Such is the rate at which advisers are disappearing, Houdini himself would doff his hat. Last year, 2,837 financial advisers exited the industry, a 12 per cent drop in the workforce. By 2023, it’s predicted there’ll be only 13,000 still operating, a 53 per cent decline on the industry’s peak in 2018.
So, what has happened to cause such an exodus? And, more importantly, what does it mean for you?
Why are advisers leaving the industry?
In April 2017, the Financial Adviser Standards and Ethics Authority (FASEA) was established to set the education, training and ethical standards of licensed financial advisers in Australia. The Code of Ethics commenced on 1 January 2020, with all financial advisers required to adhere to the Code from that day onwards.
As a result of this, the outcomes of the Banking Royal Commission and the fee-for-no-service scandal, many bank-owned licensees are being wound up, with their advisers moving on – to a new licensee or retirement.
Existing advisers have until 1 January 2022 to pass the Financial Adviser Exam and until 1 January 2026 to reach an education standard equivalent to an approved degree. Many have decided not to study, and so are either retiring now or planning to work up until the end of 2025.
Client orphaning, which refers to investments without an adviser attached, amounted to $79 billion over the second quarter of 2020 – higher than in any of the previous five quarters. In total, around $127 billion in client funds were in transition over the first half of last year, according to Adviser Ratings’ Musical Chairs Report.
When an adviser decides to retire, they either arrange to sell their business to another financial planning firm prior to retiring or transition clients to a new adviser. Sometimes they move licensee as part of this decision before notifying you.
How easy is it to change adviser?
Money, in the modern world, is a complex beast. There are tough decisions that need to be made around superannuation, insurance, estate planning and – of course – picking the right investments at the right time.
When it comes down to it, we put a lot of trust in our advisers. Sometimes, all we can do is have faith that they are as knowledgeable as they claim to be and have our interests at heart. Finding one you trust can be hard enough, so what happens when you lose contact with them or they call to say they’re hanging up the boots?
If this hasn’t happened to you yet, it may well in the near future, given the state of flux gripping our industry right now – particularly if you are currently serviced by a bank adviser.
Here are some questions to consider:
- Will your current adviser still be advising in 2026 or are they planning to retire?
- Do you value and trust your current adviser?
- How long since you’ve heard from your current adviser?
Your answers to these questions will determine whether it’s appropriate for you to make the switch. If it is, Pride Advice can guarantee that we are committed to meeting the new standards and fully intend on being around in 2026 and beyond. Besides, we’re too young to retire!
In terms of trust, that’s something that can only be determined by you after a face-to-face meeting. An initial discussion won’t cost you anything. We’ll chat about your current investments and strategy and whether we’d advise a similar course – and our reasons why.
So, if you haven’t heard from your adviser in a while, don’t panic – view it as an opportunity. Getting a pair of fresh eyes on your financial situation is never a bad thing.