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.
‘It’s not enough’: New entrant numbers tank as FAAA proposes Adviser Academy
The Financial Advice Association of Australia will set up a profession-wide academy to promote more young professionals into the industry, amid stubbornly low adviser numbers and a paltry amount of new entrants in the last year.
Despite strong rhetoric from the government around building adviser numbers and legislative changes aimed at retaining experienced advisers, there are now only 15,589 registered in the country, which is almost exactly the same as this time last year and 46 per cent lower than 2019. Numbers are expected to dip further in the last few days of June as exiting advisers jump off ASIC’s register to avoid the industry funding levy.
But an “even bigger problem”, according to FAAA chief executive Sarah Abood, is that while the industry is losing plenty of advisers due to factors like increased costs, compliance and regulatory pressure, too few new entrants are coming in to replace them.
“New entrants have crashed,” Abood said during an FAAA policy briefing in Sydney this week. “They’ve crashed to zero since 2019.”
Just 312 financial advisers first provided advice in 2023, she said.
“Only 312… it’s not enough. It’s not enough to offset the advisers that are going to retire. We could put a zero behind that and not really impact meaningfully on the supply of financial advice.”
The advice industry can’t fall into the trap of thinking that new entrants don’t matter, Abood continued. While the dearth of advisers is a factor in pushing up the cost of advice and effectively boosting adviser remuneration, the damage this does to the profession in the long run must be considered.
“Some advisers are running great businesses and they’ve got way more demand than they can deal with, and they might be thinking… well this is ok, maybe not having a heap of competition is a good thing,” she said. “But we know that a profession that’s in decline is not a strong profession. It’s not going to end well if we don’t put a stop to it.”
Stumbling blocks
One of the choke points in the flow of new entrants into the advice profession is the lack of universities that have signed up to provide the specific education required to become a registered financial adviser, a set of standards which was laid down by the now-defunct Financial Adviser Standards and Ethics Authority.
While the industry has what FAAA head of policy Phil Anderson called “very prescriptive requirements” for qualification, with both an adviser exam and an ‘equivalent degree’ forming the core of the benchmark, only a handful of (mostly smaller) universities have elected to provide the required courses.
“The most prestigious universities in Australia have not chosen to participate,” Anderson said. “And if they do not have approved degrees, then that is not a pathway for people to come through financial advice.”
We have a situation now, he explained, where students coming through the prestigious universities don’t have a viable pathway to get into advice. To make matters worse, the ones that are providing financial advice courses are under threat.
“We are concerned about the the viability of some of the universities that are currently providing financial advice education,” Anderson said, “and we want to hold on to those that have put the investment into it.”
Adding to the pressure is a reduction in the number of large licensees in the industry after the Hayne Royal Commission reshaped the industry away from institutional advice provision.
“That means new entrants can no longer rely on big employers to run large graduate intake programs,” said FAAA general manager of education, Anne Palmer. “That has left the obligation on smaller-sized advisory businesses to train up new advisers.”
Adviser Academy
The FAAA’s plan to reanimate adviser numbers, and particularly new entrants, is headed by a plan to set up an academy that would help promote advice to possible new entrants, educate them about the profession and place them in roles within the industry.
This ‘Adviser Academy’ would educate high school and university students about the rewarding nature of the financial advice role, Palmer explained, and encourage them to complete financial planning qualifications.
“The Advice Academy will also support qualified graduates to find entry level roles in the profession and to assist emerging professionals to find and complete Professional Year placements.”
Initial interest from the business community has been “good”, she added, with advice practices and licensees keen to sponsor the program.
