By 2030, dramatic changes to the wealth management industry will see advisers split their services into three specific models, according to consultancy group KnowItDigital.
The consultancy puts forward the theory that the advice service landscape will be split into three broad models in a little over ten years: high-net-worth investment advisers with ongoing client relationships, transactional and broad-based advisers, and aged care specialists that may include estate planning.
Advice revenue will shift away from the traditional segmentation of superannuation and retirement (currently 35 per cent), loan and investment advice (26 per cent) and SMSF advice (over 20 per cent), the paper outlines in a paper.
Instead, verticals will be more in line with specialisations as a “greater delineation between transactional and ongoing advice will emerge”.
HNW client services will include areas like SMSF, stockbroking and property broking, while transactional or “broad-based” advice will include traditional money management advice, it states.
Aged care advice will become a growth area for advisers, as the demographics of the Australian population makes “an increase in the need for aged care, and advice thereon, inevitable”, it says.
“The Australian Bureau of Statistics project the proportion of Australians aged 65 and older projected to increase from 15 per cent to 23 per cent over the next 50 years,” the consultancy’s paper cites, noting also that projected individual health costs may double by 2035.
A 30 year wait
There will be a vastly different landscape in 2030, says KnowItDigital chief executive Wayne Wilson, led by the move towards specialisation.
“I think practices will either be target-specific or have practitioners within their practice that are target-specific,” Wilson tells Professional Planner.
The paper studies the changes that have dominated the industry in recent years, including education standards, the Life Insurance Framework reforms, the Productivity Commission’s report into Superannuation, the Retirement Income Forum and the Hayne Royal Commission. The anticipated effect of the ongoing Royal Commission into Aged Care Quality and Safety is also taken into account. Educated assumptions are then made about “what the industry will look like in 2030”, with the acknowledgement that “this is a significant undertaking, with great unknowns”.
Industry headwinds will see adviser numbers fall dramatically leading up to the 2024 education standards deadline, with a significant drop in the short term “led by the departure of older planners”. Adviser numbers will be slow to return, it states.
“The number of advisers in the industry in 2030 will be lower than is currently the case. The exodus of the early 2020s will not have been fully reversed, however a steady flow of new, younger advisers will see the numbers back above 20,000,” the paper projects.
When numbers do stabilise, the paper postulates, advisers will be “younger on average, and will be less likely to have changed career to enter the industry”.
Overall, the changes to the industry will be a positive in the long run, Wilson believes.
“I’ve been in the industry for 30 years and we’ve been talking about it becoming a profession for all of those 30 years but I think we’ll see that happening with what we’re going through now.”