While the outflow of advisers since 2018 has left the industry depleted, the quality of the remaining cohort has significantly improved according to ARdata.
The new face of advice looks markedly different to that of its predecessor, the group writes in its Q3 Musical Chairs report, with the remaining 18,901 registered advisers better educated, more qualified and more likely to “behave in ways associated with quality advice” than those that have left the industry.
ARdata’s ‘quality score’ system for advisers shows a median rating of 792 for remaining advisers as opposed to a score of 690 for ceased advisers.
Broken down into sectors, as shown below, the scores paint a picture of an industry moving towards a higher distribution of quality advisers according to the group’s metrics.
The amount of ‘exceptional’ advisers, for example, is 14.8 per cent for current advisers while only three per cent of the advisers that have left the industry had the same rating. On the next highest band, 26.9 per cent of remaining advisers are rated ‘very good’ while only 11.1 per cent of ceased advisers did.
On the lower end of the scale, 37.5 per cent of remaining advisers had a quality score of either ‘poor’ or ‘fair’ while 62.2 per cent of advisers who’ve left the industry fell into these two categories.
“The advice industry has undergone a colossal shift in the last few years, with regulators, consumers and advisers themselves demanding higher standards from the people who manage Australians’ wealth,” the report states.
“It stands to reason, therefore, that the remaining advisers should collectively have the attributes to improve outcomes for their clients.”
According to Angus Woods, the founder of ARdata’s parent company Adviser Ratings, the quality score matrix is still in development but at this stage includes education levels, commercial credit scores of practices, director history, movement between licensees, membership associations (and their attendant codes), experience levels, licensee and client satisfaction scores.
Despite a continuation of the adviser outflow seen since 2018, the report notes a positive turnaround with only 505 advisers leaving the sector and a net loss of 215. Almost 1,500 departed in the previous quarter.
It was a “relatively subdued” quarter overall for the sector, ARdata notes, with adviser exists down 26 per cent on the same period last year and lower levels of licensee switching. “In fact, it was the quietest quarter for adviser departures in two years.”
Licensee switching and adviser exits – the “musical chairs”, as the report calls it – may pick up again the Q4, however, as the deadline for FASEA’s provisional exam cut-off date nears and market agitation begins anew.
“As both Sydney and Melbourne begin to unwind their respective lockdowns and embrace the new COVID-19 normal, we expect the appetite for switching licensees to start to pick up,” the report states. “We expect movement to accelerate in the coming quarter as the clock continues to tick on education standards deadlines.”