Financial adviser shortage grows, industry warns of disruptions

The number of newly qualified financial advisers has slowed to a trickle – it’s going to mean trouble for the sector and its clients.

The number of newly qualified financial advisers has slowed to a trickle, which is going to mean trouble for the sector and its clients.

Australia’s financial advice crisis is set to worsen, with industry analysts suggesting the total number of advisers will sink below 17,000 for the first time by July.

New figures from the finance advice industry show the number of new advisers joining the industry is tiny – just 82 have qualified so far this calendar year.

Bad publicity in the form of adviser scandals, tough new compulsory exams and additional bureaucracy has created a personnel shortage which will push up fees across the sector where average annual adviser bills are now more than $3,500.

Advisers are also quitting the industry in huge numbers and the most common time for resignations is the end of the financial year. After July 1, the total number is set to drop below 17,000 and under current settings it could break below 16,000 within months.

In 2018, there were 28,000 advisers across the country – even at current reduced levels the industry would need more than 1000 newly qualified advisers per annum, the sector warns.

Sarah Abood, chief executive of the Financial Planning Association, said the industry was “facing a supply and demand crunch”. “We actually need thousands of new planners to join the industry,” Ms Abood said.

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Doug Turek, a financial adviser at Professional Wealth, told a recent episode of The Australian’s Money Cafe Podcast that colleagues were reporting a rush of new clients.

“I’m talking to other advisers and they are having their doors broken down – we are looking at a shortage. Can you imagine if this was happening in any other area: What if you had a 40 per cent reduction in the number of pharmacists or lawyers,” Mr Turek said.

Colin Williams, who runs the Wealth Data consultancy, said the shrinking of the financial adviser market is being driven by an unfortunate combination of increasing demands on individual planners and the withdrawal of the major banks from the sector.

“There were problems with bank advisers, but at the same time the banks were the engine room of the system. Many of the best advisers who went out on their own started in the banks now that process has been largely removed,” Mr Williams said.

The withdrawal of the major banks from the sector has left AMP and Insignia Financial, the merged IOOF and MLC business, as the last major financial organisations with a substantial number of in-house trained advisers.

Mr Williams said a large drop in the number of advisers will cause major disruption in the sector as top advisers may only deal with the wealthiest clients leaving the majority of investors chasing a shrinking segment of advisers still open for business.

As established advisers turn away new clients they find they are not able to successfully refer them on to peers in the industry because all the best operators are getting booked out.

The FPA’s Ms Abood said the industry could regain momentum if red-tape and rising expenses were brought under control – a change that would attract new planners to the profession. “If you look at the latest figures, the number joining is lifting slightly – but it is clearly not enough to offset the losses we are facing each year,” she said.

“We are working to reduce the unnecessary and sometimes contradictory complaints and regulatory layers that planners must contend with – most planners leaving the profession cite these issues. Clients end up paying for all this of course advice costs are rising by about 8 per cent a year.”

The FPA is working closely with universities in trying to attract new blood to the sector, Ms Abood added. “It can be a very rewarding career and demand has never been higher,” she said.