Adviser Ratings founder Angus Woods

Just over four out five Australian financial services licensees permitted to give personal advice to retail clients have fewer than 10 advisers, illustrating how disjointed the licensee landscape has become.

The latest quarterly Adviser Ratings ‘Musical Chairs’ report found 81.5 per cent (1518 of 1863  AFSLs) are privately-owned and have fewer than 10 advisers.

Adviser Ratings defines “privately owned” as licensees that aren’t owned by banks, industry funds or not-for-profits, and are not in a business with diversified business lines.

But while representing a significant majority of all licensees, they collectively only account for 4193 advisers (27 per cent) on the ASIC Financial Adviser Register, down by only 102 advisers from 4192 in December 2018, on the eve of the Hayne royal commission.

How the regulator will monitor a fragmented landscape has been raised as a concern with a former commissioner recently conceding it has been a challenge to monitor the proliferation of smaller licensees.

The number of bank-owned authorised representatives was 4960 on December 2018 when the industry was at its peak of 28,000 advisers. With the big four banks having exited, that has since declined to 220 advisers.

Limited licensees, who are authorised representatives that can only give advice on limited topics, declined from 1385 to 156.

The number of advisers operating under an industry fund-owned license has almost halved, from 1050 at the end of 2018 to 592.

Diversified licensees (defined as licensees within a business with other core reporting lines) declined from 5179 to 2280.

Privately-owned mid-size (11 to 100 advisers) and larger privately-owned (more than 100 advisers) licensees have seen drops from 4143 to 3235 and from 4341 to 3095, respectively.

The report said that during the last quarter of last year new licensee registrations outpaced voluntary closures. There were 17 new licensees established by solo advisers, and 13 licensees set up with two to five advisers.

“As we’ve seen previously, there was a strong appetite for new licensees from solo operators,” the report said.

“In fact, more than half of the licensee set-ups were applied for by advisers planning to go it alone. The remainder of licensee establishments were set up to host between two and five advisers.”

The report said well-established AFSLs were “once again well represented” among the 17 licensees closed, with 13 being six years old or older.