Allan Gray representatives from Australia, the UK and South Africa addressed the shifts in a December webinar, agreeing the changes in advice had been catapulted to the fore by the coronavirus pandemic.
JD de Lange, chief operating officer of Allan Gray, commented that in a recent survey from Wealth Insights Australia, one-third of advisers reported that they would leave the industry within the next year or two.
Contributing factors included the increasing compliance burden, a loss of revenue in the form of commissions or rebates, a drop in practice valuations and the stress of meeting new educational requirements.
“This is a frightening reality and shows the impact of the last 10 years on the advice market in Australia,” Mr de Lange said.
“We last saw adviser sentiment this low in 2010 following the global financial crash and it makes it very hard to grow the industry and encourage new entrants to join because advisers feel under constant threat. “
There are around 10 per cent fewer advice clients than five years ago, he added, which has created fee pressure for advisers and higher costs for advice.
“In an asset-based-fee world, the discussions were more investment focused and price was a function of assets under management,” Mr de Lange said.
“Today an advice plan needs a structuring fee and an ongoing management fee both based on the value proposition offered by the adviser. A new proposal costs $3,600 or more to deliver, while the annual fee could easily be more than double that.”
As a result, advisers need to have a “very clear and quantifiable value proposition”.
David Haintz, former FPA director and founder of Aussie B2B consultancy Global Adviser Alpha, weighed in, commenting advisers should shift from a product-led offering to an advice-led model.
“Advisers need to change their perspective,” he said.
“They are giving away what they should be charging for and charging for things they should be giving away.”
Meanwhile, Tamryn Lamb, head of retail distribution at Allan Gray South Africa, noted there had been major regulatory changes in her country since 2014.
The South African regulator, the Financial Services Conduct Authority, is drafting regulation aiming to make advice available, sustainable, fair and appropriately priced.
However, Ms Lamb noted the devil will be in the detail of how the regulations are implemented.
In the UK on the other hand, the country had its own Hayne commission moment with the Retail Distribution Review, which saw banks exit the local wealth industry and independent financial advisers control the value chain.
Marcel Bradshaw, head of UK retail at investment firm Orbis, reported the UK had seen a reduction in the number of advisers from 33,000 in 2012 to 26,000 currently.
But he noted the shrunken number could be a result of an inability or lack of willingness to change and adapt to the evolving landscape.
Global regulatory changes have NOT achieved desired outcomes, resulting in a growing number of low-income families being locked out of advice services. The UK Financial Conduct Authority found there is more scope for further development and innovation of models and services that could serve more consumers at different stages of their lives. The Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020, specifically requiring retail advisers (only) to seek annual fee renewals, will simply increase the cost for low-income families to access advice services, and will reduce the amount of advice reviews and service support these families could have received during their lifetime. A complete regulatory disaster.
One of the issues may be that actively managed funds, like Allan Gray, frequently under perform and ignore sexual harassment by being a major shareholder in AMP. Whilst they may have some points I’d recommend they fix up their own house rather than telling others what to do.
Another bunch of experts telling me how I should get paid. Insufferable dolts!
With 2.5 times Australia’s population, it is surprising the UK has only 26,000 advisers. That is equivalent to us having 10,400 advisers, however we have double this number.
not for long
We also have compulsory super and not a mandated government pension system.
How many more people work in the UKs Govt pension system ?
At the moment. We’re headed for 10k for sure!