Practice Management

Adviser exodus to leave $900b in limbo

More than 14,000 advisers are expected to exit the financial advice industry over the next five years, representing $900 billion of net client wealth in transition.

The Adviser Ratings “2018 Financial Advice Landscape Report” said the exodus will be fuelled by the Financial Adviser Standards and Ethics Authority (FASEA) requirements and further Future of Financial Advice (FOFA)-like changes from the banking royal commission.

“The advice industry is in extraordinary flux,” Adviser Ratings managing director Angus Woods said today.

“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 7000 advisers have left the industry since 2015, with the future attrition rate expected to increase, the report said.

It revealed 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,” Woods warned.

“However, winning millennials at the other end of the spectrum requires a very different value proposition.”

Adviser Ratings wealth chief executive Mark Hoven added the changing circumstances of advisers and shifting customer demographics are equally putting pressure on the myriad vendors to the advice industry.

“Adviser needs and buying behaviours are rapidly changing as they respond to customer demand,” Hoven said.

“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.”

He added higher expectations of technology to improve practice efficiency and client experience are 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”.

Inevitably, there will be winners and losers as vendors scramble to adjust product and distribution strategies to stay ahead of the curve, he said.

Despite the industry’s image challenges, the report revealed substantial growth in advised asset value and a 25 per cent net increase in the number of practising advisers over the past five years, enhanced by the arrival of over 2000 accountants.

Woods said the overall growth in advisers and the entry of accountants and university graduates was promising.

“However, at a regional level there are numerous under-serviced communities, particularly in the lower socio-economic fringes of the major capital cities,” he said.

“These are the opportunities for agile advice businesses to engage consumers with a contemporary approach to advice and make a sustainable difference in their lives.”

The annual report examines the current structural transition of the financial advice market and impacts for key industry stakeholders.

It incorporates Adviser Ratings proprietary data, census data and results from an online survey of 1103 financial advisers, conducted in November and December 2017.

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