Adviser losses not reflective of industry progress
The beginning of 2020 has been dominated by headlines of mass adviser departures from the industry, with the number of registered advisers having fallen to levels of five years ago. While this may make for great headlines, it says little about the progress being made in the professionalisation of the financial advice industry, particularly in a year of incredible health and emotional stress. In fact, it does little more than move the attention away from the outstanding work the industry has completed in the most difficult year for generations.
Most industry pundits forget that financial advisers are the only people that remain at the coalface in the financial advice industry, and even the broader investment industry. In periods of volatility like March 2020, investors do not call the portfolio manager of their managed fund or ETF, nor do they call the CEO of the companies in which they are invested; they call their adviser. Similarly, with most industry funds growing larger by the week, important investment decisions are referred to a mobile phone application, as they simply cannot deal with their millions of members.
So, when we read that AMP Financial Planning is no longer the largest licensee in the country, this should be seen as a positive. Not for the potential jobs lost or people leaving the industry, but the fact that the number of financial advisers directly employed by product providers is reducing. The CEO of AMP himself flagged this over 12 months ago, specifically highlighting that most Australians still hadn’t experienced real financial advice.
Similarly, to blame adviser departures on the introduction of new education standards and further overlapping of regulation ignores a number of key recent trends. According to Recep III Peker, research director at Investment Trends, when speaking to Professional Planner in 2020, the number of advisers in the industry in 2019 was actually inflated by the introduction of the Financial Adviser Register (FAR) by ASIC. In his assessment, advisers of varying levels, including accountants, paraplanners, assistants and so on added themselves to the FAR in order to avoid the need to recomplete a Professional Year under the FASEA changes. Apparently, this inflated the numbers by 10%, meaning the recent 15% falls are significantly less on a net basis than reported.
Taking this point further, not every registered financial adviser is actually providing advice. This may include paraplanners who support licensed advisers, juniors who do not provide advice, accountants who thought they may require a license but no longer do, and even varying levels of employees in stockbroking firms. One of the biggest issues in accounting for the financial advice industry is the tendency for statistical providers to extrapolate trends from smaller groups of advisers to the industry in general. Most financial advisers, like other professionals, are unlikely to respond to extensive questionnaires regarding their careers and outlook; they are simply too busy.
The fact that the SMSF Advisers Network, which licenses accountants from all around Australia, is now the largest licensee in the country, should be seen as a positive. It means the power of the major institutions continues to dwindle and that more advisers are either applying for their own licenses, or joining smaller, independent dealer groups. The days of advisers being distribution networks for product providers, in most cases, is gone.