Total adviser numbers contracted by 388 (1.8 per cent) for the quarter, leaving the total population at 21,146 – significantly better than previous quarters, according to the latest Adviser Ratings Musical Chairs report, suggesting that advisers might be taking “a more positive long-term view on their future in the industry”.
“In the last quarter, there has been a substantial increase in the narrative, coming from all corners of the industry, to reduce compliance red-tape to lower the cost of advice and simplify requirements for providing limited advice,” Adviser Ratings said.
“Senator Jane Hume, ASIC, FSC/Rice Warner, the major advice and accounting associations, and other private groups have all contributed to a generally constructive discussion with a variety of models and solutions presented.”
However, there is unlikely to be material change until “blockers” to advice simplification – including current requirements under the best interests duty and the FASEA code – are addressed. Royal commission recommendations, including the single disciplinary body and compensation scheme of last resort, have also stalled. The unwinding of government stimulus also looms as a key headwind for the sector.
“Economic commentators are concerned this may precipitate the collapse of many more businesses, predominantly in the SME sector, which includes most financial advice businesses. It remains to be seen whether the positive impact of increasing consumer demand for advice can offset the financial pressures that many advisers are experiencing,” Adviser Ratings said.
The research house also noted that the number of “zombie licences” – AFSLs that have been scrubbed of advisers and removed from the financial advice register while remaining in-site on the AFS register – has increased significantly, presenting a “prima facie” opportunity to acquire established licences.
“The key motivation for taking this pathway is to shortcut the timeline of six to eight months (and possibly longer) that it takes to get a licence from ASIC in the traditional way. However, buying the licence means buying the processes and systems that have been put in place and previously considered by ASIC to ensure the licensee acts in accordance with Corps Act,” Adviser Ratings said.
“It also means buying exposure to any historical non-compliance that can be fatal for purchasers, so a thorough due diligence is essential.”
Since we are on the topic of Zombie companies, if those running Adviser Ratings have any clout at all they should be raising hell in Canberra. Their business is dead. There will be less than 15,000 advisers by the end of the year and those who remain will quickly reach capacity due to the high demand from people who can’t find an adviser. At that point, why would anyone waste their money flaunting themselves on a website like Adviser Ratings?
We got our AFSL licence very quickly. Made the decision, a month to prepare and submit the application, less than 3 weeks to get the licence, though longer to then leave the previous licensee. There is some very good compliance help out there. It is a lot of work and you don’t save any money but your clients can’t be taken away by your licensee any more.
There’s a lot of scare stories about extensive delays to get an AFSL, but from what I hear your experience is fairly typical for financial advisory applicants that aren’t trying to do anything too complex.
I suspect many of the zombie licences are being retained by their owners for potential future use if/when better opportunities arise. Perhaps when some of the regulatory complexity is resolved? Perhaps when the FASEA cull is complete? Hard to see them having much value for sale to a third party, given the huge risks involved for both parties in such a transaction.