War for talent only just heating up: AR data

Almost 80 per cent of advice practices are aiming to grow their client base but will struggle to service the additional business as the market for advisers is getting more competitive according to Adviser Ratings.

Data from the researcher found 58 per cent of advice practices are purposely growing but after certain client types, while 22 per cent are re-actively growing and adding clients of any description.

AR econometrician Nicolas Peña Mc Gough tells Professional Planner this analysis was made based on surveys done last year ahead of the firm’s Advice Landscape report due in April.

“What we’re seeing from those numbers – a high number of practices want to grow in advisers but at the same time, we have a big number of advisers who are thinking of leaving the industry,” Peña Mc Gough says.

Compounding this issue is the 61.5 per cent of practices that want to add advisers, despite 22 per cent of planners citing they want to leave the industry.

Peña Mc Gough says the timeframe is over the medium to long term depending on legislative changes with the 1 January 2026 deadline to hold a tertiary qualification being a significant factor.

“Where are they going to get the new advisers from? Are they going to fight for them; are we going to see a surge in supply from somewhere?” Peña Mc Gough says.

New entrants are expected to be part of the competition for talent but only 586 provisional advisers have joined in 2021 and 2022.

Dance practice

The researcher released its latest Musical Chairs report this week which found almost two thirds of advisers (64.3 per cent) are operating under privately-owned licences, while the proportion of advisers under limited licences has shrunk to 1.1 per cent.

The report also highlighted the reduction of licensee switching that has happened compared to previous years, although the proportion has increased.

Last December AR released an update showing 93 per cent of planners intend to increase their fees next year.

Peña Mc Gough says further information on that data is expected when the Advice Landscape reported is released in a couple of months.

“We’re going to analyse this through the February and March period and publish the report in April,” Peña Mc Gough says.

Directed investments

The report analysed the Future Flow Intentions of advisers and found 88 per cent of advisers intended to increase inflows to managed accounts within the next 60 days, while 71 per cent will increase flows to term deposits.

This comes at the expense of managed funds and listed shares which are expected to see outflows by 57 per cent and 53 per cent of advisers respectively. ETFs remain largely neutral.

AR chief operating officer Chris Williams says the flows are coming from managed funds moving to platforms that offer managed accounts.

“We are seeing platforms that do not have that level of product offering are scoring lower in that adviser community as well.

Additionally, platforms that don’t offer a variety of product types and asset classes received negative feedback.

“If I look at that investment vehicle distribution across different platforms, you can clearly see that advisers are actually scoring those platforms lower because they don’t have that product offering,”

The findings of the research are similar to data released last October from Investment Trends, which showed one-in-four advisers intended to stop using a fund manager.

Investment Trends research director Dougal Guild told Professional Planner the loss of flows from managed funds is often made up through other vehicles like managed accounts and active ETFs.

“Managed account portfolios also rely on elements of managed funds – it’s really about this switch between managed funds held directly versus managed funds being held by managed accounts or model portfolios,” Guild said.

“You just can’t look at the percentage drop into managed fund use because a lot of that managed fund use is now appearing in managed account portfolios.”