Since 2019, adviser numbers have taken a nosedive, with more than 10,000 departures in two short years. Unfortunately, Adviser Ratings has long predicted the worst is yet to come.
The convergence of professional standards, increasing PI insurance and licensee costs, and COVID-19-related pressures has prompted thousands of industry stalwarts to reconsider their career plans.
Our latest analysis indicates the profession’s numbers will plateau at 12,000 in 2026. In other words, a further 5000 advisers will exit the industry before we start to see a recovery akin to the one the UK saw after the Retail Distribution Review reforms. If our grim forecast comes to life, that’s a loss of more than 15,000 adviser in seven years.
Chart 1 – Adviser numbers*
Source: ARdata. *Forecast January ’23 and January ’26 numbers.
Of course, in any industry or profession, there are new recruits to replenish the losses from retirees or career-changers. However, in financial advice, the pipeline of new talent is still a trickle. Last year, we saw the highest rate of new entrants since professional standards began, but there were still fewer than 250 graduates. The entry-to-exit ratio is about 1 to 20.
What could turn things around
The federal government is currently reviewing professional standards and specifically questioning whether on-the-job experience should receive greater recognition – something the Labor opposition has also shown support for.
Under one proposal, existing advisers with 10 years’ experience over the past 12 years could circumvent the current degree-equivalent requirement, provided they complete a tertiary-level ethics unit.
In light of this, Adviser Ratings ran some analysis on the effect such a proposal could have on the workforce. Our figures suggest if experienced advisers were relieved of the current education requirements, more than 7000 active advisers would meet the qualifications. Meanwhile, more than 2700 who are no longer registered on the ASIC Financial Advisers Register would also meet the standard.
Chart 2 – Recognising experience: potential implications
Source: ARdata. Note-The shaded area represents advisers with more than 10 years’ experience. Columns denote raw numbers of advisers at each year of experience.
To be clear, we’re not suggesting that changing the standards to recognise experience would lift adviser numbers by 10,000. Not all active advisers would choose to stay in the industry, while not all ceased advisers would rejoin if such a change were made. By now, many have retired, are well on the way to new careers or simply don’t wish to be advisers anymore.
Nonetheless, our analysis predicts such a reform could help contribute to the downward trend in industry numbers, helping the industry avoid hitting 12,000 advisers before stabilisation occurs.
You can read more predictions and analysis in our soon-to-be-released Financial Advice Landscape Report 2022
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Comments13
"I am a semi-retired risk insurance adviser. I was lucky enough to find 2 younger career advisers to take over my book of clients. More importantly, my new partners are good, ethical people with the right approach to the profession. I could have passed the bullshit exam, but chose to move on because of the many other road blocks the regulators have made, ostensibly to make us all better more compliant advisers. I sat a Kaplan practice exam. That was enough for me. 85 questions, with ONE question about life insurance. Higher education is for academics, not advisers who know their business and operate in a professional, ethical way. Whatever crooks we had in our ranks are still there, just better educated now. I agree with most of the comments here, but have to take to task a few of them: "No No No" - So, you reckon that an adviser with 20 odd years experience, a faultless record, always fully compliant in audits, and genuine testimonials from happy clients doesn't cut it unless they get a degree. Please! "Not falling for it" - Same goes for you. There are many great people out there who you describe as "hangers on" who don't need further education to prove they are better advisers. "Damien' - There are probably thousands of adviser out there who were very serious about long term careers and were doing a great job before being forced to be further educated, and having to waste money that could have been better spent servicing lower end clients. One more gripe: I cannot believe that from 1st January 2022, you need to be an AR under an AFSL to help with claims? This means I can't help my sister-in-law with cancer because I didn't sit an exam last year. She is in good hands. However I have assisted in the payout of millions of dollars over many years, sometimes fighting tooth and nail to get money for clients in need. Now I'm no longer qualified. This is a greatly under estimated, over criticized, over regulated profession that only does good for people. We don't need a degree, just a more commonsense approach to regulation and harsher penalties for the crooks. While we were rolling with the punches, what were the providers, licensees, AFA and industry bodies doing to make representation to politicians? Clearly not much. This talk about recognizing experience is too little too late."
Deputy 13:19 on 15 Mar 22
"The education requirements must stay. Every adviser serious about a long-term career in the profession has committed the time and money to increase their education standards. Changing it now will set us back years. Also, having a Financial Services Minister that does not believe making upfront advice tax-deductible will make advice more affordable is not helping either."
