Salaried or Self Employed Adviser – Where to Next?

Chris Cave our consultant managing the role
Posting date: 18 September 2020

Once financial advisers have seen some degree of success in their job, there is always the increased likelihood of a head-hunter calling to tell them how much they are missing out on and they would be unwise to not speak with their client. 


For the person making that call, it’s bold/brave/naive (delete as appropriate) to assume what job satisfaction looks like for an individual.  


Why do we do the jobs we do?


Even people who like their job should ask themselves this regularly. For Financial Advisers, they will be asking their clients questions like this all the time. Many years ago when I was advising, one of my sales managers suggested that clients simply looking to ‘make more money’, aren’t telling the full story regarding their true objectives (financial or other). There will be something they want to do with that extra cash - early retirement, a landmark holiday, a secure future for their children, second home and so on. For financial advisers looking at their career options, similar principles will apply. 


What advisers want


As an adviser, a precious commodity is time. As there are a finite number  of hours in the working week, it’s a challenge to balance how much time you spend on business development, client engagement, CPD, networking, admin, research, and down-time. Most advisers aren’t paid by the hour so getting the balance right is crucial and time should be one of, if not the biggest factor in your decision to move, namely - what will the change do for my time management and is this best achieved in a self-employed/ partner, salaried environment?


It's worth pointing out that I will refer to ‘self-employed’ a lot. This could mean partnership or network models. Some firms refuse to call their advisers ‘self-employed’ but the reality is that they are often not paid a salary and have to handle their own tax and NI. There is potentially a rationale of using terms such as ‘partner’ or ‘non-salaried’ to accommodate IR35 but that’s for another time.


The right environment can give a real boost to the way you work. For some this could be a physical office, home/agile working, no KPIs, no visible management, good CRM/client advice tools, IT suite, admin, research, paraplanning, or good professional connections. These factors aren’t mutually exclusive to each other and different remuneration structures come with different pros and cons. Many focus on a small number of factors when ruling out the possibility of moving from self-employed to salaried, or vice versa. 


With all of the above in mind, we would be naive to not consider a big reason we go to work - remuneration. Discretionary or formulaic bonus? High salary vs low salary for achieving revenue multiples? Low fee split with high support? Capped pay away? Inclusive PI and licensing costs? Appointed representative vs directly authorised?


It’s enough to make anyone say, “I’ll stick to what I know.”. Maybe this is what is right for you but I’ll always challenge someone to question what they think versus what they know


Almost every person I have spoken to who has moved from a salaried role to a self-employed/ partner model has said either said that they wish they had done it sooner or they had no idea of the support available. I believe the latter is the biggest hurdle for many who truly back themselves to write business but fear of the unknown too often wins out. Various companies who can facilitate this remuneration model will provide different benefits and sometimes a few conversations with a few different options can open up a previously undiscovered world.

Why people choose salaried...

The most common answer is, ‘family, mortgage or security’ or sometimes all three, and many will completely empathise with this. The strange answers often heard however relate to age. “I am a bit too young to do this but I will definitely want to consider the option of self-employed in future once I get more experience.”. Again not a response which has anything inherently wrong in its intent but just as often we hear, “I’ve been salaried for so long so I can’t now make the change as I have a mortgage and family who are reliant on the guaranteed income. I should have done it when I was younger.”


So with both of these responses in mind I think it’s pretty clear that many financial advisers will never make the jump to self-employed but in choosing that path must recognise that their success will probably always benefit their employer first. If these people feel valued in that environment and believe their career has a successful path laid out, then it is likely to be the correct choice.


Some just like the idea of working around others and being part of the success in a company with a stronger brand than most individuals would have on their first day as a sole trader.


There is another common answer which is linked to where an individual gets their business from, particularly if clients and/or leads aren’t provided. Bigger business have the financial resources and the connections to obtain business opportunities en masse and for the advisers with a high proportion of income which isn’t self-generated, it’s likely the salaried route is again correct. But what about the salaried adviser writing business for clients who would have otherwise never even heard of the name above the door?


Why people choose self-employed


There are two key drivers here which affect an individual’s decision to go self-employed. In no particular order of general preference; financials (taking a greater proportion of the business written), and being your own boss - building something for yourself. Many don’t like the idea of an expectation to work a fixed number of hours and come to the office every day when they believe these aren’t the factors which enable them to do their job most efficiently.


As a self-employed individual you can find businesses which will see you benefit from anything from 40% of advice fee income up to 100% (with additional fixed costs). The proportion you effectively pay away will cover the things you would hope you don’t need to worry about or don’t want to worry about. This is without considering the option for an individual to operate as a directly authorised entity. At this level however every aspect of a business becomes your problem and it all comes at a cost.


The proportion you don’t take home (pay away) as gross income needs to go towards the facilitator’s cost for keeping you, which can include…

  • Regulator fees/ licensing
  • Insurance costs
  • Software and CRM licenses
  • Office premises and associated costs
  • Stationery (business cards etc)
  • Marketing (websites/social media maintenance etc)
  • Administration
  • Paraplanning
  • Research tools
  • Business opportunity and lead provisions

There are undoubtedly other costs to consider but on the whole, there is a lot to think about. When factoring all of the above it’s easy to see why some prefer the simplicity of working for a business directly on an employed model. If however, these fixed costs are something you are happy to take on, why would you not explore the option of building something for yourself?


The impact of Covid-19


The recent health and economic scare of Coronavirus has led to many businesses rethinking their strategy of recruitment - but more importantly the need for financial advice has never been higher, even before the Covid-19 scare. Providers are streamlining their processes and robo-advice platforms are increasing in numbers all the time. The need for advice however has not gone away and I am yet to see a robo-platform of any nature in any walk of life display empathy or read someone on an emotional level. For these reasons, the financial adviser is still a indemand profession and with the financial markets being impacted by Covid-19 it represents a great opportunity for advisers to re-engage existing clients and be a trusted professional for new clients.


The economic impact has led to many businesses streamlining their businesses and we have seen redundancies in advisory firms. With many advice firms now exercising caution, but the need for advice going up, is the option for job seekers now to go for that opportunity with nothing to lose and everything to gain?   


So where to now?


You could be right now considering a move from a self-employed or salaried position to the other and want to sound out the options. At Hanover we have fantastic relationships and historic successes with businesses who offer different types of remuneration model. We are more than happy to speak directly with an adviser looking for their next steps and will bring value to their search with a completely impartial stance. Our interests are in finding quality people, quality places to work. Our knowledge in the market positions us extremely well to encourage conversations with the key people who will complement your circumstances and working preferences.


Perhaps you are a business reviewing your remuneration model. Our market intelligence offering can help you with insights to make your proposition more appealing and/or competitive. Is your benefits package in line with those you regard as comparable competition? Are the self-employed splits too generous or not generous enough? Are you losing candidates at crucial stages of the recruitment process?


We have conducted surveys for businesses to help them obtain an understanding of what the competition is doing and how their teams are positioned to make the most of market conditions.


Please feel free to get in touch for a consultation.

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