Cover story: Advisers at breaking point

Since the Covid pandemic and the subsequent lockdowns, people have become more aware of, and more willing to talk about, their mental health. Mental Health Awareness Week, which takes place this month, is testament to this increased openness.

However, poor mental health itself, sadly, has not gone away. The stresses of everyday life, combined with the cost-of-living crisis, are contributing massively to a rise in conditions such as anxiety and depression.

According to the mental-health charity, Mind, one in four people will experience a mental-health problem of some kind each year in England.

A recent study by the Mental Health Foundation found that 73% of the population had felt anxious at least sometimes in the previous two weeks. One in five people (20%) felt anxious most or all of the time.

Toll of the profession

Contemporary research suggests that many financial advisers are not immune. In fact, it reveals they are struggling to cope with the toll the profession is taking on them.

And, while it is unfair to point the finger of blame solely at the increased burden of regulation, the statistics show it is having a profound impact on advisers’ mental health.

You often hear people say, particularly older advisers: ‘I can’t retire because my clients need me.’ No, they don’t; they need financial advice

In its ‘State of the Advice Nation’ report, published in February, The Lang Cat found that fear of further regulation was the main issue keeping 31% of advice business owners awake at night.

The report, which surveyed 400 members of the advice profession, revealed that advisers were particularly worried about the volume of new regulation and the pace at which it was coming at them.

It’s easy to see why. Since the implementation of the Consumer Duty in July 2023, it seems there has been a stream of regulatory changes, proposals and warnings.

You need only check The Lang Cat’s Analyser tool to discover just how many.

In November last year, the Financial Conduct Authority sent out a Dear CEO letter to all wealth managers and stockbrokers, warning them its supervision would become “more targeted, intrusive and assertive”.

In the same month, the regulator published its Sustainability Disclosure Requirements consultation policy statement, including the introduction of four sustainability investment labels.

While advisers strive to improve the financial health of clients, the growing regulatory burden seems to be exacting a high cost on their own mental health

Although these rules are likely to have a greater impact on asset managers, advisers will need to get to grips with them too.

More recently, in February, the regulator wrote to 20 of the largest financial advice firms, requesting information about their delivery of ongoing services to clients. It asked if they had assessed their ongoing services in response to the introduction of the Consumer Duty, and whether they had made any changes as a result.

Other FCA initiatives looming over advisers are the Advice Guidance Boundary Review, the Appointed Representatives regime, work to identify vulnerability in client bases and the retirement income advice thematic review.

Then there are numerous policy changes, of which advisers must keep abreast.

Staying on top of all these things and filling out forms are a full-time job in themselves.

Small firms

Such demands can be particularly challenging for smaller firms, which may not have a compliance or regulatory function in house.

Steve Nelson, Lang Cat insight director and co-author of the ‘State of the Advice Nation’ report, says the burden of regulation continues to be a “massive headache” for firms, adding: “It’s a real concern to see this driving some to breaking point.”

I don’t think the environment of many firms is particularly helpful. There may be pressure on generating fees, or on getting bigger clients

He says many respondents from smaller firms spoke about the disproportionate impact on them.

In another study, by CoreData Research — published in September last year — 35% of advisers said regulation was negatively impacting their mental health, while 63% said it was affecting their ability to do their job. Only one in 10 disagreed with the latter statement.

“While financial advisers strive to improve the financial health of clients, the growing regulatory burden seems to be exacting a high cost on their own mental health,” says CoreData editorial director Will Roberts.

He says the Consumer Duty is proving “particularly problematic”, with a majority of advisers saying it will raise their business costs, increase advice fees and widen the advice gap.

“Amid these concerns, one in 10 advisers said they were considering leaving the industry,” adds Roberts.

The younger advisers need to be trained, and be aware of, what they are going to suddenly take on

“So, while the regulator expects advisers to identify and understand the needs of vulnerable clients, more should be done to look after vulnerable advisers who may be suffering in silence.”

As if more proof of the strain on the profession were needed, research last year by Embark Group found nearly two-thirds — 60% — of advisers believed that ad hoc changes to tax policy were having a larger effect than before on their business processes.

Add to this the fact that a similar number — 63% — of advisers say their firm will need to outsource to meet the Consumer Duty requirements, and a picture emerges of regulatory-driven workloads driving up costs.

