Behind every great IFA lies three support staff
Back in June 2008 Nick Cann, Chief Executive of the Institute of Financial Planning (IFP), gave a number of bold predictions about the shape of the industry in the post-RDR world. One of these suggestions was that the ratio of support staff to advisers would increase so that for every IFA, there would be three administrators or paraplanners supporting them.
Recent market trends would certainly support such a theory coming to fruition.
In 2008 and 2009 paraplanner jobs and administration jobs registered by Exchange Street accounted for 36% and 37% respectively of all financial services jobs taken on by the company. However as 2010 has unfolded these figures have increased significantly, with now 52% of financial services jobs registered being paraplanner jobs and administration jobs (the remainder sales roles, such as IFA jobs), representing a huge swing as the RDR looms ever larger.
Certainly there are other contributory factors to this situation. As it can be more difficult to assess the overall financial benefit of employing support staff businesses took the unfortunate step of making employees from the support rather than sales function redundant. The result was that during 2008 and 2009 paraplanner jobs and administration jobs dropped off significantly. The swing of 2010 could be directly linked with the industry taking affirmative steps to replace and replenish their administration teams, hence the rise in paraplanner jobs and administration jobs year to date.
However with thousands of IFAs leaving the industry since 2008 (and many more predicted to leave by 2013) it should be expected that companies would need to bolster their sales force but in the main have not done so, hence the drop in IFA jobs being registered. Certainly a belief in the positive impact of administrators and paraplanners on the ability of IFAs to write increased levels of business is well documented. It may also be the case that from a cost perspective, massively relevant given market conditions, an increased support function ratio represents excellent value. Paraplanner jobs tend to be marketed at £25,000 - £30,000 (more in the South East) whilst administrator jobs tend to be advertised at £16,000 - £22,000. IFA jobs in contrast command greater salaries (£30,000 - £50,000) and also a commitment to paying bonuses, something that support staff rarely qualify for.
Therefore it could be argued that the drop in ratio of IFA jobs as opposed to technical support roles could be a deliberate attempt by advisory firms to control costs, employ only more reliable business producers and look to boost production by freeing up these proven consultants from the burden of paperwork. To some extent this has been common practice at small, boutique wealth management practices for a number of years, where top producers could have two administrators and two paraplanners supporting them. However it does appear that such an approach is beginning to be taken up by firms across the industry and we should expect the ratio of paraplanner jobs and administration jobs, as opposed to IFA jobs, to grow.
Recognising such trends, Nick and the IFP will themselves be unveiling the new Certificate in Paraplanning later this week as for once, someone has called the market correctly.