Widening the funnel: Navigating a path forward for adviser numbers

Witnessing a profession dwindle from 26,500 to fewer than 16,000 within four years has been a disheartening setback.

Ever since, the advice landscape has been in a perpetual state of anticipation, with the future trajectory of adviser numbers in coming years remaining uncertain.

It is clear that reviving the industry to its former glory is of paramount importance – but there is more to the story.

How can the industry see an increase in capable advisers?

This is a question of both quality and quantity.

Brian Knight, chief executive of Kaplan Professional, says that Australia’s unmet consumer demand is a resource-related concern.

“With the number of Australians coming up to retirement and the amount of people seeking or needing financial advice, we just haven’t got the resources,” he says.

“That’s why we’re getting differing views from politicians wanting to expand who can give advice, and the solution should be that, as a country, we need a more robust and well-trained pool of financial advisers.”

In July, Financial Services Minister Stephen Jones suggested that the industry could reinstate itself as a 30,000-strong force by embracing a long-term pragmatic strategy.

It was here that Minister Jones also underscored the pivotal role education plays.

“We have to be pragmatic about it and have more doors at the university level, such as by recognising components of other degrees and ensuring there is a logical pathway,” the minister said at the time.

Advice as a career path

Mr Knight concurs that the solution begins with introducing financial advice as a career path at an early stage, asserting that a lack of awareness is hampering the entry of future advisers into the field.

“If you go to a careers night at schools, parents aren’t aware of what careers in financial advice are, and that’s the same for a lot of young people,” Mr Knight explains.

“It’s not something that leaps out … we only have a couple of universities who even have financial planning electives in the curriculum.

“There are a multitude of careers and we’re currently not winning that battle for young talent.”

Phil Anderson, general manager for transformation and policy and advocacy at the Financial Advice Association Australia (FAAA), takes a broader perspective, linking the difficulty of attracting new participants to the nation’s limited provision of financial literacy education.

“We want people to be enthusiastic about becoming a financial adviser early on, whether that’s in high school, whether that’s university or whether that’s in their first job that they do before they pursue a career change,” Mr Anderson says.

“The challenge to emphasise is financial literacy.

“How many Australian children are thinking about what superannuation is, or for that matter, what life insurance is?

“Unless they are thinking about those things earlier in life, they are less likely to be so quickly focused on financial advice as a potential career.”

For Mr Anderson, the promotion of financial literacy stands as an opportunity to attract a generation of financially savvy Australians to the profession.

“How do you get people to start thinking about investing when they are still at school? I’m not talking about one in 1,000 young Australians, but one in five?

“How do we make them start taking an interest in this?

“If we can do that, then it fundamentally changes everything for them from that point onwards.”

Attracting the ‘right people is key’

Meanwhile, Corey Wastle from Verse Wealth reiterates the need to attract talent that can “lead the profession” in coming years.

“I think we need to first and foremost be focused on attracting the right people to the industry now and into the future.”

Importantly, Mr Wastle emphasises the need to direct efforts to making advice an appealing career for more young women.

“As a whole, we traditionally haven’t done a great task of attracting young talented women into financial advice, and I think a big part of that is the misconception that people generally have around the role of a financial adviser in someone’s life,” he says.

“I think there’s a lack of awareness around not just what an adviser does, but even the fact that the role exists.

“It’s not about products and portfolios, it’s about service and making a difference to people, helping them solve real problems in their life and achieve real things.”

Described as the perfect mix of “head and heart”, Mr Wastle asserts that the role of an adviser presents an exciting opportunity for those who understand the full scope of what a career in advice encompasses.

“When people understand what a modern-day adviser does, I think that’s compelling to a lot of people,” Mr Wastle says.

“I think part of that happening is a natural consequence of advice evolving beyond products and portfolios into a client experience that’s more personalised. Advice is now more values and goal oriented.

“Shifting the narrative of what it means to be an adviser is one of the foundational things that we need to do.

“And if we do this en masse, as a profession, that narrative over time will shift itself organically.”

Equally important is the initial task of generating awareness for such a narrative.

Marketing fail

Ever since the Hayne royal commission and now amid the anticipated implementation of elements of the Quality of Advice Review, the industry has navigated shifting regulations.

According to Neil Macdonald of The Advisers Association, a majority of Australians might not be aware of the regulatory burdens and shake-ups advisers have faced.

“A lot of people who have been within the industry for a long time keep referring back to the royal commission and other history that has been in the background. But for lots of people outside of the profession, they have never even heard of it,” Mr Macdonald says.

“We have not been good, as a profession, in getting our marketing done well,” he adds.

“As an adviser, you can make a massive difference in people’s lives, and that message isn’t getting across.

“Ultimately, professional bodies like the FAAA need to actually start encouraging their members to talk to people. The reality is that a lot of our clients, or even their kids, can be potential financial advisers.

“Fundamentally, you need a viable pipeline of people wanting to be a financial planner.”

If sufficient awareness is drawn to elevate financial advice as a valuable career path, there may indeed be a surge of young Australians choosing to pursue the profession.

But yet, another question would remain: do current pathways truly facilitate the entrance of new talent into this profession?

As part of the announced experience pathway, which is currently before Parliament, the government proposed several changes to simplify the process for new entrants.

Under the current law, new entrants are asked to complete an approved qualification, including meeting all the conditions prescribed for that approved qualification, as determined by the minister in the Approved Qualifications Determination.

However, under the new law, the minister may approve one or more ways of satisfying the conditions for an approved qualification. This, the Treasury explained, provides greater flexibility to new entrants, recognising that there may be different study pathways available to satisfy the education and training standard.

Mr Macdonald deems this as a temporary solution, rather than a long-term fix.

