The number of advisers leaving the industry has accelerated with 1759 ceased advisers in Q2 eclipsing the 1066 that abandoned their authorisation in Q1, new research from Adviser Ratings revealed.
The rate of ceased advisers peaked in June, with 1001 pulling up stumps.
In total, 2825 advisers ceased their profession so far this year, slashing the number on ASIC’s Financial Adviser Register (FAR) to 25,470, a decrease of 11 per cent from its December peak.
The data in the Adviser Musical Chairs Report highlighted a “dearth” of new advisers, with only 19 for the year. It noted that many advisers already have their degree and exam qualifications but haven’t yet completed the professional year. These “provisional” advisers are expected to show on the FAR in early 2020.
“The number of financial advisers is shrinking, with limited new entrants and a constant trend of leaving advisers,” the report stated.
The report predicted the adviser decline in numbers will continue, “particularly in the short term prior to larger numbers of new entrants, but also in the medium term”.
More and more advisers will “bite the bullet” leading up the 2024 education requirements mandated by the Financial Adviser Standards and Ethics Authority, the report noted.
Speaking to Professional Planner, Mark Hoven, chief executive at Adviser Ratings, noted that 4,500 advisers became authorised in December due to a rush to sign up before the 1 January cut-off date. Advisers authorised after this would be treated by ASIC as new advisers, Hoven said, “even if they had 30 years-experience”.
“It’s a once in a lifetime event,” he added.
Hoven says the trend is fuelled by a combination of the Hayne royal commission, sharp rebukes to the “much chastened institutions”, the incoming removal of grandfathered commissions and the possible removal of insurance commissions, as well as the FASEA education standards.
Also notable is that more advice licensees are being cancelled than registered for the first time since Adviser Ratings began the report in 2015, indicating that the shine may be wearing off the self-licensing trend. “I thought that was the most interesting thing,” Hoven said. “We’re finally seeing that graph flip over.”
He notes that there are a lot of “headwinds” to registration, including professional indemnity insurers leaving the market and people becoming wise to the difficulties in running self-licensed boutiques.
“There are over 2,200 licensees currently registered, but over half of these (1207) have just one or two advisers and 1650 have five or less advisers,” the report reveals. “May and June 2019 have seen the two highest totals of discontinued licensees per month since January 2015.”
The study also identifies a significant increase in the adviser movement between licensees, which has gone up 20 per cent on Q1 to 700 advisers. The most noticeable trend here is the exit of advisers out of institutionally aligned licensees to private licensees that have over 30 advisers.