Adviser Ratings has predicted that with the recent exodus of advisers, as many as 100,000 consumers have either stopped seeing an adviser or were orphaned.
In an analysis piece published by the firm late last year, Adviser Ratings said that while adviser numbers dropped below 16,000 for the first time in 2022, there is cause for optimism with signs that the annual exit rate has slowed.
Namely, in 2021, more than 4,000 advisers left the profession; in 2022, the number of exits stood at around 1,000.
“While that is still a lot, it’s a quarter of what we saw the previous year and several thousand fewer departures than there were in the prior two years,” Adviser Ratings said.
“We still predict the workforce’s numbers will fall further as consumers continue to grapple with the impact of having 12,000 fewer advisers than there were in 2019,” the firm noted.
Moreover, Adviser Ratings’ analysis has shown that around 10,000 advisers would become qualified if the experience standard recognised advisers with 10 years’ experience in the last 12 years.
In December, Financial Services Minister Stephen Jones promised to have the provisions for the implementation of the experience pathway ready for legislation by mid-2023.
“I can advise you today that I am confident that we will have provisions ready for legislation in the first half of next year,” Mr Jones said while speaking at the Association of Independently Owned Financial Professionals’ (AIOFP) annual conference.
“Some of you may ask why the commitment for relief for experienced financial advisers or even changing the qualification framework for qualified financial advisers hasn’t already been done, well we can’t just do that with a stroke of a pen,” he continued.
Moreover, Mr Jones confirmed that the government would provide “consultation documents for the sector on those issues in the early months of next year”.
“It would be my hope that we’ve got legislation in the first half of next year through to Parliament so those things can be settled.”
Sorry but the number is actually closer to 1 million. In my practice of 4 advisers we cut off or orphaned approximately 420 clients. I have a friend with a very large practice (13 advisers) who drop over 11,000 clients off the books.
100k is ridiculously low number!!
Seriously, some of the statements from advisors below & those who like, indicates they don’t really care about their clients. Just their own welfare. Secondly “orphaned” is an appalling description. I don’t think your high end clients could care less about loosing your “advice”. They are grown ups. They’ll find solutions.
Totally disagree. Very concerned for my clients, however I am running a business also. I don’t make the rules, however I do need to abide by them. That has implications for me, my business and my clients.
I made a decision that if a client was not profitable they were no longer a client and therefore I would not deal with them. I care about my mental health and that of my family more than I ever will care about an external party. That’s a simple fact of life. The client was told that they could call a 1800 number or pay a higher fee, in other words they were given a choice
Seem’s a touch light personally. 10,000 advisers have left and 100,000 means only 10 per adviser that left. I have had 300 clients leave and go back to AMP and whilst they aren’t technically orphaned no one is talking to them.
When all this meaningless debacle finally settles
I suggest the number of so called “ Orphaned” clients will be more likely 300-400k who no longer will seek or pay for comprehensive advice.
These people will most likely not even pay for “one off” pieces of advice and who knows how that could possibly be delivered whilst still protecting the advice strategy against a system that is designed to nail an adviser to the wall for a minor or honest oversight or omission that would not negatively impact the effectiveness of the strategy or advice piece.
This last decade has been a regulatory failure of huge proportions taking with it good, hard working trusted people & destroying their self worth and resulting in abandoned clients who relied on guidance & understanding.
Rightly or wrongly, cutting of ongoing commissions meant that many account-holders that weren’t ongoing clients, were cut from Advisers books. That is as much the reason as anything. The cost of moving forward, you could say.
Moving forward to Product Providers providing Advice – all paid for from the administration fee you mean?
Am I missing something? Surely the remaining advisors have the capacity within their business’s to take on those “orphaned” clients. Survival of the fittest.
Why would you want most of them? Not many who were orphaned are paying $5k pa ongoing.
Very likely product providers will look after these client – likely they want to retain the FUM – might even help with some “good advice” on making additional contributions I suspect. What could possibly go wrong?
Memo to Minister Jones :
As a former self employed adviser currently retired with over 30 years experience still aged under 60 with a clean compliance record, I would consider returning to help people such as those 100k orphaned mentioned in this article following the recent mass adviser exodus provided there was no need to sit the FASEA exam which I never attempted given my planned exit occurred in 2021…
I imagine there may well be quite a number of former advisers in the same situation?
Even an authority to advise again perhaps limited by time to say 5 years might help to provide a solution to this problem thus allowing time for new advisers to commence their careers?
