The number of advisers leaving the industry slowed significantly in the first quarter of this year, in signs that the COVID-19 pandemic may be prompting practitioners to reconsider retirement.
Adviser Ratings’ Musical Chairs Report for Q1 2020 revealed that the industry experienced a net decline of just 678 advisers by the end of the March quarter, compared with 1,133 advisers leaving the industry in the last quarter of 2019.
This represented a 2.9 per cent decline in adviser numbers over the three months, which was significantly smaller than the 16 per cent reduction that the industry saw last year. The report noted that it was possible increased demand for advice off the back of the coronavirus crisis was slowing down the expected industry exodus as a result of rising regulatory costs.
“The industry including super funds are reporting a huge spike in demand for guidance around issues like early release of super that could become the saviour of some advice businesses,” Adviser Ratings noted.
“Whether this COVID-19 inspired demand can postpone or reverse adviser decisions around exiting or switching licensees remains to be seen.”
Adviser declines were again most pronounced in the institutionally aligned sector, which shrank from 39 per cent of the total market at the end of 2019, to 37.6 per cent of the market by the end of March.
The privately owned sector also declined but by a smaller amount, having shrunk 9 per cent since the beginning of 2019 compared with 18 per cent for the broader industry.
Among privately owned dealer groups, those with 200 or more advisers were the only category to see significant positive growth in numbers over the first quarter of 2020. The report noted these groups could continue to benefit from the abandonment of self-licensing by some practitioners in the coming recession.
“In these economically challenging times, we are likely to see a flight to safety as advisers favour licensees with greater scale and stronger balance sheets,” the group said.
“For many, this safe haven may be quite appealing for those from institutional backgrounds who have since experienced the white-knuckle ride of their own self-licensed boutique. Having said that, these same licensees will be judged by how they leverage that scale to support advisers with services that help them grow their business and manage compliance.”
Some dealer groups outside the institutional space saw significant growth in adviser numbers as a result of corporate actions, with Interprac adding the most advisers in the quarter as a result of the sale of Yellow Brick Road’s Wealth division to its parent company, while Insight Investment Services gained the second highest number of advisers from its merger with Ausure Financial Services.
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