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.
The advice business models that are growing in 2024
While the advice and licensing landscape continues to evolve, it seems the pure financial planning business model is the only channel in the industry that is standing still.
Numbers from research outfit Wealth Data show that the financial planning business model is the most used format across the industry by a large margin. Exactly 10,412 financial advisers were registered in an advice business that followed a financial planning model on January 1, 2024, and exactly that amount were registered on September 19, 2024.
The number of licensees overseeing a financial planning business model, however, has increased throughout the year from 43 on January 1 to 61 on September 19.
The only other specific business model to appreciate during the year to-date has been the ‘Accounting – Financial Planning’ model, which generally involves accounting firms that offer holistic advice. This category gained 13 advisers to go from 885 advisers at the start of the year to 898, a gain of 1.47 per cent.
The flip side of the accounting coin was not as successful, though, with the ‘Accounting – Limited Advice’ model, which typically provides self-managed superannuation fund advice for trustees, losing 71 advisers as it declined from 572 to 501, a 12.41 per cent drop. This continues a longer trend for the limited advice model, which has been hampered by a number of regulatory amendments, including the requirement to pass an exam that is tailored to pure financial advisers rather than accountants.
Another business model experiencing difficulties is the advice provided by industry super funds.
“The Super Fund Based Advice model, mainly composed of industry super funds giving advice, has decreased by 45 advisers (down 6.30 per cent),” said Wealth Data founder Colin Williams. “This decline is largely due to mergers among super funds and advisers previously limited to basic superannuation advice being removed from the ASIC [Financial Adviser Register].”
In total, the advice profession has lost 116 advisers to date this year, down from 15,658 on January 1 to 15,542 now. This comes despite 83 new licensees opening while only 69 closed, hinting at the rise of smaller and mid-sized licensees at the expense of larger and more institutionally-aligned wealth groups.