Damien 19:56 on 10 Mar 22
"I'm sadden that I have to look at what I do now in Financial Planning, as I see the mums and dads that want to see us, but as mentioned the cost is now getting out of hand to make working in this industry worth it. I'm at the end of my career soon, but wanted to go on my terms, not be pushed out, due to heavy compliance and ridiculous amounts of study, that take up, so much time and money. I enjoy doing the study, but it has become a chore now, that I don't need or enjoy. it doesn't make me a better planner in the end."
mary kehely 11:09 on 10 Mar 22
"Agree with the majority of the previous comments that items such as excessive compliance, poor profitability, increased PI costs and excesses, lack of tax deductibility etc are more important than education. This is particularly relevant given that once people with a 4 subject Diploma are allowed to remain advisers the next government, which will be the ALP in my view, will use it as a excuse to marginalise the profession even further. Basically don't trust a politician with a promise"
Scott 20:06 on 09 Mar 22
"Uni qualified (eco/accounting), DFP, CPA early 70's, recently retired, I would have continued 3 days/week for 3+ years, including mentoring young advisers except for overlapping/unnecessary compliance requirements taking most of time."
Phil 18:28 on 09 Mar 22
"Biggest problem as i see it the so called Uni Qualified Advisers who have No Clue of real world advice and long term strategies that have never seen a real decline of markets will be in for a rude shock. No credibility No sense and definitely no idea what to expect and how to handle a client properly.. So before you get your policy makers in to as to what qualifications are needed .. how about the pollies look at themselves? No Degrees, No Qualifications handing out money and getting paid a fortune.. But we digress even the 1 in 20 will be gone within 5 years!!"
Uni Qualified Advisers 18:17 on 09 Mar 22
"The big change the industry needs is tax deductibility of upfront fees, not reducing education requirements. Most professions receive some kind of initial financial benefit, we receive nothing. For example, if you go and see a medical professional for an initial consultation, you’ll generally get something back via either Medicare or Private Health. I saw a dentist not long ago and only had to pay a quarter of the bill thanks to Private Health. Accounting fees are of course tax deductible, however they don’t have the high compliance requirements we have, so their costs are lower in a relative sense. In my personal experience the most common question I receive from a prospective client is whether the initial fee is its tax deductible or not. Most are shocked to find out it’s not and it’s become a major roadblock stopping people from seeking advice. Like most advisers my fees have risen substantially in recent years due to the compliance burden we carry and that has seen a reduction in our new client success rate. Like most advisers we’ve had to move up the food chain and stop servicing your everyday mum and dad, which has always been our key market, however they are no longer prepared to pay the inflated cost for initial advice. Tax deductibility would open the door once again to the everyday Australian and help improve profitability for advice practices, which is sadly lacking for many. That in turn would create demand for advisers, which would encourage more to stay and importantly more new people to join. "
Greg 16:48 on 09 Mar 22
"The big change the industry needs is tax deductibility of upfront fees, not reducing education requirements. Most professions receive some kind of initial financial benefit, we receive nothing. For example, if you go and see a medical professional for an initial consultation, you’ll generally get something back via either Medicare or Private Health. I saw a dentist not long ago and only had to pay a quarter of the bill thanks to Private Health. Accounting fees are of course tax deductible, however they don’t have the high compliance requirements we have, so their costs are lower in a relative sense. In my personal experience the most common question I receive from a prospective client is whether the initial fee is its tax deductible or not. Most are shocked to find out it’s not and it’s become a major roadblock stopping people from seeking advice. Like most advisers my fees have risen substantially in recent years due to the compliance burden we carry and that has seen a reduction in our new client success rate. Like most advisers we’ve had to move up the food chain and stop servicing your everyday mum and dad, which has always been our key market, however they are no longer prepared to pay the inflated cost for initial advice. Tax deductibility would open the door once again to the everyday Australian and help improve profitability for advice practices, which is sadly lacking for many. That in turn would create demand for advisers, which would encourage more to stay and importantly more new people to join. "
Greg 16:48 on 09 Mar 22
"I'm about to retire not because of the education requirements but largely as a result of the grossly excessive compliance environment. I want to spend my time advising clients but have to spend huge amounts of time completing overlapping and frequently unnecessary compliance requirements. The government and the regulators have completely stuffed it up at great cost to consumers."
Andrew 16:37 on 09 Mar 22
"Stemming the flow of advisers by dropping the education requirements isn't a good solution for the industry, its the reason why we are here in the first place. Through less red tape, less fees and increased profitability, adviser numbers will grow again, but this time with a higher minimum education standard."
No No No 16:26 on 09 Mar 22
"I don't think changing the education requirements will make that much difference. The over compliance is killing the industry, most of an advisers time is now spent doing paperwork."
Brett 16:19 on 09 Mar 22
"Far better to have 12000 uni qualified advisers serving clients than 22000 advisers, where nearly 1/2 aren't capable of doing a few uni subjects over the next 4 years. I say this as a 30 year long adviser who went back, spent the time and the money to do the study. It was worth it. Financial planning needs to be rid of the "hangers on" if there's any hope of encouraging new participants.."
Not falling for it 16:14 on 09 Mar 22
"The Liberal government's new taxes (levies) and unnecessary red-tape is responsible. They must have known this would be the result, so I'm amazed how Josh Frydenspend and Jane Hume think the loss of 10,000 advisers is a positive to the wider community."
Chris 16:12 on 09 Mar 22