Once peaking at 26,500 registered financial advisers in 2019, the sector has experienced a dramatic collapse, raising questions about its long-term sustainability.
“Projections suggest that without substantial policy intervention, the industry may not recover to its former numbers,” said Aman Ramrakha, executive director of research at Rainmaker Information.
The peak period for adviser registrations between 2015 and 2019 ended abruptly, leaving the sector in a state of uncertainty.
This surge in registrations was largely driven by the Australian Securities and Investments Commission requirement that all financial advisers be registered by January 1, 2019, to benefit from a long transition period to meet new education and regulatory standards.
However, when the reality of these stringent requirements set in, many advisers began to exit the industry.
“The exodus was compounded by the banking sector’s exit from financial planning, ”said Ramrakha.
"Had the 2019-2022 trend continued, Australia would have run out of advisers by 2027."
From2019 to 2022, the financial adviser sector experienced a staggering 38% drop, losing nearly 10,000 registered professionals in just three years.
While the rate of decline has slowed, adviser numbers continue to fall, albeit at a much-reduced pace.
Rainmaker has postulated four scenarios for the future of Australia's financial adviser sector, in the latest Financial Adviser Report.
Rainmaker envisages a somewhat optimistic scenario (scenario 2 – see graph below) that suggests that the number of registered financial advisers will follow the long-run trend, but ignore the 2015-2019-2022 boom then bust.
This scenario results in the long-term forward projection that Australia in 20 years will still have about 11,000 financial advisers; still a large decrease from2024 numbers.
The most optimistic projections suggest that by 2044, Australia could still have over 12,000 financial advisers.
However, a doomsday scenario indicates that if adviser numbers continue to fall by 5% per annum, the industry could be left with only 5,500 advisers by 2044.
"Irrespective of the scenario, they all illustrate the gravity of the situation. While they may seem arbitrary, they reinforce that the current trend is unlikely to reverse without intervention," Ramrakha added.
Despite these challenges, core markets for financial advisers, such as retail superannuation and investment platforms, continue to grow.
However, disintermediation and divestment by wealth managers remain as key themes in the financial advice landscape.
“The shrinking number of advisers has had a notable impact on the volume of funds under advice, although certain products like managed accounts and exchange-traded products (ETPs) are experiencing growth,” said Ramrakha.
"In this disrupted wealth management market, the remaining financial advisers are becoming more strategically important. Fund managers need effective advisers now more than ever, especially given the growing number of consumers who require financial advice but are not receiving it.”
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Total risk market inflows were down a marginal 0.6% over the year to June 2024, decreasing from $18.3 billion to $18.2 billion.
Dual access ETPs, which are transacted both on stock exchanges and off-market through funds managers, can cost four times as much as the rest of the Australian ETP market.