RDR 2.0?

Verve Group head of adviser support Christian Markwick says: “The profession is going through so much change at the moment, with the Consumer Duty, thematic reviews, capital redress, the repercussions of the British Steel pensions scandal, technology… it feels a bit like RDR [Retail Distribution Review] all over again.”

If you speak to anyone in the police service, medical profession or counselling, they are trained to leave that at work and not take it home with them

He says some — particularly more mature — advisers are at a loss to know what to do.

“Quite often the more established, usually smaller, business owners just can’t see the wood for the trees, and it’s very much affecting their mental health.

“They’re talking about selling businesses that they weren’t going to sell, and saying they just need to get out.”

David Owen, formerly Openwork wealth proposition director, agrees. He says some of the older advisers, who have been advising clients since the 1970s, have gone through the RDR and are now being asked to comply with all the new regulatory changes.

“There are a lot of advisers who are vulnerable themselves,” he says. “They’re being asked to do things that they’re just not capable of doing any longer.”

Last month, Money Marketing conducted a poll that asked advisers what impact, if any, regulation was having on their mental health. Of the 182 people who responded, almost half (46%) said it was so bad they were considering leaving the profession.

If it starts getting too emotional, step away and bring in an expert, such as a therapist or a financial coach

Altogether, 22% described regulation as having a ‘big impact’ on their wellbeing; 15% said it was having ‘a bit of an impact’; while only 17% said it was having ‘no impact’.

Regulation is important — few will dispute that. It ensures that consumers get the best outcomes, and helps to keep firms accountable for their actions and for the amounts they charge.

But is it realistic, or financially viable, for smaller firms to keep up with the pace?

And what are the regulators doing to ensure that implementing their changes is achievable?

The FCA was approached for comment but had not responded when MM went to press.

Advice, not therapy

It isn’t all about regulation, of course. It would be unfair — and inaccurate — to blame that alone for advisers’ mental-health struggles.

There is another issue that newer advisers may not have been prepared for when entering the profession, and that is just how close advice can get to therapy.

Supporting our advisers’ mental health is vital

Conversations around retirement, divorce, illness and death mean many advisers have deeply personal and, at times, upsetting discussions with their clients. But, unlike therapists, who are trained to deal with these situations and even have access to their own counsellor, advisers generally don’t have much preparation or support.

“We’re not counsellors, we’re not therapists,” says Ovation Finance founder Chris Budd. “We are here to help clients understand what their money is for. But, if that starts getting too emotional, step away and bring in an expert, such as a therapist or a financial coach. Don’t feel you’ve got to go there.”

Budd says some advisers are so worried about unlocking emotional stuff they can’t handle, they avoid bringing it up at all.

“I don’t think that’s very helpful either. But let’s just dial it down a little and not get too carried away with the massive impact that we can have.”

He says an adviser is not there to change a client’s life.

“You might, and that’s great, but it’s not your job to do so.”

Some, including Markwick, want to see advisers receive more support for dealing with difficult client conversations.

They’re talking about selling businesses that they weren’t going to sell, and saying they just need to get out

Markwick believes that professional bodies from the sector, such as the Chartered Insurance Institute (CII), the Chartered Institute for Securities & Investment and the London Institute of Banking & Finance, should introduce this type of module into their training courses.

Budd agrees.

“I think the younger advisers need to be trained, and be aware of, what they are going to suddenly take on. I don’t think a lot of them are ready for it,” he says.

“It’s never even crossed their minds that they’re going to find out things about clients that their husbands and wives don’t know.

“They’re going to find out some horrific things that they’re either going to have to keep confidential or deal with.

“I don’t think it’s ever been part of any training. We need to get advisers physically and mentally able to take that on board.

The profession is going through so much change at the moment… it feels a bit like RDR all over again

“If you speak to anyone who works in the police service, medical profession or counselling, they are trained to leave that at work and not take it home with them.

“I think most advisers will take it home because they’ve never had training on how to deal with it.”

Budd points out that there are many government-funded courses, such as training on mental-health first aid, and he does not think the profession has even considered tapping into them.

Mental-health training courses

But how likely is this to happen? And how quickly?

The CII has built an extensive body of learning for members around mental health, with a range of self-awareness and management-skills courses in its free, career learning hub, FutureMe.

