Do financial advisers have a good reputation? Our article on how to become a financial adviser in the UK is one of the most popular posts on this website. It’s popular because Google sends plenty of searchers and researchers to our post, and in turn, this is because lots of websites and online resources link or point to this article.
One of the opening thoughts of that article is about how well regarded are financial advisers. I didn’t think it was sensible to dwell too much on this question in that article, as I’d be distracting from the key question of how to actually get into the profession.
In this article, I’ll make 4-5 points which help to explain the current state of the financial advice profession in the UK.
Do Financial Advisers have a good reputation: 5 Thoughts
Financial advisers aren’t as well utilised as you might think
If we were to separate the UK population into two groups; those who regularly engage with a financial adviser for their savings and investments, and those who don’t.
The size of these groups will tell you quite a lot about the brand name recognition of the profession. The number of people who DON’T see a financial adviser would exceed those that do, by many multiples.
A CNBC survey found that less than 1% of US households use a financial adviser, for example.
That’s right, only a small fraction of UK adults use a financial adviser. This is for three reasons:
- A huge chunk of the population have little in the way of savings or investments. While an adviser might be able to assist with guiding people to save, this type of advice isn’t worth paying for, if you don’t have the cash to be able to invest in the first place.
- Lots of people are ‘put off’ from investing by historical volatility in the market, and would never see themselves as an investor – with or without a professional’s help. They stick to simple cash ISAs which generally doesn’t require advice.
- A healthy chunk of investors feel that they can do sufficient research themselves, and they feel confident enough to make their own financial decisions without advice. Perhaps they’ve used investing courses or the best investing books to educate themselves.
This means that most are not familiar with the profession, particularly compared to other professionals such as teachers, doctors, whom we’ve all come into frequent contact with and feel we have a thorough understanding of their job.
Financial advisers are paid well, and less well
Sometimes, the prestige of a professional can be driven by the high earnings of those at the top of that career ladder.
As an example, a senior partner in the Magic Circle law firms or the Big Four accounting & consultancy firms can expect to take home pay approaching £1m per year.
As well as making the headlines, these figures grab the attention of bright teenagers and students who are looking for a career to throw their ambition behind.
The pay of financial advisers is not widely known. This is probably because the job title, firm, and pay can vary so widely. Some financial advisers, working in branches of UK banks do not earn more than £30,000 per year. Whereas advisers working at boutique wealth management companies can easily generate six figures.
This muddied picture of whether being a financial adviser is a ‘lucrative’ profession probably doesn’t help how the professional is regarded. You’ll note that the more public-facing and visible advisers are often the lowest paid.
Financial advisers avoided blame for the 2008-2011 financial crisis
An excellent feather in the cap of the financial advice profession is the way it avoided attracting mainstream blame for the financial crisis of 2008 – 2011. Banks, auditors and (to some extent) central banks took the brunt instead.
This is partially valid. Financial advisers focused on savings and investments would not have encouraged residents to take out the type of risky subprime mortgages which triggered the losses and crisis in the US. That being said – some of the culprits were commission-based mortgage advisers (sales people) in the US, who, incentivised by their remuneration structure, were thrusting the largest, cheapest loans at people who simply couldn’t afford to repay.
If you haven’t watched the film, The Big Short which dramatises the wide west of credit which led to this disaster, I recommend you do so.
Financial advisers are not associated with bankers
Financial advisers have retained a very independent and separate image from the investment bankers who sip champagne in a pinstripe suit. This is only a good thing and when wondering whether financial advisers have a good reputation, the proximity to the scoundrel investment banker is an important metric!
Financial advisers have higher qualifications
Financial advisers need to complete a ‘level 4’ qualification in the UK to practise as a qualified individual. Finding a financial adviser with such qualifications is easy, because this became mandatory years ago, so the entire profession has brushed up on its credentials to meet the new requirement.
Qualifications at a more advanced level are also available, such as the ‘Chartered Financial Planner’ status, which is obtained from qualifications equivalent to bachelors degree. This professionalism of the industry has helped to elevate the status of very technically gifted professionals.
Overall
Overall, do financial advisers have a good reputation? Financial advisers are relatively well regarded in the UK. As an industry, they’ve avoided the negative publicity of scandal, and haven’t been tarnished by the recent poor practises of investment banks and subprime mortgage brokers.
That being said, few Brits have ever used a financial adviser, and the profession isn’t held up as a lucrative profession which young people will chase after. Perhaps it’s because the job isn’t as easily dramatised on TV as legal and the medical professions are!