Financial advice gets sliced from the menu for all but richest Australians

Advisers are actively cutting out all but the wealthiest clients as the sector faces a personnel crisis.

Financial adviser numbers in Australia are falling fast with estimates that the current 20,000-plus licensed advisers will fall to less than 15,000 in the next few years.

Financial advice for all but the richest Australians is in serious jeopardy.

The advice sector is shrinking, the majority of students in existing courses are not becoming planners and now evidence is accumulating that the best advisers are cutting off anyone who is not officially “wealthy”.

The concerns are echoed across the financial planning industry with the issue at its most severe where advisers cut a whole layer of clients leaving them to find their own way through a forest of financial products and social welfare legislation.

Fearing a backlash, the majority of advisers refuse to comment publicly on the shift but are debating the issue furiously on a range of industry chat forums.

As one top adviser – who has regularly featured among the top ranks of The List: The Top 100 Top Advisers – suggests: “It’s all too much trouble and it’s not economic to service clients who are not sophisticated investors – the whole thing is a lot easier if we just concentrate on them.

“I don’t know what’s going to happen to the rest of the market.” (Under current legislation a sophisticated investor must have $2.5 million in assets or an annual income of $250,000 for at least two years in a row.)

Financial adviser numbers in Australia are falling fast with estimates that the current 20,000-plus licensed advisers will fall to less than 15,000 in the next few years. As this occurs, there is now a clear and present danger the middle market will be left behind.

Here’s a taste of some recent comments made within adviser chat forums which capture the crisis in the sector – and confirm the worst fears among regulators for the provision of good quality advice at anywhere near generally affordable prices.

One adviser explains: “We’ve been offloading clients starting back in early 2020. What worked for decades just isn’t working anymore and we will focus on our higher net wealth engaged clients.”

Another advisers complains: “It’s not that I don’t understand how important the compliance details are – I truly do – it’s just that it’s making me miserable, It seems more important that we document in 20 different ways what we’re doing for a client – not what we actually do.”

Behind the growing level of concerns are two outstanding issues – the general disrepute of the industry which has been tested again this year by scandals linked with Melissa Caddick, the missing Sydney adviser, and separately, the late David Hunter Campbell of the Castle Rock group.

And on a more pedestrian level the bureaucracy and overlapping regulations faced by the vast majority of advisers who are unconnected, but tarred all the same, through consistent irregularities in the industry.

One of the few advisers to speak out on the matter is Perth adviser Steve Blizard of Roxburgh Securities – who is also an active Liberal Party member in Western Australian.

Says Blizard: “I can assure you that most smaller practices are ‘transitioning’ smaller clients out the door. When you can only charge $500 per annum for small clients and it costs $1000 in time to chase up the annual renewals and service support fees – what to do next becomes a harder reality.”

As national academic standards loom for the sector, representative groups are trying to streamline the advice system with moves to establish individual registration of advisers and to scrap the expensive statement of advice requirements.

But time is running out as a lack of suitable personnel becomes ever more evident: A recent Adviser Ratings survey at nine universities found that only 28 per cent of those financial planning degree ended up working at an advice firm.

Originally published as Financial advice gets sliced from the menu for all but richest Australians