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.

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“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.