A confluence of macroeconomic and microeconomic factors are putting the Australian advice industry in a position to flourish in the coming years according to CoreData chief executive Andrew Inwood.
Opening the Professional Planner Best Practice Forum Tuesday morning, Inwood said the big banks’ collective exit from the sector in the wake of the Hayne royal commission had left a huge gap in the market.
“As the banks exited the system they threw off a lot of people who were advised customers, people who thought they had an adviser, who took advice and paid for advice as part of their day to day,” Inwood said. “We think there are as many as 2,000,000 unassigned customers in the market right now.”
Calling them the “accidentally unadvised”, Inwood said these people are set to come flocking back to an advice market that is light on the supply side given adviser numbers have retracted by about a third to 19,000 in the last three years.
“They’re going to come back into the market in some way, shape or form as they realise that relationships change and they have to start talking to somebody else. Think about Westpac, CBA, NAB to a certain extent and ANZ exiting the system, each of them throwing off large numbers of people who were previously advised,” he said.
“Some people think that’s going to be handled digitally – our data says not. Our data says that these people want a relationship, they want to talk to someone, they effectively want to pass trust with someone, and that someone is an adviser.”
The return of orphaned clients to the market is coupled with an enormous transfer of wealth from ‘boomers’ to the next generation, he explained.
“The biggest lump ever to move through the topography is [from] those born post war,” he said, estimating that the total transfer is estimated at around $3.9 trillion.
The research on this transfer is clear, Inwood continued. People are worried about where their money is going, which means they will gravitate towards advisers to help mitigate those concerns.
“Their biggest fear, and let me be candid about this, is that it ends up in the hands of someone they don’t like. The person they like least is the tax department. Their second fear is that it ends in a car on somebody’s driveway, someone spends it foolishly,” he explained.
“The only way that they have confidence this is going to be done probably is if they get an adviser to help them set up their tax, set up their systems properly and make their process work.”
Inwood laid out several other factors that will affect the business environment for advisers in the coming years, including the ongoing economic fallout from the pandemic and leadership changes at the top for the corporate regulator.
“The shift in power at the regulator is clear,” he said, noting Joe Longo had taken the chair role from James Shipton.
“It’s much more active leadership,” he said, calling Longo a “lawyer’s lawyer” and predicting a heavier involvement from Treasury at ASIC.