Grim picture for financial advice in latest Landscape report
Key findings from the Australian Financial Advice Landscape Report 2022 have painted a grim picture for the financial advice industry, predicting higher client fees and dwindling adviser numbers.
Without a doubt, the last few years have been tough on financial advisers. Increasing compliance burdens have gone through the roof, going back to university to sit exams has been troublesome and the pandemic has resulted in longer working hours; and it has all been too much for some. Many have left the industry as a result and “just 13,154 advisers would be left in four years’ time, compared to 20,764 at the beginning of 2021,” the report finds.
According to an article in the Australian Financial Review, “over the past year, 100,000 dropped out of their advice services, taking the total cohort of advised Australians to just 10.1 per cent of the adult population, down from 13.9 per cent in 2018.”
Off-the-cuff, that number seems suspiciously high for that many Australians to become non-advised in just one year. Especially when the expectations are for a significant rise in demand for advice in areas such as tax reduction strategies, capital preservation, and ESG investing.
According to the annual Financial Planning Association of Australia (FPA) Money & Life Tracker report, which surveyed more than 2,000 Australians, demand for financial advice is expected to surge, with 2.6 million non-advised Australians intending to seek help from a financial planner in the next two years.
The estimated 100,000 Australians who are believed to have exited the industry this year may have supposedly “turned to unregulated advice by following investing and finance influencers, or ‘finfluencers,’ on digital platforms such as TikTok, YouTube and Instagram,” or no advice at all, according to the AFR.
However, looking at commentary online from industry participants, it appears the 100,000 customers that were believed to have left the financial advising industry actually reflects M&A movement in the financial advice industry, along with the significant exits of each of the major banks from the sector in the last 12 months, rather than actual customers leaving their adviser.
The report does, however, note positive developments for advisers, which include clients who have said their financial position has improved as a result of financial advice, and the average net worth increasing by $140,000, on average.