Research firm Investment Trends‘ latest 2022 Adviser Business Model Report, has found that one in four advisers expect to leave the industry within the next five years, although nearly half of advisers report higher practice profitability than last year.
The firm’s, Research Director Dougal Guild told Riskinfo that of those advisers suggesting they intend to leave the industry in the next five years, a quarter are aged 60 years or older, “… and therefore many of these are simply moving into retirement.”
He says that generally however advisers have cited ‘compliance burden’ as the main challenge they deal with in their business for many years now, closely followed by ‘regulatory change/uncertainty’.
Guild says that administering fee disclosure and client opt-in was cited in Investment Trends’ latest survey as a specific example of this ongoing regulatory change and compliance challenge.
“Ultimately this leads to an increase in the cost of providing advice and an inability to provide that advice to those less wealthy clients who need it.”
The report, an in-depth study of Australian financial advisers and their business support needs, found that financial advisers’ resilience has been put to the test over the past 12 months.
The company says that the ever-changing regulatory landscape has seen the population of advisers drop from 20,000 in 2021 to 16,500 in 2022.
The latest report also revealed that the move to self-licensing has eased over the past year as advisers begin to weigh up the benefits with the additional costs and compliance challenges associated with this model.
“Despite this, the movement of advisers around the industry will continue, as 70% looking to leave their licensee in the next 12 months intend to move to a self-licensed model.”
Guild says that decreasing NPS is, in part, “…driving the increasing number of advisers across both the ‘Aligned’ and ‘Majority independent’ segments intention to leave their current licensee to be part of a self-licensed practice.”
He adds that the more successful advisers appear to have better adapted to regulatory change and new technologies to address this cost/profitability issue.
“They primarily service wealthier clients and are prepared to pay for tech solutions to enhance their advice offering and bolster profitability.”
… 46% of financial advisers stated that they were more profitable this year, compared to 34% in 2021…
However, despite the regulatory burdens and increased industry attrition, Investment Trends is seeing practice profitability increasing with 46% of financial advisers stating that they were more profitable this year, compared to 34% in 2021.
“This is encouraging as it indicates advisers are adapting to the ‘new world’. Contributing to improved practice profit margins is a continued move by advisers focusing their efforts on acquiring and retaining higher value clients.”
Guild says that overall, practices’ net profit margins are moving in the right direction.
“Advisers are refocusing efforts on new business post the Covid and FASEA disruption. This, combined with an increasing focus on higher value clients, has delivered record high levels of new inflows.”
The report is based on an in-depth online survey of 846 financial planners concluded between April and May 2022.
The very, VERY worst thing about all of this is that the politicians, special interest groups and certain industry ‘consulting’ entities that are responsible for the conditions created in the industry over the past decade or so will NEVER be held to proper account. They should have at LEAST civil charges laid against them. With impunity they have presided over adviser suicides, ruined businesses, untold widespread and unnecessary adviser stress and they will go on to be paid by taxes from the very Australians they disadvantage.
I left our once-great industry last December and I feel acutely for the advisers, especially risk advisers, who soldier on not knowing where they or their families or clients will end up. If I was in any position of power I would be calling for those atrocious creatures to be held accountable for their incompetence and failure to consult with advisers before making drastic changes to industry rules which affect our lifeblood. I would call for the absolute freeze on any changes to our rules, regulations or code BEFORE a fully representative adviser panel is consulted in depth on proposed changes.
This travesty of adviser lives, businesses lost and client well financial being impaired cannot be allowed to stay in the hands of inept, self-absorbed and UNQUALIFIED politicians and the ‘never-left-school’ classroom bound academics. It is FAR too important to be trusted to these types. We can’t change what’s happened but we can damn well make sure it doesn’t happen again – IF people really want to and have the will. I’m looking at you, dealership heads, senior industry advisers. You need a bona-fide adviser panel that has teeth and WILL act to get their way. I can’t see anything like that right now nor any worthwhile associations that have made a difference./ Time for a BIG change in that area but I’m not seeing it at all yet sadly.
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