The inexorable march to a profession reminds me of Charles Darwin’s oft-quoted, “It is not the strongest of the species that survives, not the most intelligent it is the one that is most adaptable to change.” So, what constitutes survival? By the time 2023 rolls around, 15k advisers will have left the advice profession…
In May 2008, Senator Nick Sherry, the Minister for Superannuation, stood on the dais at the AFA National Conference, chanting “let me reiterate that the continuing strength of the financial planning industry is dependent on consumer confidence … confidence in their planners … confidence in their financial products … and confidence in the financial system. The prospects for the industry to grow and prosper are excellent and should be embraced by all in the financial planning industry.” Confidence from those within the industry was at all-time highs, and consumer trust in financial planners was also at relative all-time highs.
Two months later, in July 2008, the US Federal government had to bail out lenders, Fannie Mae and Freddie Mac. In September 2008, Lehmann Brothers declared bankruptcy. In Australia, in October 2008, Storm Financial collapsed calling in the administrators 3 months later. In March 2009, global stock markets were at their nadir.
The Global Financial Crisis (GFC) along with the collapse of prominent financial product and services providers led to a massive loss of public trust in the financial planning industry.
It prompted the industry to move from being a transactional and product-focused industry to one offering holistic advice and services.
In 2012, the Future of Financial Advice (FOFA) reforms were passed with new legislation effective 1 July 2013. This meant removing commissions from investment products and a 2 year opt-in.
In 2014-15, a raft of FOFA amendments passed parliament.
In 2017, FASEA was established placing education and new exam requirements on both existing and incoming advisers.
In 2018, the advice industry was hauled over the coals at the Royal Commission. In February 2019, Commissioner Hayne delivered his recommendations.
Advisers became very wearied, but adapted.
In 2020, having been battered for the good part of a decade, the advice industry was front and centre of the pandemic, as markets fluctuated and new stimulus measures passed. AMP hit the headlines for all the wrong reasons; MLC sold to IOOF. The removal of grandfathered commissions and the final stage of LIF was implemented.
Advisers ADAPTED (by leaving the industry).
In October 2020, Senator Jane Hume, stood on the virtual dais at the AFA National Conference exclaiming:
“You’ve been providing advice to distressed clients, doing pro bono work, providing discounted advice, putting in long hours. In times of crisis, Australians turn to their trusted financial adviser for advice and guidance. And even before the pandemic, the financial advice industry was undergoing significant transformation — the main focus of last year’s conference — following reforms to lift standards and in response to the Royal Commission…
… I know it hasn’t been easy — as the Treasurer said 'the road out will take time and there will be bumps along the way’. We’re taking a practical approach as Australia continues down the path of having a truly professional financial advice industry.
Despite all the challenges, we want as many Australians as possible to access quality professional advice when they need it. Ultimately, that’s the goal for all of us.”
A month later we surveyed the adviser market. Surveys often capture the most active advisers in the market. 22% of these advisers were at best uncertain to stay in the market. With only 4 sittings left of the FASEA exam, 43% of advisers still need to pass the exam. Having gone through adviser by adviser, licensee by licensee in terms of where advisers are on their education/exam pathway and their own personal view on their future, the “exit door” is more enticing for a further 7,500 advisers still practising. We are halfway through our adviser exodus.
It seems many advisers are not waiting for the government to cut red tape. Their decision is made. By the end of 2023, 13,000 advisers will be left in the industry from highs of 28,000 (refer AFR article).
And to bookend with a quote, in the words of financier, John Pierpont Morgan - “The first step towards getting somewhere is to decide you’re not going to stay where you are.” This is true for whether you are going to move forward within or outside the industry.
Time is not on advisers' side.