Around 2,500 advisers are estimated to have left the industry in 2020, according to data compiled by Adviser Ratings over the course of the year, leaving a population of around 20,500 advisers remaining. With FASEA’s exam and educational standards yet to come fully into force, there’s every chance we haven’t seen the worst of what is being termed the ‘adviser exodus’.
“We are going to see more advisers leave the industry,” Synchron director Don Trapnell says.
“Having said that, I detect the winds of change starting to happen in government and ASIC circles, so maybe the pendulum has swung a bit far and is starting to swing back.”
It’s true that Minister for Superannuation, Financial Services and Fintech Jane Hume spent a great deal of 2020 expressing to advisers that she felt their pain about the regulatory burden that had been placed on them and was seeking to make things simpler.
However, Countplus chief executive Matthew Rowe is doubtful any government intervention will prevent a number of what he calls “extinction events” for the advice industry in its current form.
“Generally there’s still some pain to come and dislocation,” Mr Rowe says.
“I think there’s some extinction events and that’s around the education standards and the exam, and there’s also a big shift in the financial dynamic in terms of the economic drivers of advice with the banning of grandfathered commissions and rebates coming off.”
Mr Rowe predicts there will be between 15,000 and 17,000 advisers left by the time the new FASEA exam deadline of 1 January 2022 rolls around.
“Given that there’s a couple of thousand licensees, I think there will be consolidation,” he says.
“We’re going to shrink and I think the next three to five years will be a time of significant contraction before we start to see any growth in financial advice. There will be a lot of people losing their jobs because there’s a lot of people in the ecosystem like BDMs and product people, and they are going to be competing for a much smaller pool of advisers.”
Madison Financial Group chief executive Annick Donat believes adviser numbers could dwindle to as low as 14,000 when the full range of standards come into force in 2026, which is extremely concerning for the large number of clients likely to be left orphaned.
“What happens to those businesses, but more importantly what happens to those clients?” Ms Donat says.
“The 60-year-olds and 70-year-olds who have been with an adviser for 30 or 40 years and say ‘yeah I get you’ve got someone else in your business, but you were there when I got married, you were there when I had my first child’, what happens to them?”
The exodus is exacerbated by the fact that the pathway into the industry is now extremely complicated, with few licensees set up to employ graduate advisers for their professional year.
FASEA figures provided to ifa in September 2020 revealed that just 150 new advisers were enrolled in PY programs, and few firms are prioritising this for the new year with so much else on their plate, Sequoia Financial Group managing director Garry Crole says.
“The advisers are hoping that the licensee is going to be providing the professional year, but if you’re needing to replace 3-4,000 advisers leaving over two years, the licensees don’t have the scope to provide professional years for that level of entrant,” Mr Crole says.
“We might do 5 or 10, but you’re going to have a big shortage of advisers. Practices with four or five authorised reps can look to do that themselves, we will support them but they need to do it themselves if they are going to bring people through their business.”
With simplification of the regulatory regime for advisers on the agenda for both the government and ASIC in 2021, Ms Donat says eliminating duplication within the many new laws that have come into force since the royal commission is key to getting more advisers to stay in the industry.
“If we stopped and said ‘how do I get this client to know it’s going to be okay’ and build the legislation from that, we would be in a better position,” she says.
“But that’s going to take courage, it’s going to take a really brave person, whereas I think now we have too many things to decipher and they don’t connect.”
I get the pain but not the fear. Do the exams, pass the courses and stop complaining. With 20% fewer advisers and 20% more clients this means 50% more clients per adviser (do the numbers). Adviser incomes should rise and advice business profits should rise all at the time that technology is making practice operations easier. Those that are left standing in 2 or 3 years time will reap the rewards.
The supply demand equation means fees will go up and the survivors will be paid for the specialist physicians that they are.
ROBO models do not ask the right questions. Their focus on portfolios, time frames and risk metrics mean nothing to the client – money is a means to an end for the average client and flesh and blood advisers understand that. Until AI is capable of asking the right questions and simulate talking to a real person (this could happen within 10 years) we have nothing to fear from ROBO advice
As an industry our biggest concerns is surviving this period and ASIC’s pressure on AFSL governance. Right now the big end of town is groaning, the mid tiers are nervous and the small licencees are moving blithely forward. The bloodbath has thus far only affected the top end so the next 2 years will see a lot of the smaller end close – ASIC only understands governance through dealing with the big end of town so this could get very, very ugly for the smaller AFSLs. Paul Barret has written a series of good articles around hygiene and governance and how it amplifies practice valuations – look them up
For now, we need to adapt, take really good file notes and work to change the unrelentingly negative narrative and if possible the legislative framework to reflect what advice is actually about.
I do see storm clouds but a lot of blue sky ahead my friends! 问题
The focus will shift from individual advisers to “advice firms”. The thinking by management consultant boffins is that robo-advice will fill the void overseen by just a handful of advisers.
However this is complete rubbish. Nobody shares the DREADFUL stats on how companies globally have been investing tens of millions in robo-advice tools which then get negligible take-up by humans.
Most humans find financial matters difficult, boring and anxiety arousing. Nearly half of people find it difficult to even think about, let alone plan their retirement finances. Women especially felt overwhelmed, confused and negative about financial planning, a task that many admit to avoiding even though they worry about it. Everyone reading this knows that the only way to overcome these worries is by the client building a relationship with a trusted human adviser who can then coach and guide them.
