Advisers feel they are under ‘constant threat’
Financial advisers today are having to work harder and faster to futureproof their businesses, according to Allan Gray.
The fund manager found there were three common themes across its Australian, UK, and South African markets which were ongoing regulatory developments, technology advancements, fee scrutiny and questions around the benefit of advice.
Allan Gray Australia’s chief operating officer, JD de Lange, said it was “frightening” that one-third of advisers in a survey said that they would leave the industry within the next year or two.
He said the increasing compliance burden, a loss of revenue in the form of commissions or rebates, a drop in practice valuations, and the stress of meeting new educational requirements contributed to the situation in Australia.
“We last saw adviser sentiment this low in 2010 following the global financial crash and it makes it very hard to grow the industry and encourage new entrants to join because advisers feel under constant threat,” he said.
“There are about 10% fewer advice clients than five years ago, which has created fee pressure for advisers. As a result, advice has become extremely expensive even by Australian terms.
“In an asset-based-fee world, the discussions were more investment focused and price was a function of assets under management. Today an advice plan needs a structuring fee and an ongoing management fee both based on the value proposition offered by the adviser.
“A new proposal costs $3,600 or more to deliver, while the annual fee could easily be more than double that. This all means the adviser needs to have a very clear and quantifiable value proposition.”
Recommended for you
Sequoia Financial Group has declined by five financial advisers in the past week, four of whom have opened up a new AFSL, according to Wealth Data.
Insignia Financial chief executive Scott Hartley has detailed whether the firm will be selecting an exclusive bidder for the second phase of due diligence as it awaits revised bids from three private equity players.
Insignia Financial has reported a statutory net loss after tax of $17 million in its first half results, although the firm has noted cost optimisation means this is an improvement from a $50 million loss last year.
With alternative funds being described as “impossible” for fund managers to target towards advisers without the support of BDMs for education, Money Management explores the evolving nature of the distribution role.
