mountain to climb. The best thing to do is to do your qualifications and then see what you enjoy. An IFA tends to look at all aspects of their clients financial planning. This involves

Protection
Retirement
Investments
Savings
and potentially Mortgages.

Whilst looking at all of these products, you need to be upto date with taxation and current regulation.

You will need to learn the full spread whilst tied and you will need to demonstrate a good product spread/mix when you move on to your next role. You have KPI's normally to meet and if you are demonstrating doing more investment than protetion then you may actually slow your steps into the IFA route.

I am FPC qualified, my father in law is an IFA and I chose to specialise in mortgages because I felt I was too young to be taken seriously as a FA at the age of 21. Now I believe the old git dunston at the ripe age of his mid thirties (hope I have remembered right dunston lol) is still considered a youngster in this line of work. By looking after all your clients financial needs does mean that you will earn more money as well as giving your clients a better service.

riflemanharris_2

I am currently working as a Process Engineer in the Pharmaceutical Industry in East Kent. This is riddled with politics, self interest and poor management. As a consequence I am looking for a career change. I am really interested in finance and money matters and thought I may look into becoming an IFA. I am 40, earning ~£55k, so I guess my questions are:

1. Is it too late to change now?
2. How long would I need to sustain an income significantly below where I am now?
3. How would I go about doing the exams / getting trained - i.e. can I do these by distance learning, college course, or do I need to be in a job to do them?

I would appreciate any help anybody can give,

Thanks,

dunstonh

1. Is it too late to change now?

no.

2. How long would I need to sustain an income significantly below where I am now?

It can take years for most people to build up any sort of sustainable income. However, once there it can provide a very good living. However, it depends on the distribution channels and business model you are involved in.

The biggest issue for any newly qualified individual is getting clients. Over half of new advisers dont last more than two years. Many leave in debt. If you dont have clients to advise you dont earn.

3. How would I go about doing the exams / getting trained - i.e. can I do these by distance learning, college course, or do I need to be in a job to do them?

Very few colleges do them. Because being an IFA is further up the scale than the other adviser types, you tend to find most IFAs have done time in the other roles and move through them and eventually become an IFA. Some training centres do exist to train you to go straight to IFA but they have a mixed success rate. Most trained and sat the exams on the job with either an employer paying for it or starting with mortgages and then moving forward from there or doing time with a bank. In the past the insuers used to be a common career path but the banks have replaced them.

You can also expect to earn very little in the early years. You will also have to do a lot exams.

three to get your mortgage qualified. five more to get you to certificate level. Then another four at diploma level which will be the minimum requirement from 2010 for new advisers (2012 for existing).

riflemanharris_2

Thanks for the advice.

It is certainly something I will look into further - maybe starting with something straight forward and seeing where that leads.

Potential_Advisor

Thank You, Graeme7777 for posting those questions i was just about to ask myself and in particular Dunstonh for the well informed reply. I am 42, a bit old perhaps to be considering changing careers, but my background is in General insurance sales both B2B AND B2C, and in recent years protection products such as CI, IP and life cover. So I have the sales experience and a good 'appreciation' of how financial products work, and I am progressing well with
CF1. My question is, will I be able to get a Bancassurance job at my age, so i can do my 'time' before evolving into a true advisor later on?

I think the idyll is to be 100% fee based with a reasonable number of established clients who know that you are going to put their interests first and pay you well as a result of that. Just the way I see it.

Any comments/thoughts would be interesting.

dunstonh

My question is, will I be able to get a Bancassurance job at my age, so i can do my 'time' before evolving into a true advisor later on?

"Doing Time" at a bank is a common career path now. Its a pain but you can get yourself qualified with them, they pay for it and they give you clients who you can look after well and take with you when you go IFA.

Age shouldnt be an issue by any means.

somewhatnew

If anything your age probably will be on your side. I qualified as an IFA straight out of uni at 21 (a number of years ago now sadly!) and having had client meetings with new prospects who may be a solicitor of 20 or 30 years standing or helping a person going into their retirment was always a wierd thing to do because of the age gap.

Being 42 shouldnt be a hinderance, you can get CFP1-6 done probably in a couple of months (all multiple choice exams except CFP5) which will be your (very) basic regulatory, investment, pension, protection, mortgage and planning exams done. After that you need to get a Competent Advisor Status (on the job training, maybe take 6 months) and keep sitting your Diploma exams (for which you need a minimum of 4).

There can be very good money in being an IFA, it will open up other avenues of sorts like Private Banking. It's a hard slog at the begining and can be crappy hours if you have to do client visits in the evening or the weekend. But the rewards will be there if you work hard enough