The ratio of advisers that leave the industry versus replacements is six-to-one, with the sector likely to reach 14,964 planners by the end of the year according to reseacrh group Adviser Ratings.
4,103 advisers ceased in 2021, with only 244 new entrants and 460 returning advisers for a net loss of over 3,000 according the ‘2022 Australian Financial Advice Landscape’ report.
“Businesses and government need to work on solutions to promote this industry to new talent,” the report stated. “Unfortunately, if nothing changes, the bold prediction of 15,000 financial advisers at the end of 2022 will become a reality.”
However, it noted in the new report the extension did impact the number of advisers that could have left.
“The numbers may have been lower if it were not for an eleventh hour reprieve allowing advisers to retake failed exams in 2022.”
According to the most recent figure by Wealth Data there are 17,111 advisers on ASIC’s Financial Adviser Register as of 21 April.
AR predicts the industry will reach 12,271 advisers by the end of 2025, coinciding with the education standard deadline which requires advisers to attain a relevant tertiary qualification.
AR founder Angus Woods tells Professional Planner this prediction is based on the current legislation as it stands.
“It’s nuanced in terms of what the actual structure of the industry will look like,” Woods says. “Our one big caveat in the report is the Quality of Advice Review.”
Woods says the advice review could potentially change the face of advice in 2023 once the recommendations are handed down.
“Based on how it stands today that’s where the number is going to land which is disappointing, but we’ll see how it plays out.”
There were more than 6,500 adviser movements across licensees in 2021, a 16 per cent increase on 2020.
Some 234 licences discontinued in 2021 which is the largest number since AR began tracking in 2015.
“As advisers attrite, the final number to pay attention to is switching advisers with 2,240 advisers switching licensees in 2021, a subdued number compared to 2018/19,” the report stated. “There was little opportunity for advisers to find new homes with lockdowns in force in Sydney and Melbourne.”
Unmet advice needs
There were 100,000 consumers dropping out of advice in 2021 by either ceasing their relationship voluntarily or being orphaned by their adviser.
There is only 1.9 million Australians receiving advice – around 10 per cent of the adult population – while there is 5.6 million looking for professional advice.
“If the supply of advisers is not replenished we will increasingly see Australians retire with unmet advice needs, which may become a critical issue in an age of global instability, public health crises, and an ageing population.”
The median cost for advice increased another eight per cent to $3,256 with the average client holding $785,000 in funds under administration.
“[The survey] found 65 per cent of prospective clients would only pay $500 a year for advice – about an eighth of the median adviser fee.”