It is not uncommon for people to change firms within an industry. The real question is not who has changed jobs but why? Better career opportunity? Higher remuneration package? More exciting client base? Know the answer to these questions and you will be one step ahead of your competitors and be able to keep your staff intact.
We all know that the number of advisers at the licensee level is determined by the licensee’s strategic goals, its ability to recruit and retain advisers, the average age of the financial advisers and a few other factors. These are important aspects to comprehend in order to help you understand personnel movement between competitors.
The number of advisers at industry level is hovering around 25,000 with a slight reduction in the six months to January 1, 2018.
What are the emerging trends that will have an impact on the number of advisers in the industry in the future?
I believe there are five key macro themes that will influence the number of advisers in the industry.
- Professionalism of the financial services industry
The more stringent educational standards coming requiring financial advisers to be degree qualified or equivalent by 1 January 2024 will trigger or accelerate advisers’ plans to exit the advice industry. The professionalism of the industry, however, will help grow the industry by attracting new advisers who are drawn to the prestige and defined career path that the new education standards will bring.
- Technology and innovation
The innovation of technology such as use of process automation and artificial intelligence will automate the more mundane administrative part of an adviser’s role. The advice process will continue to evolve with technology and innovation allowing the adviser to improve their client interaction and the value of their advice. The cost of advice delivery will reduce making it more affordable for consumers, thereby increasing demand for advisers. Although the talk of robot-advice replacing financial advisers is now less sensationalised, robot-advice is still a development that will have an impact on an adviser’s value proposition.
- Growing demand for professional independent financial advice
As public trust in the financial planning industry deepens, accelerated by regulatory and educational standard changes, demand for valuable non-conflicted financial advice will surge. These factors combined with the ageing population and growth in superannuation assets will result in a financially rewarding career for professional advisers.
- Convergence of advice
The value proposition for a one-stop shop for financial planning, risk, accounting, SMSF and mortgage advice for consumers are likely to drive further advice convergence. There are strong synergies in accounting and financial planning /risk firms. This trend may increase the number of accountants becoming licensed to provide financial planning advice.
- Regulatory changes and action
Regulatory changes and action may affect the number of advisers in the future. Advising on mortgage products is currently not considered financial product advice. This may change. Vertically integrated financial service models are currently receiving a lot of attention from ASIC because of the difficulty in managing the conflict of interest that may arise from recommending in-house products. If the economic benefits of vertical integration are no longer there, will the number of financial advisers tied to product providers reduce?
ASIC is currently running a case against Westpac which alleges that Westpac’s subsidiaries provided personal financial product advice when only licensed for general advice in their super rollover telephone campaign. If ASIC is successful in this case, will it deter general product advice resulting in more demand for advisers to advice on even simpler financial affairs?
It’s possible that in the next one to two years we will see the total number of advisers in the industry reduce and level off before it starts growing again. The demand for financial advice will continue to grow with the aging population creating a strong pull for new entrants aspiring to make an impact through quality financial advice. As the financial advice industry makes the transition to become more professionalised, the industry’s natural attrition will be accelerated causing a temporary blip in the growth of the industry.
Data Source
The analysis in this article is based on January 1, 2018 ASIC Financial Advisers Register. We have performed cleansing of the ASIC data to remove any obvious inconsistencies or errors.
Complimentary Licensee briefing
If you are part of a company that holds a financial service licence please contact me for a complimentary tailored briefing that answers the following questions:
- How does an adviser group’s adviser movement rates (new entrants, exits and switches etc) compare against its’ peers and the industry?
- Are your closest competitors adding or losing advisers?
- Are an adviser group’s competitors growing by attracting existing or new advisers/corporate representatives?
- Which competitors are losing market share?
- Are an adviser group’s competitors losing market share due to exits from the industry or losing representatives to competing licensees?
Please leave your details below to book your complementary tailored briefing now.
John Low is Principal of Skilful Analytics, a data analytics consultancy that helps organisations unlock data-driven insights that enhances decision making. Prior to founding Skilful Analytics, John practiced for 18 years as an Actuary applying his analytical skills to life insurance product manufacturing and financial management of life insurance companies. In his free time, John enjoys spending time outdoors with his family as well as running and basketball.
