5 ways advice changed in 2024
Adviser Ratings shares five ways that financial advice changed in 2024 with an optimistic outlook for 2025, thanks to the Delivering Better Financial Outcomes (DBFO) legislation.
With 2024 coming to a close, the Australian financial advice industry has reached a “pivotal moment of transformation and renewal”, the research house described.
Several trends occurring simultaneously have marked a turning point for the profession and has led to adviser numbers stabilising around the 15,500 mark following years of declines.
In particular, Adviser Ratings identified five key observations that shaped the industry this year:
- Stabilisation of adviser numbers.
- Regulatory reform.
- Rise of super advice firms.
- Artificial intelligence (AI) and technology adoption.
- Professional development.
Stabilisation of adviser numbers
Since falling from its peak of 28,000, the number of financial advisers in Australia has flattened out at around 15,500. Most recently, adviser numbers increased by three last week to 15,507 (as of 12 December).
“This stabilisation not only indicates a more positive outlook for the profession but also suggests a potential growth in adviser numbers as we close out the year,” Adviser Ratings wrote.
Regulatory reform
This year also saw significant announcements made regarding the DBFO reforms, which brought “welcome clarity and a sense of optimism to the profession”.
The bill to implement Tranche 1 of the reforms was passed by Parliament on 4 July and received royal assent on 9 July. This included changes such as streamlining fee documentation into one simplified document and enabling flexibility into how financial services guides are provided.
On 3 December, Financial Services Minister, Stephen Jones, unveiled further details of the DBFO’s second tranche. This includes creating a new class of adviser to provide simple advice, modernising the best interests duty, removing the safe harbour steps, and reforming statements of advice.
Rise of super advice firms
According to Adviser Ratings, arguably the most notable trend of 2024 is the emergence of “super firms” in the advice space. This concept was previously explored by Paul Barrett, chief executive of AZ NGA, who believes an “army of large, corporatised super firms” is the future of financial advice businesses.
The research house continued: “In 2024, it was confirmed that financial advice practices are now considered the most valuable asset in the financial services industry.”
This is evident through AZ NGA’s purchase of 16 AMP practices for $82.2 million compared to Entireti’s purchase of AMP’s licensees for $10.2 million.
Moreover, Australian financial advice businesses are continuing to attract the attention of overseas bidders, as seen with the Oaktree Capital Management and AZ NGA deal alongside Bain Capital and Insignia Financial.
AI and technology adoption
This year has also proved the importance of widespread technological adoption in advice practices. Netwealth previously discovered that the vast majority of advice firms that are fully embracing and adopting new technologies are reporting an annual revenue north of $1 million.
In addition, 45 per cent of practices are currently using or planning to use AI to transform their business operations to gain further efficiencies, Adviser Ratings found.
Professional development
Lastly, the importance of continuous learning and industry engagement emerged as another key theme in 2024, the research house added.
“Leading practices created comprehensive learning environments combining formal education, peer learning, and industry engagement. This, in turn, played a crucial role in lifting standards, improving the alignment of product selection to client strategy, and evolving the services provided by advisers to the needs of their clients.”
It was recently announced that the pass mark for November’s financial advice exam was the highest since ASIC took over its administration in January 2022, sitting at 77 per cent.
Joel Ronchi, who coaches advisers with their exam preparation, said he had noticed candidates were pushing back their exam dates until they felt confident to sit the exam as well as candidates having greater experience.
AUTHOR
Jasmine Siljic
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