New data has found that around 3,100 advisers have left licensees owned by the big six wealth institutions – the big four banks, IOOF and AMP.
Further, 1,900 of those advisers primarily moved onto privately-owned licensees, according to the most recent Australian Financial Advice Landscape report from Adviser Ratings.
“The advice industry is changing shape in the blinking of an eye,” said Adviser Ratings chief executive Mark Hoven.
“The continued mass migration of advisers in 2019 has been defined by the synchronised withdrawal from advice by the major banks, and AMP rebalancing.”
FASEA extension slowing down industry exodus
However, there was a marked slowdown in the third quarter of 2019 following the government’s announced extensions for advisers to meet FASEA educational standards deadlines.
“Our latest research provides a much clearer picture of the education gap confronting the advice industry, and it’s not as bad as some of the commentary suggests,” Mr Hoven said.
“Should the government legislate the proposed 2021/2026 FASEA deadline extensions next year, more advisers may choose to stay and study.”
Digital advice delivered by automated personal finance tools was also cited by the report as the new frontier for the wealth industry.
“Digital advice is a genuine solution to help more consumers with their personal finances, and for advice firms as an alternative to orphaning their unprofitable advised clients,” Mr Hoven said.
“Seventy-two per cent of institutions and 79 per cent of smart tool providers that we surveyed are confident about the future of the digital tools sector.
“However, this fledgling sector remains challenged by lack of scale and brand and is looking for institutional partners, primarily banks, super funds, advice licensees and asset managers.”
Advisers shedding unprofitable clients
The Adviser Ratings report noted that advisers are responding to revenue pressures by letting go of unprofitable clients, raising fees on average by 12 per cent to $2,800, and moving away from asset-based pricing with the balance of fixed fees rising to 70 per cent of total revenue earned.
“We are witnessing advisers rebalancing their business models to become more focused in specialised areas or embracing the integrated services model that combines financial advice with accounting and mortgage broking,” said Encore Advisory Group chief executive Tom Reddacliff.
In addition, around 1,500 practices representing 17 per cent of the market advising $190 billion of wealth are looking to sell their business.
Over 80 per cent of those businesses have fewer than four advisers, while only the larger practices typically with revenue above $500,000 are likely to be sold as going concerns.
“With income eroded due to regulatory impacts and valuation multiples falling on retained revenue, many of these practices are forced sellers and invariably price takers,” Mr Reddacliff said.
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