Last week marked the public release of one of the most comprehensive reports on the financial advice landscape ever undertaken in Australia by Adviser Ratings. The report anticipates that more than 14,000 advisers will exit the financial advice industry over the next five years, representing more than 50% of the current advisers and $900 billion of net client wealth in transition. Almost 7,000 advisers have left the industry since 2015, with the future attrition rate expected to increase.
What’s driving the exodus? The last 5 years has seen significant changes and disruptions in the financial planning and investment advice industry. These changes (shown below) combined with the aging demographic of financial advisers are driving the exodus.
- New legislations introduced by the Future of Financial Advice (FOFA) in 2014 that abolished adviser commissions from investment and superannuation products
- The introduction of rigorous education standards for all financial advisers to comply from 2024
- The new Life Insurance Framework that commenced in 2018 and significantly reduces upfront adviser commissions paid by insurance products
- The scandals and sale of major banking wealth management arms
- The current Royal Commission into banking
What else is happening? Fragmentation of the institutional distribution model is also accelerating, with advisers churning from the major banks in 2018 at 270% of the historical rate, while establishment of self-licensed practices is driving a 43% increase in licensees over the last five years. There’s a 36% decrease in institutionally affiliated and owned licensees.
What’s the future of financial advice? The report also identifies a $900-Billion-dollar transfer of advised wealth that is likely to play out over the next 5 years, in part due to advisers transitioning out of the industry. This fact, along with analysis that indicates over half of the $2.8 trillion-dollar superannuation market is unadvised shows that in spite of the upheaval and change currently taking place in the industry, there is abundant opportunity for advisers and firms who are well positioned and equipped to take advantage of the current flux.
Australia currently ranks 4th globally in terms of assets held in pension/superannuation funds at $2.8 trillion, only behind the USA, UK and Japan. As the population ages and demographics and client needs shift, the role of financial advice will play a more important role than ever.
The answer to the question? As you may know, I didn’t fall into this industry by accident. Ten years ago, I made a decision to become a financial adviser after a short career in management consulting. I wanted to help people with what I enjoy doing and have a vocation instead of just a job.
I’m honored and humbled that you have given me the opportunity to serve as your financial confidant and adviser. I look forward to serving you for the next 30 to 40 year.