The Topsy-Turvy World of Financial Planning Recruitment

The last 12 months has been a curious time in Financial Services recruitment. There have been some very noticeable trends affecting the market like never before. First and foremost, we have seen rocketing adviser salaries and an unprecedented level of counter offers. These two factors would seem to indicate an industry where talent is in short supply, where firms are struggling to recruit and therefore are willing to do/pay what they need to in order attract or keep good advisers. However happening simultaneously to this is a very noticeable, pretty widespread move by players of all sizes to slash the fees they are willing to pay recruiters. That these things should occur at the same time is counter intuitive – surely when good advisers are hard to find is exactly when wealth management firms need recruiters the most, and therefore, you would think, would understand the value of a good recruiter. 

Over the course of the next few weeks I will be looking at the factors involved in these recent movements and what we can all learn from them.

Part 1 – Rocketing adviser salaries

From analysis that we conducted at the end of last year, the average starting salary for newly appointed Financial Advisers (UK wide) was £62K, markedly up from £52K the previous year.  However this is for advisers of all levels, in a variety of environments and across the UK and therefore does not show the true picture.  Recruiting, as I do, primarily for mid to senior level Financial Planners in London and the South East within wealth/investment management firms and professional practices, I have seen salary bandings sky rocket over the past year.

Following RDR there was a steady increase, as firms moved from bonus weighted packages to salary weighted packages, but it has been over the last 12-18 months that basic salaries have really shot up. Whereas a few years ago salary ranges for a decent quality Financial Planner role within, say a top 10 accountancy firm, would typically go up to £60K, this is where salary ranges are now starting, with the top end often being £90K or more.  The vast majority of good quality, experienced Chartered Advisers within the Financial Planning divisions of the major wealth players are now already on this level and looking for £110/120K+ to make a move worthwhile. These are the sort of salaries that a few years ago were reserved for the ‘Head of’ or ‘MD’s of such operations!

Subsequently, I know advisers who were on £50K two years ago, who, with a couple of quick moves (or counter offers – see part 2 of this series...) have engineered salaries of £80K. These advisers have seen their salaries increase by more in the last 2 years than they did in the previous 15. Likewise, firms are struggling to attract an ‘up and coming’ junior level adviser with 2 years CF30 experience for much less than £60K now.

So what has led to this? As already mentioned, the changes from pre-RDR remuneration structures, where bonuses often made up 50% of someone’s total earnings, to salary weighted packages with a smaller, discretionary bonus element, have definitely had an impact. 

Moreover though I suspect it is the widely recognised dearth of new blood coming into the industry, and ageing adviser population that has led to some firms almost ‘panic buying’ where good candidates do come onto the market. The willingness of those firms, often those with big backing and subsequently deep pockets, to pay what you might consider to be over the odds, has meant that the rest of the industry has no choice but to match this level in order to stay in the race for the best talent.

However, with these spiraling salaries showing no signs of slowing down, it begs the question of whether all this is really sustainable? If the costs of employing advisers are increasing then presumably these costs will have to be borne elsewhere in the business. A slight reduction in the initial recruitment fee will have little impact so will it be in cuts to typically already stretched back office teams or will it be borne by the client? Furthermore, with the majority of income generated on a percentage of assets basis, with plunging equity markets the pressure of high salaries is a real problem.

I would be really interested to hear about anyone else’s experience of this trend, your thoughts on its causes, and its sustainability?