Speaking to ifa, Lifespan chief executive Eugene Ardino said despite the current market turmoil related to coronavirus, the advice sector was experiencing “an unprecedented time of opportunity” in the long-term as many advisers retired ahead of the incoming FASEA regime, leaving high value clients on the table.
“Five thousand advisers left the industry last year and that trend is going to continue into the first FASEA deadline in almost two years,” Mr Ardino said.
“Whilst a lot of smaller fee-paying clients are going to become orphaned – somewhere between 60 to 80 per cent of clients linked to an adviser – because it won’t be commercial to service them under a fixed-fee, lower commission model, they only represent 20 per cent of the revenue in the industry.
“That is balanced by the fact that half of the advice industry is going to exit and you are going to be left with 75 to 80 per cent of the income but only half the advisers, which is a massive supply demand imbalance in our favour.”
The comments come following uncertainty for advisers around a potential one-year extension to the FASEA exam and education compliance deadline, as legislation to lock in the extension was left in limbo following the suspension of Parliament until August due to the COVID crisis.
Mr Ardino said advisers’ first priority at the moment should be supporting their clients through the evolving crisis with clear communication around their investment strategy, but that they could also use the coming months to get their house in order to prepare for rising client inquiries as many advisers left the industry.
“Now is the time for you to build out your profile by optimising your website and raising your profile with centres of influence to get referrals – there has never been a better time,” he said.
“It’s going to be a challenge working through regulatory change over the next five years, but at the other end we are going to have a profession consumers have more trust in and will attract clients with the capacity to pay higher fees.
“It’s sad for the consumer because we will go from 2.5 million people having access to advice to having a third of that, but for the adviser it is a massive opportunity. Because that third of clients is going to generate a similar level of income to what the industry has now, but it will be shared among half the number of people.”
Mature, specialised practices in demand
Mr Ardino, whose dealer group recruited around 80 new advisers last year and lost 40 advisers, also pointed to the rise of the specialist advice practice, noting that combined accounting and advice groups were one of the key demographics looking to exit the sector, while mature financial planning practices were doing well.
“The types of advisers leaving are predominantly advisers that have very small businesses that are starting to become less viable, often accountants who’ve got a large accounting firm and small advice business so they decide the planning is too hard,” he said.
“The majority of those we are putting on tend to be dedicated advice professionals and most of them are well-established businesses – we have a lot of new advisers coming out of the various institutions that are either exiting advice or reducing the size of their advice business.”
meanwhile LFP take their advisers clients for themselves – conflict of interest ..!!
I recently reshaped my business and “let go” (very politely) of all grandfathered commission clients, clients that wouldn’t engage on an ongoing basis, and small balance clients that couldn’t pay my minimum fee so was wrong to charge them the new flat fee model. Guess what? These are the clients now coming back asking for my help over the last 2 weeks! They are the ones that need our help not the sophisticated cashed up clients. I feel so bad as I can’t help them due to regulatory laws but they’ll just ring their super fund and the person on the other end of the phone will gladly help them switch out of equities to cash. Royal Commission, FASEA, ASIC all have failed.
Same here. Had one crying today but we still declined to provide Advice and why wouldn’t we. FSG, Fact Finder, Research, BID, SOA, etc etc, and the potential client whats Advice now, not in 6 weeks, and at a cost of $5,500. Sorry, I live by the rule that others made so I will sleep well. This is the new Ethical World of Financial Planning – and there are those that say this is how professionals should act? BS to that.
Make sure you send those ex clients off to their federal member to voice their problems. Excessive, over complicated, regulation has been supported by both sides of politics. All federal MPs need to hear directly from consumers about the damage those regulations are causing.
Exactly, unless you point the clients ( and they actually do something) in the direction to voice their complaints then all we are doing is venting to each other.
my grandfathered revenue used to cross subsidise service across these clients. Grandfathering going so welcome to new world of fee for service for everyone.
Good article. Question around how current advisers who are sticking around and meet all the FASEA education requirements, how do we capture the opportunity? Is there a way we can capture the orphan cleints who need a adviser relationship? or is it up to the product provider now to service them and find a home? thanks
Yes, I would love to know also! These are great opportunities!
I would suggest that these clients belong to the AFSL who the adviser is an AR under as they are ultimately responsible for the advice and the service provided to the clients. Therefore the AFSL would need to find them a new home via another adviser within their AFSL. One thing to be mindful of,even though grandfathering is being abolished, there was always an obligation for the adviser to look after / service the client for the remuneration that was being paid to them.
Yes I agree Afsl are responsible. But most don’t have resources or capacity. Especially ex bank fp clients. There should be a way for clients to find a new adviser easily.
Be very careful. Kitty Flanagan does a great piece about the difference between rescue dogs and rescue cats. Rescue dogs are eternally grateful and will be a loyal friend for life. Rescue cats carry bitterness and anger forever, and are likely to claw your face off given half a chance.
Orphaned clients are like rescue cats.
If half the advisers leave and the current rules continue or worse, tighten, then most Australians will not be able to access real un-conflicted (non- industry super fund) advice owing to capacity constraints. It is all well and good for those that stay and their best clients.. the rest? Going to be a difficult decade for many Australians until some real sense comes back into the legislature and regulators heads.