Almost 3,000 advice practices have closed their doors in the past five years, but there is a “renewed purpose and direction” for those who remain, says Adviser Ratings.
The research firm has revealed that 2,828 advice practices, or 31 per cent of the market, closed down over the last five years during the COVID-19 pandemic.
As a result, the number of advice firms has shrunk from 8,995 in 2018 to 6,167 in 2023.
The number of sole advice practitioners also declined during the five-year period, decreasing from 5,781 to 3,733.
“While many sectors flourished or were bolstered by government interventions, financial advice practices paradoxically grappled with a legislatively-imposed recession, highlighting the complex interplay of industry-specific challenges amidst nationwide economic resilience,” Adviser Ratings wrote.
In contrast, 19 different industries surveyed by the Australian Bureau of Statistics have seen growth in their business over the same period, with the largest growth being seen in administrative and support services and healthcare.
Jobs and Skills Australia (JSA) recently added financial investment advisers to the list of 66 occupations experiencing skill shortages, when they had not been in 2022, reflecting the downturn in numbers.
But for those who remain, Adviser Ratings said there is a “renewed purpose and direction” for the sector thanks to factors such as generational wealth transfer, focus on retirement income and potential recessions.
Research also continues to emphasise the value of advice as a $3.5 trillion intergenerational wealth transfer lies on the horizon alongside underlying economic downturns.
“The complexities of modern financial markets against a backdrop of geopolitical uncertainty coupled with a potential real recession across the broader economy, mean that individuals and families, now more than ever, need guidance in navigating their financial futures,” the research house continued.
Adviser Ratings shared the views of several advisers who all have a positive outlook on the changing tides for advice.
Andrew White of Tribeca Financial in Hawthorn, Victoria, explained that advisers have never been more educated or qualified as they are today due to industry reforms, which is significantly beneficial for Australians seeking advice.
“One of the results of the industry reforms is that current financial advisers have never been better educated or qualified. I can personally attest to this having recently completed these qualifications. This has significant benefits for those seeking advice,” he said.
Jayden Post of Cruz in Melbourne added the intergenerational wealth transfer is also offering more opportunities for advisers to source new clients.
“We find that the earlier you can get the younger generation involved, the better outcome for the family over the long term. Building a plan for the families with wealth, based around the values and goals of the broader family and not just the matriarch and patriarch, can provide not only a great platform for education for the children involved, but also due to the endowment effect, have a likelihood that the strategy continues once the wealth transfers occurs,” he remarked.