What will eventually happen is that all;
insurance will be sold on line by insurance companies at increased premiums and less features – it will all be commoditised into one product with insufficient coverage, and
superannuation will be sold the same way – online with no advice
managed funds will morph into these fintech products for the same reason, with no advice or help for clients.
The reason everything will work this way is because, the websites will be plastered with disclaimers highlighting that you the client have made this decision all by yourself without any help from the product provider.
The product provider doesn’t then need any BDM’s, advisers or licences.
This will at first blush suit all the millennials et all as they want and are used to buying everything on line with no middleman or adviser, and will be suitably disinterested in these activities until they reach age 50 and start to think about what happens after kids and with retirement coming up.
It will be a wonderfully uncomplicated world, full of well of individuals, and no one will even remember the planning industries troubles come 2040 as it will no longer exist.
This is the malaise that always ensures from allowing bureaucrats, public servants and politicians to be served information from extreme special interest groups added to the politician’s absolute need to be re-elected in short time. The FARCE-IA exam is completely ludicrous and unnecessary to say the least. As if the uni degrees would not sort the caff from the wheat. I’m also still at a loss as to why there’s no separate and specialized degree or qualification for risk writers. To insist that risk writers do the full financial planning degree to SQ8 qualification is madness and misguided at best. This is the lunacy that is decimating our once great industry. Shame on anyone and everyone that is part of instigating this exam, its content ([b]examining[/b][b][/b] for [i]ethics[/i][i][/i]??!!) and for no separate risk qualification in the matrix.
how/when did the risk insurance game come under financial planning regime anyway? the single biggest mistake of the FSRA- FOFA reforms. I suppose when riskys starting branching out.
I dropped off the the FAR as a pre-2019 entrant (and passed the education requirements and exam in early 2020) simply to move into another (less stressful) role. I have not left the industry.
Like many other.
Same here
In a post-Covid19, open banking, and AI revolutionary age the emerging profession needs “first principles” thinking (starting from scratch) versus “iterative” thinking ( fixing or building on the traditional systems). The world has changed and traditional ways of thinking, working and living is becoming or in many instances is redundant. Time is of the essence transform or perish.
Advisers are hurting and totallly stressed. Why and how would anyone take on a PY new adviser entrant? NO WAY!
I want IFA and the AFA (maybe even the useless FPA?) to do a poll of the members to see how many are: 1) either suffering stress and anxiety, 2) taking some form of medication for it, 3) been diagnosed with stress, anxiety or depression????
Me. 1. 2. & 3.
“Jane Hume spent a great deal of 2020 expressing to advisers that she felt their pain.”
Unfortunately she spent very little of 2020 doing anything to fix it. Let’s hope we see some action from “do nothing Jane” in 2021. A good start would be implementing Royal Commissioner Hayne’s recommendation for a single disciplinary body. In case you failed English at school Jane, a [b]SINGLE[/b][b][/b][i][/i][i][/i] disciplinary body means removing advisers from the control of TPB, AFCA, AUSTRAC, and the non FSCP parts of ASIC. Why hasn’t that happened yet?
love the “extinction events” – good job so far, we are an “endangered species” LOL
Great work Scomo… another Industry written off under your watch.
I totally agree with Annick that we need[b] brave people from the Government and all stakeholders[/b][b][/b] to work out a workable environment for the industry. The Government and the regulators should know by now that they have
cleared out the big offenders and now they are killing the good planners who are struggling financially and mentally. They need to take action now and I don’t think the planners can wait until 2026. [b] I predict the number will be under 10,000 in 2026 if no major overhaul is done in the immediate future.[/b][b][/b]
10,000 is still probably too many.
I spend 90% of my time on education and compliance. Although I have been in the financial services industry for 30 years. Do you think a may have learnt something in that time? Not to mention my three university degrees and diplomas related to finance.
If this silly comment is true, you need to review how your business operates.
it’s simple get rid of the Fasea exam its a useless piece of paper that proves nothing in reality its only purpose is to torture an already tortured profession. i am an advisor with over 21 years of experience loyal clients and not one complaint in my over 21 years yet i still am forced to sit an exam that is not based on reality to prove I’m an ethical and honest person….. which is better actual proof of no complaints large or small minor or major, or a piece of paper issued by academics
other professions have introduced grandfathering of the education standards i.e. Psychology, yet the financial sector is singled out.
Great words Allen and I endorse strongly what you’ve said. 32 years here and still going without a complaint. That doesn’t seem to matter to these bureaucrats who simply don’t understand matters of reality. They need to tick the box of a moot exam so they can get public approval and justify their existence until the next election – they appear to be ‘doing’ something. Self interested parasites all.
Great comments Annick as always. Advisers need to be advising not spending time fixing systems or studying for exams that they are passing anyway and taking away from their client time. Training new advisers (PY year) – who has time for that – I want to meet them. The regulators have pushed this industry too far. Then I look at the morning news and how the commentators are telling people to invest in the share market – it is easy. A disaster ready to happen and the people will realise they’ve made mistakes and want advisers and they wont be around to help them as their cost to serve is too high for the average client to afford so they have left. The thing that is really annoying is that no one will be around to take responsibility for these decisions or these news items.
Those 14,000 to 17,000 numbers don’t take into account any insurance commission changes. If insurance commissions are abolished we are looking at 10,000 or fewer advisers.
Still too many.
It will be 10,000 regardless.
I reckon it will be 8,943.