Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Exodus reversing? Adviser numbers on the rise in 2023
The number of advisers in the country appears to be headed in the right direction for the first time since the Hayne Royal Commission, with a number of factors suggesting that regulators, policymakers and industry stakeholders have reached a turning point in the collective quest to arrest declining personnel numbers.
According to advice researcher Wealth Data there has been a net increase of 47 registered advisers (including provisional advisers) in the month of January, with a boost of 18 in the last week alone.
While the increase is negligible against total adviser numbers, which stand at just under 16,000, it builds on a theme that emerged in the back half of 2022 according to Wealth Data head Colin Williams. Around 2,000 advisers came off ASIC’s Financial Adviser Register in 2022, he tells The Inside Adviser, only a fraction of those losses occurred after July.
“In the first six months of 2022 the numbers were terrible, but the numbers got much better in the second half of the year,” Williams says.
The new year has seen a continuation of the reversal seen at the back end of the year.
“The number of advisers leaving the industry has definitely slowed,” Williams observes, noting that most of the advisers that had been considering a career change have already made the move. “The ones remaining are the ones remaining,” he says.
With the cut-off date for the existing adviser exam in the rear view mirror, and most advisers either having completed their qualifications requirements or on the path to doing so, the education mandate is no longer biting into industry numbers as deeply. “The whole FASEA thing has largely been and gone,” Williams says, noting that the proposed experience pathway should also grant some advisers a reprieve from the relevant degree requirement.
The proliferation of provisional advisers coming through the ranks validates the decision of policymakers to add this element to the mandate. Over two-thirds of the 336 new advisers registered in 2022 were marked as provisional, an indication that the thin pipeline of talent coming into the industry is starting to widen.
Crucially, the Quality of Advice Review (QOAR) is also seen as a beacon of hope for new and existing advisers. The review was originally scheduled by royal commission lead Kenneth Hayne to focus on the quality of advice subsequent to the implementation of his 2018 suite of reforms, but quickly shifted to advice and affordability when it became apparent those reforms, combined with the education requirements, would force many advisers out of the industry.
QOAR review lead Michelle Levy (pictured) handed her recommendations to Treasury on December 16, 2022, with proposals such as the abolition of Statements of Advice and a general trend towards more principals-based regulation aimed at making it easier, and more affordable, to provide financial advice.
“A lot of advisers were forced to leave but a lot of people see opportunity in the industry now,” Williams says.
While the QOAR and other factors point to an industry in resurgence, he warns it may still be too early to call the adviser exodus over.
“It’s hard to know if this is a definite and sustainable upwards trajectory,” he says. “The start of the year can be blurred because a lot of people resign in December and start in January. But +47 is a good start.”
