The biggest puzzle in the lucrative world of financial planning is why nobody wants to join the industry

The financial advice industry has 15,000 professionals, down from 30,000 a decade ago.

It’s never happened before, but the financial planning sector is so badly in need of new talent that it’s launching a recruitment drive.

With only a trickle of new planners being hired each year, the industry is literally shrinking.

And that means fewer investors can get reliable advice, even if they are willing to pay for it.

Yet inside the industry advisers are thriving.

“Advisers are making more money than ever before,” Angus Woods of industry research group Adviser Ratings says.

The latest survey by Adviser Ratings shows that fee increases charged by the industry are running at twice the rate of inflation while profit margins for advisers have lifted from 15 to 21 per cent.

In short, there is enormous demand for financial advice, the industry is doing well and as a career choice it would seem to be a winner. So what’s up?

The problem is twofold. The first is luring the right talent into the industry and then getting them to tunnel through new regulations so they can get on with the business of advising clients.

As Financial Advice Association of Australia chief executive Sarah Abood recently explained, the industry has 15,000 professionals but that’s down from 30,000 a decade ago. Worse still, the latest figures show it is going backwards.

Abood said about 300 new advisers have joined this year and even if the sector could attract 10 times that number, it would not be enough.

At face value the obstacle towards rebuilding the ranks of financial advice would seem to be the newer and more difficult entry exams for advisers, along with the cumulative toll a decade of scandals has taken on the industry.

But the issue runs deeper. Financial advice is seen as the realm of the older male professional who lacks the glamour or sharp instincts of peers in banking and finance.

The adviser ratings show the average age of an adviser is inching higher; it rose to 52 from 49 last year.

Financial Planning Association of Australia chief executive Sarah Abood.

Moreover, the personnel crisis facing the sector is mirrored overseas. US investment magazine Barron’s reports that a recent US survey from Cerulli found “an astonishing 72 per cent of entry level advisers left the business after reporting they see no career path forward”.

The Australian publishes the Top Advisers List each year in conjunction with Barron’s and the 2024 report will be published in November.

A key factor facing the Australian advice sector is the struggles mid-sized firms have with economies of scale. The average number of clients served per adviser is 129, made up of 97 recurring and 32 one-off clients

The industry is also splitting. At the top end are a few hundred advisers who rule the roost.

They have clients with large investment portfolios so the mundane issues of fees and levies are of much less consequence to them.

Meanwhile, the rest of the sector is battling on every front – from red tape to new levies along with the ongoing propensity of investors to ignore advice altogether. Up to two thirds of self-managed super funds are now unadvised.

Adviser Ratings say the average “retail” adviser makes about $140,000 a year and charges clients about $4300 per annum, although these figures include novice advisers which would skewer the salary figure lower.

The crux of the issue for these “average” advisers is that their total funds under management is on average $89m – while some top advisers could have clients who have the same dollar figure inside an individual portfolio.

As Abood says: “We’ve got a big problem. New entrants have crashed and the 312 advisers who first provided advice in 2023 is not enough to offset those retiring.

“We want to really get more people considering this career, it’s a very good option for anyone looking to join the finance industry.”