There are now only approximately 1,200 risk specialist advisers in Australia, according to the Adviser Ratings’ Landscape Report.
The comprehensive, 230 page report says the 2021 year closed a with further 609 specialist risk advisers (pure risk or mostly risk) leaving, and at a rate of almost 2.5 times greater than their non-risk counterparts, leaving a high proportion of orphaned clients.
“To further complicate the exits, some holistic advisers are choosing to remove risk advice altogether due to the cost, complexity, and compliance,” it says.
The Adviser Ratings’ Landscape Report, which illustrates how the changing nature of wealth management has impacted financial advice, funds management and consumers, is based on six research projects undertaken across five months and involving more than 40,000 surveys of financial advisers and consumers.
A statement from the firm says other key findings include:
- 100,000 either ceased receiving advice or were orphaned by their adviser, as advice affordability became more of a concern
- There are 5.6m unadvised Australians looking for professional advice, with five percent of consumers indicating they get all their advice from social media
- The average median cost of advice has increased a further eight percent to $3,256
- 234 licences were discontinued in 2021 – the largest number since tracking began in 2015
- There has been a 50 percent increase in the past four years of advisers partnering with super funds, as super funds become the next frontier for consumers looking for affordable advice.
The firm says that with it predicting the departure of a further 2,387 advisers from the industry in 2022, the cost of advice and the number of orphaned clients look set to grow.
Adviser Ratings CEO, Angus Woods says the advice industry has been in a state of flux for a number of years, “…and we continue to see that change today.”
“Through our research we go deep inside the evolution of advice and funds management. We look at how it is responding to consumer needs and analyse the penetration and sentiment towards the technology that underpins the industry.”
There are 100,000 fewer customers of financial advice today and 3,323 fewer advisers compared to 12 months ago, with the median cost for advice increasing another eight per cent, to $3,256.
“This has coincided with a general improvement on the standard advice, with the Adviser Ratings Adviser Quality Score (AQS) increasing from 678 at the end of 2018 to 707 at the end of March 2022, based on a score out of 1,200.”
Adviser Ratings says that to service clients more effectively and efficiently, research indicates that financial advisers intend on using investment platforms more in 2022.
Woods says the advice and wealth management industries continue to evolve and the impacts across the board, from product providers through to consumers, is significant.
“Our research asks many questions on how Australians will receive advice in the future, and who will advise them. There is more change to come,” he says.