Chair James Shipton has revealed ASIC’s plan to conduct a study into unmet advice needs, with internal sources at the regulator confirming the as-yet-unannounced project will happen in 2020.
Speaking at the CFA Societies Australia Investment Conference in Sydney, Shipton spoke on the “seismic shifts” happening in the advice industry “from one path to another path” and how this is affecting consumers.
“We’re monitoring it,” Shipton said. “We want to engage with the industry about the consequences of this – unintended or otherwise – because we are worried about it.”
He then flagged a project ASIC is preparing for on the widening advice gap.
“We’ve got a body of work on unmet advice needs,” Shipton said. “We can’t dictate how a market develops, but we certainly want to be a core part in the discussion about how it can best develop and how it can be optimised for the coming environment that we’re in.”
While the project hasn’t been formally announced, it hasn’t come completely out of the blue. In an August report entitled Financial Advice: What consumers really think, ASIC mentioned a “larger research project in 2020-21 that will explore whether consumers have unmet advice needs”.
The report stated that the research will contain the state of the financial advice industry, the demand for advice, the supply of advice, the gaps between supply and demand and the measures required to reduce them.
Enough advisers to go around?
The threat of unmet advice needs is a hotbed issue for advisers under pressure from regulatory tightening, heightened education standards and the repeal of grandfathered commissions.
According to Adviser Ratings 2850 of the country’s 25,000 or so advisers left the industry in 2019 to August, with even the most conservative pundits predicting 20 per cent of advisers (ie 5,000) will move on before 2024.
While this date was predicated on an education standards cut-off date that has since been extended to 2026, the issue remains; will there be enough advisers to go around?
According to ASIC’s report the need for advice is going in the opposite direction to the dwindling adviser pool. The number of surveyed adults who want financial advice is now 27 per cent, it states, while 41 per cent of people intend to get financial advice in the future.
The rough numbers, as they stand, would indicate a heavy burden for advisers in the future. In 2017, 69.47 per cent of the population (measured then at 23.2 million) was over 25. If an eventual nadir of 20,000 advisers is required to service 27 per cent of this population it would mean 4,351,600 advice seekers at 217 clients per adviser.
In an earlier address at the CFA conference, Shipton said he was “genuinely excited” by the potential of fintech in the industry. ASIC’s Innovation Hub is concurrently looking at collaborating with “innovative startups and scaleups” across a number of areas in financial services, including robo-advice.