Nothing tends to stay still in the financial advice world. A number of accelerating trends changed the landscape for both advisers and clients last year. The shrinking adviser universe brought thousands of exits, while remaining advisers took on more clients, switched provider loyalties and charged higher fees.
We’ve done a roundup of some of the research insights we’ve gathered from our most recent Landscape Report, which tells a story about how quickly things are moving.
1. The advice universe was in freefall
While adviser exits have been a theme for several years, last year brought one of the steepest declines since we’ve been collecting data, with more than 4000 departures. It was second only to 2019, the year the Hayne Royal Commission findings were handed down.
As Figure 1 shows, new adviser entries didn’t come close to matching the exit rate, while licensee switches were slightly below historical averages.
Figure 1 – Adviser movement history, Source: Adviser Ratings' 2022 Australian Financial Advice Landscape Report
2. The face of the average adviser has changed
Each year, we provide insights into what the average adviser looks like by analysing the total universe and asking about provider preferences, client numbers, funds under advice, fees and salaries.
Last year, we discovered the average adviser is a 51-year-old man from inner Melbourne, who is degree-qualified and privately-licensed. On average, the adviser is older, has a higher salary (about a $5000 increase, year on year) and has seen more one-off clients amid the pandemic than in previous years.
Source: Adviser Ratings' 2022 Australian Financial Advice Landscape Report
3. Advisers plan to lift their ESG investment
As sustainable investment becomes more desirable, we asked advisers about their ESG intentions over the following 12 months. More than half of the surveyed cohort said they planned to lift their investment, with no-one planning to invest less.
Figure 2 – Advisers’ ESG sentiment, Source: Adviser Ratings' 2022 Australian Financial Advice Landscape Report
4. Fees have skyrocketed in four years
As the market contracts, the median advice fee has jumped more than 40 per cent in four years. The median fee is now above $3500, more than $1000 higher than it was in 2018.
Figure 3 – Average and median client fees (2018-2021), Source: Adviser Ratings' 2022 Australian Financial Advice Landscape Report
5. But fewer prospective clients can afford advice
Amid these fee rises, Australian consumers told us they were being priced out of advice. In fact, three-in-five consumers who want advice told us they could afford to pay only a maximum $500.
Figure 4 – What consumers would pay for advice, Source: Adviser Ratings' 2022 Australian Financial Advice Landscape Report
6. Advised Australians report higher financial literacy
To further delve into the unsung advantages of advice, we asked about the financial literacy of both advised and unadvised Australians.
The advised group reported having a better understanding of money, with nine-in-ten reporting average to above-average literacy levels.
Figure 5 – Consumers’ self-rating of financial literacy, Source: Adviser Ratings' 2022 Australian Financial Advice Landscape Report
7. Fewer Australians are seeing advisers
With more than 12,000 advisers departing in three years, we’ve seen the proportion of Australians who are seeing an adviser drop, too. Nowadays, 1-in-10 Australians has a financial adviser, compared with almost 14 per cent a few years ago.
Figure 6 – Advised consumers, 2018-2021, Source: Adviser Ratings
To deliver our market-leading insights, we rely on Australian advisers and practice heads to describe their experiences with financial products, industry service providers, fees, clients, and sentiment from the past year. We use this valuable information to to help advisers navigate rapid industry changes and to offer other parts of the ecosystem an understanding of what advisers want and need. We’d love for you to be involved.
To participate in the 2023 Adviser Ratings Landscape Survey, receive your exclusive regional report and go into this year's $35k prize draw, ENTER THE SURVEY HERE
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Comments1
"Yes, good information."
Richard Lynch 01:25 on 17 Nov 22