Industry to shed 2,400 advisers by year's end

The year 2022 is expected to be another devastating year for financial adviser numbers, with Adviser Ratings suggesting that another 2,387 advisers are going to make their exit across this calendar year.

This, according to research by Adviser Ratings and Vanguard, will take the universe below the 15,000 mark for the first time.

“Adviser Ratings has not been shy about making bold predictions on the direction of adviser numbers. Based on several inputs, including attrition to date, as well as the impact of education mandates and patterns in the UK after the Retail Distribution Review, we have long said the universe would fall below 15,000,” the Australian Financial Advice Landscape report reads.

But there is some good news on the horizon, with Adviser Ratings predicting yearly adviser departures will then slow, before stabilising in 2026.

According to its long-term forecast, the number of advisers in the industry would drop to 14,964 in 2022 and continue to decline to 12,271 in 2025.

However, interest in advice is not waning. In fact, according to the research, the number of client leads doubled in 2021.

Using its lead generation tools, Adviser Ratings said that more than half of the leads generated were over 55 years old, and almost 40 per cent were between the age of 35 to 55. But younger Australians too are said to be showing a willingness to get a handle on their finances earlier, with close to 1,000 leads coming from those under 35.

Adviser Ratings cautioned advisers not to ignore the young Australians given that this generation are set to become the beneficiaries of more than $224 billion a year by 2050.

But despite increasing interest in advice, there has been a further drop in consumers using a financial advice mainly due to the rise in adviser fees which are pricing out many Aussies who want or need advice.

The Adviser Ratings 2022 financial advice consumer survey found 65 per cent of prospective clients would only pay $500 a year for advice – about an eighth of the median adviser fee.

The report found that the median ongoing fee has increased by 41 per cent in the same period, rising from $2,510 to $3,529.

Comparatively, Adviser Ratings found that the average FUA per client has only increased 22 per cent, laying bare the stresses to run a profitable practice at the expense of Australians being able to access affordable advice.