The retirement of some advisers due to the changes in education and professional standards is unlikely to create a gap in the provision of advice, with one consulting firm claiming most of those departing are likely to be non-productive advisers.
NMG made the comments as part of its regular “Trialogue” newsletter, in which it stated “it is useful to recognise that not everyone on the ASIC financial adviser register is equal”.
“In fact, there are three significantly different types of individuals listed on the register, and the implications of the groups exiting the advice industry are profoundly different,” the firm added.
It stated the three types of advisers were non-financial advisers, who made up 28 per cent of the register, non-productive financial advisers (18 per cent) and productive financial advisers (54 per cent).
Additionally, it claimed almost all of the non-financial adviser segment would leave the sector, making no difference to the advice gap, and most non-productive advisers would also leave making less than a 5 per cent contribution to the advice gap.
“If a non-productive (or a non-financial adviser) leaves the industry, this doesn’t create an advice gap,” it said.
“We see it a little bit like a tree falling in the woods – if nobody is there to see it. Nor does it create an immediate sales problem for asset managers, platforms or insurers either, because the productive advisers are the ones who are responsible for almost all of the new business in the industry.
“Over time, some of those clients of non-productive advisers, who leave the industry, will be served by the remaining advisers and moved to contemporary products, eventually putting them in a better position.”
NMG pointed out that as part of its Australian Adviser Insights Programme it had only identified 8 per cent of advisers in the ‘productive non-salaried’ segment who were planning to stop providing advice, and some of those would remain in business in a management role instead.
The firm also labelled predictions of the end of financial advice, due to new education requirements and the impact of the financial services royal commission, as “Chicken Little-esque”, as were the claims of an advice gap that would prevent consumers from receiving advice.
Rather, it pointed to rising demand for advice driven by the growing number of affluent and high net worth households that will be serviced by more efficient licensees and practices, and a new crop of graduates who have met the new education requirements.
“So, while the sky is not falling in, and the advice market will not significantly reduce output in the near future, there are impacts on both adviser business models and also on product providers who need to review their product and distribution strategies to ensure they are meeting the needs of this brave new world of financial advice.”