Can Australia restock its supply of financial advisers?
Dwindling numbers of Australian advisers is a major concern, but BT Financial chief executive, Matt Rady, says the thriving UK market gives him hope that we can attract new blood to the profession — provided we go about it the right way.
It’s 2023, and you’re a young Australian graduate looking for a career path. What makes you choose financial advice? Or not?
With adviser numbers dropping by 38 per cent between 2019 and 2022, according to Rainmaker, the concern is that not enough people will choose advice as a career unless there’s significant work undertaken to attract them.
So, what can the industry do to help?
The UK’s improving advice industry has one expert believing Australia is more than capable of following a similar path, provided it proves the value of the profession.
“In Australia, one of the challenges advisers say they are facing is attracting talent, especially younger generations, to the advice industry,” Matt Rady, CEO of BT Financial Group told Money Management.
“The UK experience is very interesting and gives us reason to be optimistic. After a lengthy period of contraction and consolidation, there’s good reason to believe that the advice industry can once again grow.”
Continued professionalisation
Figures from the UK financial regulator, the Financial Conduct Authority (FCA), show steady growth in adviser numbers from 32,690 in 2013 to 36,674 in 2021, which equates to nearly 4,000 new advisers. The revenue generated by the sector has almost doubled too, from £2.6 billion ($4.7 billion), £1.5 billion of which was commission-based, to £5.4 billion in 2021, of which just £700 million was derived from commissions.
Like Australia, though, it wasn’t always this way. The Retail Distribution Review, aimed at raising the standard of financial advice, was carried out in 2013, sparked by issues including mis-selling scandals. Some key elements of this reform were raising qualifications and cutting the commissions paid by pension funds and investment companies for selling their products.
The review caused an initial wave of panic and predictions of an exodus; however, while there were some initial exits and consequences for consumers, this was not long-term and ended up as a turning point for the profession.
While this precedent may be cause for optimism, there’s of course work to be done in Australia, and BT’s boss is firmly of the opinion that this starts with demonstrating the value advice provides to society.
“Continuing the professionalisation of advice is key,” said Rady.
“We know those that have an adviser are much more likely to be advocates. As more people gain access to advice, they will appreciate its value. And this should lead to more people pursuing what I think is a noble profession — dedicated to helping people to achieve their goals and have a better financial future.”
The question of education
Another piece of the puzzle is opening up pathways to the profession.
“The proposed relaxation of qualifying degrees for entrants will be positive if enacted, as it will aid in opening up pathways,” Rady said.
“Not only for graduates, but also [for] existing advice support staff who are considering becoming a financial adviser as the next stage in their career.”
Treasury is currently conducting a consultation on proposed legislation around education requirements. One element of this is to open up much-discussed experience pathways to prevent further advisers leaving the profession due to not having the required education.
The legislation would also allow new entrants to apply to the Minister to have their degree recognised and for education providers to confirm that a person has completed the requirements of an approved degree. These amendments would address cases where would-be advisers currently fail to meet the education standards for technical reasons and aim to recognise that there may be different study pathways that meet the education and training standards.
However, attracting new advisers also goes back to articulating to young university entrants the reasons they should pick a financial advice degree.
Alisdair Barr, founder of Striver, an initiative to support students and early career job seekers in financial services, told Money Management earlier this year that a major issue is the lack of demand as young people simply don’t seek to undertake advice-related degrees.
This could be a reason why major institutions such as the University of Sydney, University of Melbourne, University of Adelaide, Australian National University, and Monash University don’t even have specific offerings.
There’s a role here for the industry to step up and raise awareness.
“As a profession, we're not doing enough to promote that [being an adviser] is a great opportunity to give back, to make meaningful contributions to people’s lives, and to generate a really good income and living standards for ourselves,” Barr said at the time.
This is something that BT is focusing on, as well, as Rady said BT is collaborating with Striver by holding recruitment events around the country and matching graduates and representatives from advice practices.
“We’re also trying to do more to showcase the various career pathways in advice and provide mentoring and training to help advisers attract and retain talent,” Rady concluded.
AUTHOR
Alexandra Vanags
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Short answer is NO, we won't be able to "re-stock" Australia with financial planners OR risk specialists. These are two distinct professions. The reason I am so sure is because, after 36 years as a risk specialist I got to know how politicians think. They are interested in nothing that doesn't assure their jobs and/or re-election. They will not stop assaulting our profession with compliance, negative soundbites or over-zealous regulation designed to push advisers OUT and make it easier for their benefactors such as industry super and other special interest groups. We all know that once politicians have a certain 'power' it usually takes an Act Of God to remove it from them. Well, that is the case with our profession. They won't peel back regulation, costs or compliance now. Risk advisers can't practically charge fees and so need much more than a 60/20 commission rate. No new risk advisers will join and/or thrive unless this is enacted AND compliance/red tape decreased. ASIC fees increasing each year WAY above any inflation excuse is but another example. No, risk specialists are mostly extinct and if not certainly will be by 2026 and so goes the story of investment advisers/FPs too. Life companies will then be marketing direct as their only real sales possibility so good luck to them with that. Of course, the client is the great loser at the end of it all.
This is such a load of bull eg I completed a GradDipFinPlan with a distinction average last year and made contact with more than 500 firms Australia-wide to complete my professional year (PY) but wasn't able to secure a position. There was barely even any interest. I've now been forced to give up and return to work as a secondary school teacher (plenty of work in that industry). From that one can only conclude that there is NO DEMAND for financial planners in Australia. Don't fall for all the "skills shortage" and "war for talent" crap like I did - whatever you do, don't waste your time and money studying financial planning.
There are other potential explanations Martin:
a) The risks and costs for experienced financial advisers to mentor PY candidates under the current regulations are too high.
b) As most financial planners will attest, engineers and shoolteachers generally make the worst clients, because they are arrogant know it alls unwilling to accept guidance or direction from others. For the same reason, former engineers and schoolteachers are unlikely to be good trainees in a new career.
A bit harsh on the schoolteacher side... certainly some think that way, but others can see the value of our expertise if it is explained properly, just as other clients do.
personally, I agree that the cost in dollars and time to help somebody through a professional year is too much for no guarantee of benefit during or after that period is a problem...
...that might be considered by politicians sometime long after its too late.
I can feel for you Martin, but I can't even understand why you want to join this industry with the regulatory and cost issues we currently suffer.
I don't think it's lack of demand...but the PY is a BIG load on a practice. I know our principal would only consider it for one of our current staff members, if he was looking to advance. Why risk taking someone on, spending the time to get them through, with the chance they will move on once they have their foot in the door?
There will be a war for talent if and when financial advice becomes lucrative like it was years ago. Until such time, best to stay away from the industry.