FOR IMMEDIATE RELEASE: 24 MAY 2018
Adviser Ratings Pty Ltd
0413 614 640
More than 50% of financial advisers to exit industry leaving $900 billion of wealth looking for new home
Sydney, NSW: Adviser Ratings anticipates that more than 14,000 advisers will exit the financial advice industry over the next five years, representing $900 billion of net client wealth in transition. This exodus will be fuelled by new FASEA educational standards and further FOFA-like changes from the Royal Commission. 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 33% increase in licensees over the last three years. These are key findings from an inaugural research report that examines the current structural transition of the financial advice market and impacts for key industry stakeholders.
“The advice industry is in extraordinary flux” said Adviser Ratings Managing Director Angus Woods. The impending withdrawals of major institutions from advice are compounding the impact of historic adjustments to adviser business practices driven by regulatory reform, predominantly FOFA and FASEA. Consumer expectations are crystal clear that the advice industry must implement the necessary changes to achieve professionalism and earn the respect of the community.”
Almost 7,000 advisers have left the industry since 2015, with the future attrition rate expected to increase. IOOF and AMP are the majors most at risk from adviser churn motivated by FASEA. Similarly, stockbrokers and life-focused licensees are the industry groups with most attrition risk since they have the lowest adviser educational levels, with Bell Potter requiring more than half of its advice workforce to be requalified for 2024.
The adviser exodus, together with an ageing client demographic, is putting pressure on advice practices to modify business models for sustained growth. “With the large majority of advised clients transitioning to retirement and beyond, advisers need to have the skills and capacity to service that demographic,” said Woods. “However, winning millennials at the other end of the spectrum requires a very different value proposition”.
The changing circumstances of advisers and shifting customer demographics are equally putting pressure on the myriad of vendors to the advice industry. “Adviser needs and buying behaviours are rapidly changing as they respond to customer demand” said Adviser Ratings CEO Wealth, Mark Hoven.
“The explosion of self-licensed practices is driving more open approved product lists, including stunning growth in managed accounts. We have seen the related emergence of many boutique investment research and consulting firms. Higher expectations of technology to improve practice efficiency and client experience is reflected in increased dissatisfaction with the incumbent financial planning software and platform providers, enabling an ecosystem of start-ups hell-bent on innovation and disruption” said Hoven. “Invariably there will be winners and losers as vendors scramble to adjust product and distribution strategies to stay ahead of the curve.”
Despite the industry’s image challenges, there has been substantial growth in advised asset value and a 25% net increase in the number of practising advisers over the last five years, enhanced by the arrival of over 2,000 accountants. “The overall growth in advisers and the entry of accountants and university graduates is promising” said Woods. “However at a regional level there are numerous under-serviced communities, particularly in the lower socio-economic fringes of the major capital cities. These are opportunities for agile advice businesses to engage consumers with a contemporary approach to advice and make a sustainable difference in their lives”.
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About the 2018 Financial Advice Landscape report
The Landscape report is the most comprehensive snapshot of the financial advice industry and provides a unique view of the advice ecosystem in 59 regions across Australia. The report incorporates Adviser Ratings’ proprietary data, census data, and results from an online survey conducted in Nov-Dec 2017 responded to by 1,103 financial advisers.
About Adviser Ratings
Adviser Ratings launched in October 2014, in the wake of the Future of Financial Advice reforms (FOFA), the Financial System Inquiry (FSI) and financial planning scandals of the time. Adviser Ratings’ vision is to improve the penetration of advice amongst Australian consumers. There are more than 24,000 financial advisers on its independent platform, enabling consumers to browse and search for an adviser suited to their needs, rated and reviewed by other consumers. Adviser Ratings has evolved into a data and technology company providing services to the wealth management industry including advice licensees, super funds, life insurers, fund managers, investment platforms and software providers.
For more information, visit http://www.adviserratings.com.au
FOR MORE INFORMATION
Mark Hoven | CEO of Wealth | Adviser Ratings
0413 614 640