Fund sector needs Whitehall changes to make apprenticeships work
Financial Times - March 2019
I may not be what first comes to mind when you think of diversity. I am white, male, middle aged, and now decidedly middle class. But it wasn’t always so. When I was weighing up my career options as a teenager, most of my peers were readying themselves for a life working in the coal pit. As it happens I was fortunate enough to get a grant and became the first in my family to go to university. Education offers a crucial route for people to improve their lot in life. I was one of the lucky ones, but life opportunity shouldn’t hang just on chance.
Apprenticeships offer school leavers the opportunity to gain paid and purposeful experience that can lead them, debt-free, into full-time employment. For others it can enable a career swap after a change of life circumstances. Today, the best apprenticeships even rival the best universities: securing an apprenticeship at Jaguar Land Rover can be more competitive than getting into Oxbridge.
But even if I’d taken an apprenticeship when I was younger, chances are I wouldn’t have ended up in asset management where I work today. Sadly too few young people of school-leaver age know about the wonderful opportunities our sector has to offer, something we are working hard with our industry’s grassroots careers service - Investment20/20 - to address. Over the past five years, Investment20/20 has supported almost 1,400 trainees to start their careers in asset management. Half of those have done so straight out of school. However, at the moment only one in 10 roles filled by Investment20/20 can officially be classed as an apprenticeship, and therefore qualify for funding under the government’s apprenticeship levy.
No-one can argue with the principles behind the levy – funding more apprentices is unarguably a good thing to do. However the design of the levy means it is almost impossible for our industry to benefit from it. Many asset management firms determined to add apprentices to their workforce often find it easier and cheaper to adopt their own smaller programmes than tapping into government funding that could genuinely help the industry scale up its apprenticeship scheme. Others are forced to abandon the idea of apprenticeship schemes altogether.
In the first 12 months of the levy, twenty four IA members paid out a total of £10.9 million into the apprenticeship fund yet received less than 2% back of that total back to fund their apprenticeship programmes. For every £61 paid out by asset managers, our industry was only able to unlock £1 to fund our own apprentices. The problem is not confined to our industry alone, a 2018 research report by The Open University stated levy-paying organisations only withdrew 8% of the £1.8 billion paid in.
And the demand for entry-level jobs is there. Investment20/20 currently almost 5,000 young people registered on our website, up from only 4,000 a year ago and we are working with over 40 member firms to help find placements for many of them. Of those school-leavers who go through the Investment20/20 programme, almost three quarters (72%) go on to work for the firm they did their placement with. We could likely place even more, but with budgets being sucked up by the costly and inefficient nature of the apprenticeship levy, firms don’t have the capacity to fund more places for our trainees.
Yet small tweaks to the scheme would enable many firms to fulfil the government’s objectives and unlock the funding set aside for this important purpose. Firstly, introducing a pooled approach in partnership with industry trade bodies would allow employers to co-ordinate their approach for similar apprentices and jointly run courses, creating economies of scale and allowing flexibility for new recruits year on year.
Secondly, there is an opportunity for upskilling existing employees. In Scotland, the levy is being used more flexibly and by pooling the funds is enabling existing employees to receive training to develop their skills. Replicating this across England and Wales would make sense. Conversion Courses would also allow people with other educational backgrounds – people such as my younger self at 18, having studied humanities or other non-STEM subjects – to enter the industry.
Finally, introducing higher funding level for Level 6 and Level 7 Financial Services Professional Apprenticeships would open up more opportunities and make it easier to fund expensive but necessary professional qualifications. We understand that changes can’t happen overnight, but to make the levy effective, the framework must change.
Apprenticeships genuinely open doors. Our industry understands that a diversity of backgrounds and perspectives leads to better decisions from the investment floor all the way to the way companies are run. But if we’re going to deliver that, we need the system to work with us, not against us.