We’re not counsellors, we’re not therapists. We are here to help clients understand what their money is for

It also has more practitioner guidance on how to handle clients with mental-health conditions within Financial Assess, its online learning and compliance system.

The most recent and innovative example is a virtual-reality workshop to help advisers engage with clients in vulnerable circumstances, which the CII is offering on 29 May and 20 June. You can register for the Virtual Reality (VR) Workshop at: www.cii.co.uk/learning/training/vulnerable-clients-virtual-reality-vr-workshop/

Debt-advice firm Money Wellness has put in place several initiatives to help its advisers with their own mental health.

For example, after every client call the adviser has 15 minutes to decompress and reflect on what’s been discussed. If they still don’t feel great afterwards, they can discuss their feelings with their team leader and take time out until ready to recommence.

Quite often the more established, usually smaller, business owners just can’t see the wood for the trees

Money Wellness head of colleague engagement Stacey Cannon says: “Our employees are on the frontline of the cost-of-living crisis.

“They’re often the first person a customer has spoken to about their money worries. Because of this, they listen to heartbreaking stories every day.

“These people could be losing their home, their family, their livelihood, and in some cases feel suicidal. We don’t just help with debt; we listen to their stories and situations and then signpost them to additional specialist support.

“Helping people in their darkest hour can be hugely rewarding, but it can also be pressurised and mentally exhausting. Supporting our advisers’ mental health is therefore vital.”

As is often mooted, there is already a huge shortfall in the number of advisers needed to meet the growing demand, so the fact that many advisers are feeling pushed out by so many factors affecting their mental health should have alarm bells ringing.

Helping people in their darkest hour can be mentally exhausting

The UK has around 28,000 financial advisers, but St James’s Place Financial Adviser Academy head Andy Payne has said he thinks that at least another 50,000 are required.

There are, of course, many schemes and courses to train the next generation — including Future Financial Adviser, the MM-backed initiative. However, the last thing we need right now is more advisers exiting the profession, potentially widening the advice gap further.

Company culture

Another stressor for advisers is the culture within some firms. Although the sales-driven philosophy of the 1980s and ’90s has largely faded within the advice sector, it still exists.

Last year, MM features editor Maria Nicholls wrote a leader column about how sales pressure was forcing some advisers to leave the profession.

“I was shocked to read a piece by one of our columnists, Vicky Ngoma, explaining why she was giving up on becoming an adviser,” she wrote.

Ngoma had said that, as a self-employed IFA, she had felt pressure to put herself in front of groups with more disposable income than she had, pushing product sales and basically “helping the rich to get richer”.

While the regulator expects advisers to identify vulnerable clients, more should be done to look after vulnerable advisers who may be suffering in silence

Maria wrote: “This undercurrent of sales pressure is not acceptable. The profession must be on its best behaviour to attract the talent it so badly needs.”

Budd says: “I don’t think the environment of many firms is particularly helpful. There may be pressure on generating fees, or on getting bigger clients. That environment can be unhealthy.

“Not all firms these days are like that — it’s not quite Wall Street any more. There’s been a very helpful culture shift. But, if there are still firms like that, it’s not going to be very good for mental health.”

Obligation to clients

Stresses of the job and not having ‘enough hours in the day’ also featured in the Lang Cat report as primary factors for keeping advisers awake at night. One in 10 even said the fear of failing to meet client expectations was causing sleepless nights.

We often hear advisers say their clients are almost like friends. This is a good thing in that it means advisers really do want what is best for them. But there is a danger it can lead to the adviser putting the needs of their client ahead of their own mental-health needs. This is something that concerns Budd.

“You often hear people say, particularly older advisers: ‘I can’t retire because my clients need me.’

“No, they don’t; they need financial advice.”

Amid these concerns, one in 10 advisers said they were considering leaving the industry

Budd says he had thought all the clients at Ovation were there because of him. But, when he took a step back from advising, he handed over his clients to other advisers — and those clients are all still there.

“Nobody is that important,” he insists. “You need to recognise that your role is about helping the client and it’s not about you.”

Whether it’s more training to help advisers cope with the emotional aspects of talking to clients, or a scheme to help ease the burden of regulation, or even just a forum where advisers can talk about their struggles — something needs to be done to reel them back from breaking point.

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This article featured in the May 2024 edition of Money Marketing. 

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