So you are one of these advisers who wants a carve out and still want to be called professional, but don’t want to meet the standards. Nearly 9/10 passed the exam. If you are experienced as you say you are, then it will be easy for you.
I am over 60, 35 years experienced, passed the exam, have met the education. What’s your excuse? fear?
No fear CP just believe (like so many others) that FASEA was a con job. Am unsure about your reply as to why I didn’t do it given I stated I didn’t need to but well done to you all the same most likely because you had no choice? By the way being called a professional is not just a matter of whether or not you can pass a test it is also how you behave. If client outcomes are the real test then I hope you score as well as I did in that regard. Your reply does offer any other solution to the problem highlighted in the article as to why so many Australians are not getting advice anymore? I was simply offering one possible solution nothing more nothing less. Over to you.
Thanks UP, There are many definitions of a “Professional”, but the common one I subscribe to is:
• Meeting the prescribed Education Standards for the Financial Planning Profession (which are now in place)
• In our “profession” is having had to pass the FASEA exam (now in place)
• Adhering to a code of conduct (this has been set by Fasea) as well by the FPA, AFA etc if you are a member (13 Associations apparently)
• Experience
• Competence
• Behaviour and conduct (as you have stated)
• And others can add other criteria as well
Regardless of whether Fasea was a con job, or whatever, any exam was never going to be perfect but nearly 9/10 have passed it. Just get over it and move on. The bigger issues are red tape, compliance QAR and anything else that you can highlight going forward.
Regarding the education, it is just 8 units or less for most that qualify for the available credits meaning for most it was or is 2-4 units, and you have until 2026 to complete it.
However, the article was about the orphan clients, which is terminology form the life sales industry, where volume by sales, policies etc was your measurement of productivity and profitability.
The world has changed. There are things we can control and things we can’t such as the red tape costs, which makes profitability per business and per client now the focus to run an effective, sustainable and profitable business.
There are and will be clients who are not profitable, do not meet every ones criteria, or quite simply don’t want or need advice. Let’s see what the QAR throws up before going further.
One question UP, did you get a BOLR payment or just got out at a profitable time?
What is a BOLR payment?
Buyer of last resort where companies such as AMP guaranteed to buy your business on a predetermined multiple generally on renewable income. A hangover from a past time of life sales and manufacturer’s who were or are distributors. Sounds like this wasn’t you then.
Serious, you want to be called a Professional because you passed FASEA?
If you don’t want to sit and/or can’t pass the FASEA Exam you don’t belong in the Industry….no matter what your experience is or that you have a ‘clean’ record. The FASEA Exam is no more than a person with a 30 year Driver’s License being asked to re-sit their Driver’s License Test to update their skills as a Driver because Road rules and traffic conditions have changed. If you don’t want to do it, hand back your Driver’s License.
I applaud the introduction of the FASEA Exam with no exceptions or exemptions! The FASEA Exam is no more than a CPD exercise with a common starting point for all those that want to practice as Financial Advisers. It should be a pre-requisite before you can be an AR along with other education qualifications.
Let’s continue to clean up this Industry and get rid of ‘2 week’ trained advisers trying to meet ‘sales’ targets.
As for Orphaned clients; again re-engage them into the new regime and pricing structure or let them go. The cost of progress. Get with the program or do it yourself.
Well said and I totally agree.
Due to Jane Hume and the Liberal government imposed red-tape and new taxes (ASIC levy) , I ended relationships with about 30% of my clients.
All the orphaned clients will soon be served directly from the product providers. Jane Hume and the Liberals represent Big Business, not small business.
And watch that exit rate speed right up again in around 2.5 yrs….
I orphaned any client who was paying less than $3,000 per annum ongoing. Loss leading otherwise.
So are you saying someone who would pay a fee of around $2,000 for maybe one or two reviews per year, 3 or 4 hours work, is not only adequate to cover costs but you are making a loss? I find that very hard to believe.
Yes, that is what I am saying. Being a business owner I make it my business to crunch the numbers.
Are you stating a review takes 3 or 4 hours – or are you saying two review takes 3 or 4 hours? Either way – where did you get those figures?
I’m pretty certain that bigal is saying that two reviews equates to 3 or 4 hours work – and that is nowhere near correct. If it is done compliantly, it’s way more time than that. RoA, file notes, fee consent (perhaps two – one for the licensee, one for the platform) – I could go on………and on……..
Think you need to look closely at your costs and service offering.
I have – hence the action to orphan.