The decline of adviser numbers over the past couple of years or so has been well documented, but it is only part of the story of what’s been taking place in the industry since the end of 2018.
At the same time overall numbers have been falling there’s also been a significant redistribution of advisers among licensees, an “unbundling” which has radically reshaped the profile of the industry.
In December 2018 the number of active advisers on the ASIC financial adviser register (FAR) peaked at 28,538. By the beginning of October this year the number had fallen by more than 7000, or 25 per cent, to 21,365. While some advisers have been leaving the industry altogether, others have been leaving their licensees and looking for an alternative home.
At the end of 2018 the largest licensees accounted for 39 per cent of all advisers, or a total of 11,233 authorised representatives. Now the number is just 5879 advisers, and the “top tier” of the licensee industry (licensees with more than 500 advisers on their licence) accounts for only 28 per cent of advisers – an 11-percentage point fall.
Two tiers of the licensee industry in particular have seen significant relative gains: the large (100 to 499 adviser) tier, and the small (two to nine adviser) tier.
The large tier accounts now for 26 per cent of the total adviser market, and the small tier for 18 per cent.
The medium (10 to 99 adviser) tier has remained more or less static at about a quarter (24%) of the industry, and the single-adviser licensee tier has increased from 3 per cent of adviser numbers to 4 per cent.
The overall number of licensees has declined since the end of 2018, from 2211 parent entities to 2090.
During the period under review the average large-tier licensee has grown, from 178 advisers at the end of December to 194 advisers each by October this year. At the same time the average size of a medium-tier licensee has barely budged – it was 25 advisers at the end of 2018, and it was 26 advisers in October this year.
This redistribution of advisers is significant for at least three stakeholders: the regulator, suppliers of goods and services to advisers; and consumers.
It’s significant for the regulator because traditionally it has been able to effectively regulate a large number of advisers by touching relatively few licensees. Contact with 18 key licensees in 2018 meant the regulator could oversee more than 11,000 advisers; by October to oversee the same number of advisers it would have to be in contact with 35 licensees.
It is a similar story for suppliers – product manufacturers, software vendors and the like. To reach 11,000 advisers today, a supplier would need to be in contact with almost twice as many licensees now as it was in late 2018.
And it’s significant for consumers too, because the entities that make up the all of the tiers outside the top tier simply lack the resources Top-Tier licensees have had access to handle issues such as remediation.But as the top tier continues to dwindle in overall industry significance, and more and more advisers find a home in the other tiers, the regulator will need to turn at least some of its attention from the Top Tier to the other tiers, if only because that’s where the weight of advisers is now accumulating, and where most advice is now likely to be delivered to consumers.
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