Adviser exodus could see 1m clients without advice

Addressing a recent hearing of the House economics committee, Easton Investments managing director Nathan Jacobsen said the group’s data indicated that even accounting for the drop-off in demand for advice as fees climbed higher, demand would still dramatically outstrip supply in the sector in four years’ time.

“Our modelling suggests that in 2025 there will be over 3 million households in Australia who will be prepared to pay for the advice as it currently costs, but the population of advisers will be down to about 15,000 and will only be able to service 2 million households,” Mr Jacobsen said.

“Advisers’ average fees are increasing, and advisers are increasingly shifting to clients who can afford to pay more fees because their services are in demand and there are fewer of them.”

Mr Jacobsen said while it was “a great time to be in business” for the advisers who chose to stay in the industry after the introduction of the FASEA regime, the social impact of the educational standards would be significant as middle-class consumers were locked out of advice.

“For the country, it’s not a great outcome. I’m a firm believer in the value of financial advice, and I think an accessibility issue is building,” he said.

“It may be a temporary dislocation which is just a product of the pace of new entrants, and obviously it will correct itself at some point, but in the next five years we certainly do have an accessibility issue.”

Mr Jacobsen said while there were “probably operators in the industry who weren’t doing the right thing” prior to the introduction of the reforms, many were exiting because of the complexity of additional study demands.

“There are operators in the industry who are very good advisers and are following the law, but the change is simply too much for them, so they choose to exit,” he said.

“I have very good, quality advisers for whom it just doesn’t make sense. If you’re 60 and running a good business, does it really make sense to spend six years on extra study?”