One in four advisers expect to leave industry within the next five years

One in four financial advisers expect to leave the industry within the next five years, a new study has revealed.

This finding was reported in Investment Trends’ 2022 Adviser Business Model report which looked at the needs of Australian advisers and their business.

The report also found that 37 per cent of advisers intend to switch licensees and 70 per cent of those suggested they’ll switch to a self-licensed model.

“Decreasing NPS is in part driving the increasing number of advisers across both the ‘aligned’ and ‘majority independent’ segments intention to leave their current licensee to be part of a self-licensed practice,” Investment Trends’ research director, Dougal Guild, said.

The research firm also reported that, due to key challenges such as the compliance burden, providing affordable advice and regulatory change, the total cost of providing financial advice to the typical client has increased from $2,850 in 2020 to $3,280 in 2022.

“The more successful advisers appear to have better adapted to regulatory change and new technologies to address this cost/profitability issue,” Mr Guild said.

“They primarily service wealthier clients and are prepared to pay for tech solutions to enhance their advice offering and bolster profitability.”

However, despite the regulatory burdens, Investment Trends reported that practice profitability has increased with 46 per cent of advisers saying they were more profitable this year compared to the 34 per cent in 2021.

“Overall, practices’ net profit margins are moving in the right direction,” Mr Guild added.

“Advisers are refocusing efforts on new business post the COVID and FASEA disruption. This, combined with an increasing focus on higher value clients has delivered record high levels of new inflows.”

The release of the latest study comes after Investment Trends' 2022 Adviser Technology Needs report found that the use of multiple platforms has reached an average of three, which the research firm is saying is due to “advisers increasing the proportion of new business directed to their secondary platform at the expense of their main platform”.

However, the percentage of new inflows by advisers through platforms has dipped to 71 per cent on average (from 76 per cent in 2021), though the long-term trend remains stable with 73 per cent expected in three years' time.

Despite the increasing use of multiple platforms, the study found that overall adviser satisfaction with platforms dropped from 72 per cent last year to 67 per cent.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.