Why this professional believes adviser numbers are due for a notable rebound

Speaking on an upcoming episode of the Relative Return podcast, Nick Eatock, CEO of intelliflo, a digital advice provider, delved into the parallels between the advice industry in the UK and Australia, shedding light on why he anticipates a swift resurgence in the number of advisers in Australia.

Mr Eatock explained while the Retail Distribution Review (RDR) of 2012 resulted in a lot of adviser losses in the UK, having imposed a fee-based advice model and eliminated commission-based sales for financial products, it ultimately led to a drastic improvement in the quality of advice provided.

“What we saw, just before RDR went live, in the two, three months beforehand, the advice numbers dropped dramatically, just as they have done in Australia with the royal commission and so on. But what happened as a result of that was that, actually, advisers ended up having good conversations with clients,” Mr Eatock said.

“The reality was that clients were very accepting of the approach, so I didn’t hear a single adviser actually say that they’d had a challenge.”

He noted that although the RDR narrowed the scope of advice in terms of the client base reached, it also brought about enhanced transparency, measurability, and engagement in the advisory process.

Most notably, he added, it resulted in advisers recognising the upsides of technology.

“Technology became the enabler to enable advisers to get out to their clients and provide the service they did.

“And what we saw over the subsequent years was that the number of advisers grew, year on year. Alongside that, a whole bunch of new people came into the industry in the form of paraplanners as well,” Mr Eatock explained.

He believes that a similar scenario will play out in Australia.

“Essentially, it ended up becoming a good news story,” Mr Eatock opined.

“We still have an advice gap that I think was created by it, which is the not so good news story, but that has narrowed slightly over the years, as advisers have delivered their advice to more people, and we expect that to grow.

“So then, when you paint that against the Australian market, I think exactly the same thing is happening, just years down the road. We’ve seen the adviser numbers drop significantly, but we think that they will bounce back”.

Much like the Future of Financial Advice (FoFA), the RDR sought to improve the clarity and comprehensibility of fee structures and services offered by financial advisers.

The RDR also introduced stricter qualification requirements, mandating that advisers attain a higher level of expertise and knowledge similar to Australia’s Financial Adviser Standards and Ethics Authority (FASEA) exam.

While the RDR did lead to a reduction in the number of financial advisers in the UK initially, as some individuals left the industry due to the changes, it aimed to create a more professional and client-centric advice landscape.

Looking forward, Mr Eatock predicted the Quality of Advice Review (QAR) would instigate a stronger shift to digital technology.

“What we’ve observed in the UK is they’ve [advisers] used the technology we and others provide, then it’s actually helped enable those advice businesses to provide advice to people who aren’t just at the very top end of the wealth spectrum. It probably hasn’t gone far as I would like it to go, but it’s definitely trending in the right direction,” he said.

“So I think, as we see in Australia, as we come out of the next year or two, Quality of Advice Review and so on, then I think what we will see is, through the access of choices of technology systems for advisers in Australia, and hopefully those advice tools that are better integrated together, I think we’ll see that advisers are able to actually service clients, investible assets below where they’re currently.”

To hear more from Mr Eatock, tune in to Relative Return.