At a glance
- Long life expectancy and uncertainty over state pension are fuelling growing demand
- Requires maths knowledge, interpersonal abilities and ability to communicate complex details in layman terms
- Financial rewards can be high
- Need at least basic qualification and several years' experience
- Small independent firms often join networks to share support services
The uncertain future of the state pension is just one example of how the government is expecting individuals to bear more responsibility for their own financial security in the future.
The onus on the individual helps explain the increasing importance of the role of financial advisers - and particularly independent financial advisers (IFAs) - as guides through the minefield that is the investment market.
IFAs differ from other financial advisers in that they are free to recommend products from the entire market, charging their customers either by set fees or through a commission-based system
According to the Association of Independent Financial Advisers (AIFA), IFAs "help people achieve their financial goals in the most efficient and suitable way." This can apply to companies just as much as to families and individuals.
BusinessesForSale.com spoke to someone who bought a financial-services business. Robert Ward's is an unusual story insofar as he actually started the business, sold it and later bought it back.
IFAs differ from other financial advisers in that they are free to recommend products from the entire market, charging their customers either by set fees or through a commission-based system. There are three other types of financial advisers: tied advisers, who work for a single institution; multi-tied advisers, who work for more than one financial institution; and whole-of-market advisers, who work with any company they want on a commission basis.
But IFAs account for 80% of investment, pension and protection business transacted in the UK, and are increasingly seen as the best financial gurus by institutions and the general public alike.
IFAs do not just advise on pensions, long-term investments and mortgages - they can also get involved with specific issues such as school fees, divorce, holiday homes or tax. When it comes to business clients, they could be consulting on pension plans, director packages, 'key man' insurance or commercial mortgages.
The AIFA boasts that "the job satisfaction is enormous." One can see why, even if financial services is not the most glamorous of industries.
IFAs can make a big difference to the wellbeing of clients, and not just in a monetary sense. Personal debt in the UK is at unprecedented levels and financial problems are now a big factor in marriage breakdown and many other social issues.
Helping people become financially secure in the long term is therefore very rewarding, and the process can sometimes result in a close professional relationship lasting decades.
IFAs clearly have a great deal of responsibility and the job requires a high level of intellect and drive. Analytical and problem-solving skills are paramount, as is the ability to plan long term.
A wide range of financial products are available, and you need to understand the features, benefits, technical details and usage rules of almost all of them. Furthermore, you need to be able to convey these complex details in layman's terms.
Assessing people's needs in the event of death or serious illness also requires sensitivity. To make your firm a success you need to have commercial prowess, networking skills and the ability to form trusting relationships.
Unlike some careers - such as estate agency - you cannot simply set yourself up as an IFA tomorrow. The sector is closely monitored by the Financial Services Authority (FSA), and as a minimum you must have completed a Certificate in Financial Planning, the benchmark standard for financial advisers.
To maintain that accreditation an adviser needs to keep up to speed with the market - which is likely to entail additional, advanced qualifications from among the 38 currently available. The FSA also requires at least three years' experience at an accredited firm or network before it will give its blessing to sole traders or other new entrants to the market.
Many careers start off with support work at IFA companies, with others working at product providers (such as banks or insurance companies) or mortgage intermediaries. These offer the chance to learn the trade, or at least a specialised part of it.
Qualifying and working as an IFA might sound like hard work, but the rewards are considerable. Basic salaries for experienced advisers are often over £50k per annum, which, with commission, can bring total earnings well into six figures.
One IFA firm for sale for £1.6m on BusinessesForSale.com boasted of making an adjusted £400k on a turnover of £1m.
Many independent IFAs or IFA firms opt to become 'appointed representatives' of a network, allowing them to share marketing and administrative costs, and refer business to each other according to who has the relevant geographic- or sector-based specialisms. Although not technically a franchise system, there are parallels.
As with any 'people-based' business, much of the company's value resides in the contracts between its employees and their clients. Retaining employees and ensuring contracts survive any handover are key if you are considering buying an IFA firm.
Whether you are already established as an IFA, or whether you are thinking of training as one, buying an established business could certainly offer the opportunity to leapfrog into this increasingly competitive market.
Competitive, yes - but the market is likely to continue absorbing new competitors. With people living longer than ever, and expectations for retirement increasing with every generation, the market for financial advice seems set for further growth.
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