Financial advisers are facing some real headwinds at the moment. Over the coming year, they’re all required to sit and pass a universal examination, and then they’ll need to upgrade their studies.
All this while grandfathered investment commissions are being banned, the price of support services increase, and practice valuations take a hit.
The good news? More research from CoreData shows that if you can just persevere through the short-term challenges, the size of the prize is mind-blowing.
First, some facts
For the past seven years, CoreData has been presenting the SMSF Awards in conjunction with selfmanagedsuper magazine. The awards rank the best service providers in the self-managed super space and are underpinned by quantitative research into the needs and wants of advisers and trustees.
This year, the research confirmed what we all know. There is a looming advice gap in Australia, similar to what we have seen over recent years in the UK.
When the Retail Distribution Review (RDR) regime was introduced in the UK, we saw adviser numbers drop by 20 per cent. Even today, they still haven’t returned to their pre-RDR levels. Compliance costs went up, and each practice advised fewer clients.
That’s right, fewer advisers were each servicing fewer clients. An advice gap emerged.
And we’re seeing the same thing here in Australia. Just last quarter, according to CoreData’s analysis of ASIC’s financial adviser register, around 7 per cent of advisers left the industry. We expect that trend to continue, with up to 40 per cent of advisers to leave the profession by 2024.
More clients are looking for support
While the supply side is under pressure, consumer demand for advice is only increasing. According to CoreData’s SMSF research, two in every three SMSF trustees are looking for professional support. While only a minority want to completely outsource their decisions, more than half are looking to for a professional they can trust to validate or assist their financial decisions.
And that’s just today. The outlook for advice is looking even rosier. Over the next 25 years, all of the Baby Boomers will need help with their retirements, older Baby Boomers and the Silent Generation will require advice on aged care arrangements, so they can grow old with dignity, and almost $4 trillion will transfer between generations. It will be the greatest transfer of wealth between the generations that Australia has ever seen.
And families will need help in navigating the complexities.
So just press on
Most of today’s advisers will meet the challenges head on. They will pass the FASEA exam in coming months, and then most have to pass just a few study units to meet the new education requirements. Most financial planning practices receive no grandfathered commissions at all.
So, press on. Clients value your services and want an active relationship with someone they can trust. The short-term challenges are real, but once you meet them the opportunity is unprecedented.
“Do not pray for an easy life, pray for the strength to endure a difficult one.”
– Bruce Lee
