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?”
Our political leaders are not too bright
Existing data once stripped back shows that there actually only around 11,000 advisers now, the rest that make up the remaining 8,000 are stockbrokers, lifies, etc who don’t offer full strategic advice.
The numbers are well worse than people think.
that is correct. I am the only one on record who has said that there will be 5,000 advisers left by 2026. 20% of those who have an approved fasea degree and passed the exam are leaving. you need to look through the FAR to actual advisers by excluding stockbrokers and timeshare people as well as risk specialists. if you take those numbers out it’s already looking very low.
I will be correct in the end. to 5,000 we go.
I said 4796.
The assumption that advisors can service 133 clients is a bit of a stretech given current regs, process and compliance. Based on a generous number of 15,000 advisers staying in the profession and the reality of them being able to fully deliver services, IMHO limits advisers to a max of 90 clients each. Meaning the profession is at full capacity servicing 1,350,000 clients.
So add another 650,000 to that 1,000,000 unserviced voter clients.
Different advisers have clients with different complexity. Some labour under dealer groups that impose far more complex systems and processes than is needed to comply with the law. Some work longer hours. Some are just more efficient. Just because you can only service 90 clients, it doesn’t mean others can’t service more. BTW we call it maths in Australia.
I (and my support team) only service 65 clients, and I’m/ we’re quite happy with this amount.
Mr Jacobsen said while there were “probably operators in the industry who weren’t doing the right thing”….yes Nathan – why not just say BANKS/LARGE INSTITUTIONS rather than suggesting/implicating privately owned, boutique practice advisers?????????
Quite possibly because problems exists across ALL advice businesses be they corporate or privately owned. The size and ownership does not dictate quality or compliance.
You are kidding yourself if you think the issues are only in large institutions or banks. These issues are across the industry, just that the larger groups were reviewed first and self reported many issues.
Absolutely!! just face it KC, the industry has had a free ride for the last 40yrs. Times up!!
Move to Industry Super – they will give you a phone and product to sell sell sell. Time is not up at all – it’s just changed hands.
Yep, problems are more likely whenever advisers are used as a conflicted salesforce for inhouse products. Historically this occurred in the big institutions. But it’s increasingly happening in small to medium sized dealer groups as they force newer sorts of inhouse products such as dealer group managed accounts, SMSF admin services, and badged platforms, onto their advisers.
Selling in house products works well at Industry Super does it not?
YOu can add AIA to that list now too. What a joke they are setting up an “advice” arm.
Run by someone with ZERO advice experience or qualifications
Just when clients need advice the most?
Totally irresponsible fasea
It is make the rules up as it goes?
A short dislocation could mean a catastrophic outcome for an insurance claim a lapse or similar?
Unbelievable level of arrogance
FASEA has implemented the rules dictated by the government in legislation. O’Dwyer Morrison Fraudenberg & Hume are the targets for blame
Great work Josh…..have a beer to celebrate another under-achievement that started with a photo opportunity and headline then faded to a no comment.
Don’t worry Nathan. The instos are paying the “key money” for their return with computer driven “personal advice”.
Just $2B in consumer compensation is cheap to get rid of all those pesky advisers who wont flog the insto product. Plus think of staff you don’t need.
There is a plan, its just that consumer outcomes is the usual cover story for big end of town buys off government to do over said consumers.
far out, what a whinger!!!
It sounds far out but if you don’t see it as a conspiracy but a royal stuff-up first, followed by opportunism it would still be the same outcome. Advisers for the wealthy and lots of piranhas taking care of the non-advised.