With COVID came many financial challenges for Australians, and unfortunately, accessing professional advisory services grew even more difficult.
Over the last few years, the number of financial advisers in the workforce has continued to trend downward in Australia, with statistics showing more than 2000 advisers have exited the industry this year alone.
Before the Banking Royal Commission in 2019, there were nearly 28,000 advisers across Australia.
Now, just in the first week of December 2021, that number is down to 18,574.
Several factors are influencing this trend – one of the biggest being a growing burden on advisers to meet strengthening education and compliance obligations on top of providing extensive financial advice.
Gone are the days of simply completing a four-month Diploma of Financial Planning to become a fully licenced adviser. Practitioners are expected to enter financial advisory with graduate qualifications in finance, economics, or similar degrees, and a one-year full-time equivalent postgraduate Diploma in Financial Planning.
Many advisory firm owners and managers – including myself – also prefer new advisers to work under supervision before being able to provide advice independently.
Gaining experience under the wing of a veteran adviser is good for both the adviser and clients. Professionals learn to better maintain and develop their skillsets while adding to clients’ confidence in the services we provide.
New advisers need to be across the complex web of regulatory requirements, be ethically mindful, keep up with contemporary trends, and ensure legal and confidential compliances are being met. It’s a tough job, but with the right guidance, new advisers will thrive.
The Financial Adviser Standards and Ethics Authority now requires all new entrants and existing advisers to sit the Financial Adviser Examination (FASEA) exam. New entrants have been required to pass the exam since January 2019 while existing advisers have until January 2022 to complete it.
Pleasingly, all authorised representatives in my team are FAESA qualified and go through a rigorous training and upskilling program, giving our clients confidence our advisers are well educated.
The almost four-hour exam tests the practical application of advisers’ knowledge across:
- Financial advice regulatory and legal requirements (including Corporations Act, Privacy and Tax Agents Services Act).
- Financial advice construction – suitability of advice aligned to different consumer groups, incorporating consumer behaviour and decision making.
- Applied ethical and professional reasoning and communication – incorporating FASEA Code of Ethics and Code Monitoring Bodies.
Behind the scenes, changes to rules in July this year mean clients are now required to re-engage advisers on an annual basis in writing, something I have done for many years. Without this the adviser is not authorised to receive annual fees from the client’s investment accounts.
This opt-in requirement makes it increasingly difficult for some advisers to justify keeping their full portfolio of clients on, particularly when coupled with rules requiring them to assess the “best interests” of clients and ongoing service promises. Essentially, it is incumbent on the adviser to document and deliver service and therefore justify value in the eyes of the client in order to continue the relationship and receive payment.
However, I wholeheartedly agree with applying the “best interests” requirement. Those who don’t, risk engaging in unethical professional conduct and their clients may be put in a precarious position – or worse have their investment desires scuttled, if the “best interests” requirement isn’t adhered to.
Many advisory firms have minimum client fees in place to ensure they are recovering significant costs of compliance and administration. It is sometimes hard to justify value to some people, who may not see an initial or ongoing investment in financial advice as a priority.
Not all advisers can keep up with growing compliance and education costs – and with new fee requirements, we might see further exits from the industry.
But as the world works, a reduced supply means demand grows, and currently in Australia, financial advisers are in hot demand.
Luckily, I have more than 20 years’ experience in private wealth management and my team are suitably qualified and established to continue surviving the ebbs and flows of the industry.
If you’d like your finances to be in a better place, our professional and highly accredited team are happy to sit down for a chat and provide an investment strategy to suit your needs – so don’t hesitate, give me a call.