The number of arrivals entering the financial adviser pathway still resembles a modest trickle and the journey into financial advising remains marked by a departure-to-entrance ratio of approximately 5:1, reflecting the reservations many harbour about assuming the advisory mantle.
It’s no secret that over the past 5 years, the financial adviser universe has rapidly contracted (see Figure 1 below). Despite the unprecedented demand for advice, the industry now has only 15,688 active advisers to service Australian consumers, reaching a historical low. However, even with this severe shortage of qualified financial advisers, a staggering 79% of paraplanners express a palpable disinterest in progressing to financial adviser status.
Figure 1 - Australian Financial Adviser Numbers (2016 – 2023)
Source: Adviser Ratings
The latest insights from networking co-operative, The Paraplanning Hub, shed light on this dynamic. Only 21% of paraplanners harbour ambitions of stepping into the shoes of a qualified financial adviser. While this reflects a marginal increase from the previous year's intent percentage of 20.5%, it is a marked decrease from 2021's more optimistic figure of 28%. The reasons behind this reluctance include the preference to avoid direct client interactions and an aversion to the sales pressures inherent in the financial advisory role. One poignant comment mentions the lack of support provided to facilitate the transition into an advisory position.
Interestingly, 55% of paraplanners surveyed say they intend to undertake further training. Figure 2 below shows the distribution of training fields planned.
Figure 2 - Paraplanners' Future Training Focus
Source: Australian Paraplanner Survey 2023 – The Paraplanner Hub
Examining the gender breakdown, 71% of paraplanners identify as women and it’s worth noting that all surveyed paraplanners aged 20-30 are female. The high representation of women is attributed, in part, to the flexibility that remote work provides, especially for those balancing the responsibilities of caring for young children. In contrast, the majority of financial advisers are men, with an industry split of 78% male to 22% female. In spite of this adviser gender gap, the aspiration to progress to the role of financial adviser is equally distributed among paraplanners of both genders. Fifty percent of both male and female paraplanners share this ambition.
As the government reviews the final recommendations of the Quality of Advice Review, the paraplanning industry is on standby, eager to discover whether Michelle Levy's suggestion to eliminate Statements of Advice will be adopted. Notably missing in the first release of legislation, recommendation 9 calls for simplifying Statements of Advice with a record that is more fit-for-purpose. Widely anticipated to be accepted into legislation, paraplanners seem somewhat unconcerned as only 37% think that regulatory amendments will impact their job security.
Unsurprisingly, the most prominent and lingering concern among paraplanners is the inexorable march of technology and artificial intelligence (AI). In the survey, 39% of paraplanners cite these advancements as sources of apprehension, marking an increase from the previous year's 29%.
On average, a paraplanner currently completes about five Statements of Advice per week. The anticipation is that new legislation might streamline SoA’s, potentially allowing paraplanners to generate a greater number of concise, purposeful advice documents. Digging deeper into the responsibilities shouldered by paraplanners, it becomes evident that they dedicate a substantial portion of their time to data entry, software configuration, and modelling.
In an interesting twist, 41% of paraplanners express a desire for more project-based work, hinting at a potential shift in their roles. Despite their aversion to being "client-facing," a significant number express interest in increasing tasks related to client presentations and meetings. Could increased exposure to client interactions potentially fuel a desire among paraplanners to transition into advisory roles?
As the advisory sector advances towards professionalisation via the enforcement of education standards and ethical practices, there remains a plea from paraplanners. They urge industry regulators and policymakers to scrutinise the essential progress needed to formalise the paraplanning role. A centralised system for registering and evaluating paraplanners based on their experience, akin to advisers' registration with ASIC and associated professional groups, is advocated for.
In the face of these developments, an overwhelming 67% of the paraplanning cohort expresses optimism about the future and reports high job satisfaction, highlighting that the severe shortage of financial advisers in Australia won't find a concrete remedy in paraplanners seeking to up-skill their careers.
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"The irony in having such a large percentage of Paraplanners being averse to becoming Financial Planners, is that the social skills needed to build trust and confidence with clients, that opens the door to having a great and fulfilling career, is not taught in a book, though the back office process, including all the preparation work Paraplanners perform, can be a convoluted road, where the final product, being the SOA document, is very rarely read by clients, as they find it all very time consuming to read, it is full of legalize and does a wonderful job of creating confusion, which means many clients need to fall back on the trust factor as the biggest decision as to how to proceed. Red tape and a maze of complexity is not conducive for people to want to become a Financial Planner and Paraplanners are at the coal face dealing with it day in, day out, which may be a good indication of why these percentages are so high. Preparing all the required documentation that is going to be used for the initial and subsequent ongoing work the Adviser will utilise when providing advice to the client, can require an in-depth, analytical brain. The social skills for experienced Advisers, come naturally, though all the preparation work can seem more like torture, so it requires two to tango. All the analytical skills in the world, can come to very little though if there are insufficient Advisers to help clients and yet those very skill sets Advisers need, seem to be a mirage when it comes to allowing people into, what has become a very exclusive club that opens the doors for the wealthier and politely needs to show the exit door for everyone else who cannot afford the entrance fee. And so the trickling in and pouring out continues."
Jeremy Wright 17:30 on 29 Nov 23
"Do they identify as female or are they female? "
Mario Fish 15:25 on 29 Nov 23