Cessation of licensees outpacing new entrants
Almost one-in-two licensees are handing their licence back within five years as the cessation of licensees is outpacing new entrants into the industry.
According to data from Encore Advisory Group, there were 122 new licensees in 2019 with 181 ceased, and 137 new ones in 2020 with 209 ceased.
Tom Reddacliff, Encore Advisory Group chief executive, said there was a surge before and just after the Royal Commission of people getting their own licence and that had now steadied off.
“That might surprise people – that there have been more licences handed back than has been created in recent times,” Reddacliff said.
“A lot of people are handing back licences within five years… You typically get a licence, you go through a few professional indemnity (PI) renewals and then close to 50% are handing them back within that time.
“Having your own licence is now is something you have to take very seriously and have the right infrastructure and setup around you – the people that are really committed to that are starting to settle into that.”
Reddacliff said the PI market was not going to get any easier and that advisers already had varying experiences with PI renewals.
With the evolution of grandfathering and other changes, it had become “more obvious” that active advice would be the only viable business model.
“All of the trends have been moving to the fact that if you don’t have an active valuable relationship, then that form of revenue is dead in the water,” Reddacliff said.
The proportion of the market over the last two years had changed due to the exodus of the big banks and vertically-integrated players.
“The two areas that have grown the most are privately-owned licenses of 100 or more advisers and then there’s continuous growth in people getting their own licence,” Reddacliff said.
“If you’re still around in 2023 and you’re going well… my hypothesis is that the demand for advice will go up and the supply of advisers will go down.
“Costs are going up, but we have every reason to be optimistic we can get through this period as there are some green pastures ahead.”
AUTHOR
Chris Dastoor
Recommended for you
A relevant provider has received a written direction from the Financial Services and Credit Panel after a superannuation rollover resulted in tax bill of over $200,000 for a client.
Estimates for the calendar year 2024 put the advice industry on track for a loss in adviser numbers as exits offset gains from new entrants.
Adviser Ratings shares five ways that financial advice changed in 2024 with an optimistic outlook for 2025, thanks to the Delivering Better Financial Outcomes legislation.
National advice firm Invest Blue has announced several acquisitions, including the purchase of an estate planning and wealth protection business Lambert Group.