“I think it’s a bit of a bandaid rather than addressing the core issues,” he admits.

“FASEA has introduced some fairly narrow definitions of study. So if you change the title of the course, the course doesn’t qualify and you’ve got to have it approved again.

“If you do an accounting course or you do a law course, the university says that meets the criteria. So I think we need to shift the whole education focus to ‘this course is equivalent to that’ and allow the universities to certify through there.”

New entrant pathway

Moreover, earlier this year, Mr Jones revealed that he will turn his attention to the new entrant pathway in the back half of 2023 – a pathway that has been in discussion since 2021.

Namely, the new adviser pathway and the experienced adviser pathway have been closely linked since the previous Liberal federal government issued a consultation in December 2021.

While both the Liberal government and the current Labor government have now consulted on the pathway, there’s been no meaningful movement on the new entrant front.

The most recent consultation gave three proposals for new entrants:

• Streamline core knowledge areas from the current 11 to a proposed five.
• Allow education providers to self-declare that the degree they are offering teaches the core knowledge areas.
• Streamline the professional year by introducing more flexibility in how candidates are able to complete it, including the point at which they have to pass the exam.

However, a third consultation is now in the works.

It is unclear how similar the upcoming consultation’s recommendations will be to those in the August paper.

According to Mr Anderson, considering the two rounds of consultations already undertaken, the focus should now lie on how the industry can design something that still maintains “a core knowledge” of financial advice.

“We should also be conscious that financial advice, as a term, is used quite broadly. There are people who specialise in risk advice, data, stockbrokers as well. So it needs to be flexible enough to cover the different areas of specialisation that exist,” Mr Anderson explains.

“But it needs to be more flexible to allow more people to come into advice, not necessarily immediately when they start university.

“Maybe there’s a mechanism for them to have done a program that includes most of the core, but then there’s the opportunity for them to do bridging subjects at a later point to get into advice.

“We do want more flexibility. We want it to be possible for people to come through a range of different pathways, rather than the fairly inflexible regime that we have at the moment.

“The current regime means that you basically have to have selected your program as a financial planning program before you start your degree. It doesn’t offer flexibility to people who have already gone through a year of uni already or that are into their second year and say, ‘Well, I really want to become a financial adviser. How do I do that?’”

Mr Knight agrees that the requirements remain rigid, creating challenges in establishing pathways for those interested in pursuing a role in advice.

“From an education perspective, the requirements are very prescriptive and that really narrows your funnel,” he says.

“Now the trouble is, when students come out of university … there’s a big demand, it’s costly, the professional year requirements are demanding and it doesn’t have that sort of structured pathway.

“It’s a big gap and it’s proving difficult and costly for the industry to do, so we’re just not getting the people into the careers that we want.

“We need to start training differently and we need to start thinking differently.”

It appears that Minister Jones’ prediction for the industry will therefore require a new approach to how financial advice is both marketed to Australians and how it is structured as a career pathway.

Indeed, striving to nearly double the size of a profession might also require a pinch of innovation.

As such, Mr Knight says the journey to 30,000 will be a stretch unless the current education framework is disrupted.

“We need to widen the funnel and make advice more attractive, and have it start off as more generic to then specialise later.

“If we do that, when people start thinking about their careers or when they’re in uni doing a more generic degree, if they start to think ‘I might go this way’, then they can plan around what they really want to do,” Mr Knight suggests.

“We need all of the industry for this, and educators are going to be a critical part, but we have all got to start working on how we skill graduates into planners much more quickly. How do we all pull together?

“It’s the associations like the FAAA, its adviser groups, that can start to work together.”

An ambitious feat

Earlier this year, Kaplan Professional reported a surge in Study Period 1 enrollments, marking the highest figures since late 2021.

Notably, new entrants enrolled in strong numbers.

According to the educational institution, the upward trend is an indicator that, regardless of current red tape, Australians are “simply getting on with” their education requirements.

“As the year has gone on, we’ve been surprised at the numbers,” Mr Knight comments.

“We’re getting good, strong new advisers, with those being new entrants and career changers.

“We’re also getting an increasing number of postgraduates who are getting picked up with a degree in economics, for example, and are then coming on and doing a grad dip to get their technical skills. So those numbers are holding up the new entrant numbers.

“Over the last couple of years, since the introduction of the new standards, there are literally thousands of advisers who finished qualifications and have gone on and gotten degrees.

“We now have a core that is very educated,” Mr Knight adds.

As the government explores avenues that acknowledge more flexible pathways to meet education and training standards, it is hopeful to see that there are those already on their way to entering the industry in the meantime.

Nonetheless, achieving an adviser pool of 30,000 remains an ambitious feat. Minister Jones acknowledged that a viable path forward must be oriented towards the long-term, implying that we may not see any significant jumps within the next few years.

But for Mr Anderson, a pragmatic approach to increasing adviser numbers should be a shared passion across the entire industry.

“I think it can make a difference. It can make a material difference. We have got to motivate people to want to become financial advisers,” Mr Anderson notes.

“But alongside that … we still need to maintain high education standards, but we need to remove some of the unnecessary complexity that comes to make it more flexible for people who are still going through a university program to end up being financial advisers.

“I’m obviously aware of what the minister said, the timeframe is probably going to be a challenge. I think rebuilding our numbers will take a little bit longer.

“That’s only to emphasise the fact that we need to get started as soon as possible.

“This [is] to say that I think that everyone across this broader financial services industry has a stake in this. I think that we’re obviously strong supporters and are making sure we have more financial advisers in Australia but, equally, it’s critical to all stakeholders.

“We need to do everything that we can, because in the absence of that for a significant period of time, many Australians are going to miss out on the substantial value that comes from accepting financial advice. So, this should be a priority for everyone,” he concludes.