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Adviser numbers could drop 50%: Moore

A prediction that adviser numbers could halve over the coming years has been disputed by professional associations.

Thursday, February 8th 2018, 6:00AM 4 Comments

by Susan Edmunds

Marketing expert Mike Moore, who helps advisers to buy and sell books of business, said about half the advice industry would decide they could not be bothered with the new rules being introduced by the Financial Services Legislation Amendment Bill.

In the short-term they might go to work under the care of another provider with a licence, he said, but that would not be a long-term solution.

“It’s a bigger issue than we are giving it credit for.”

He said all the focus had been on the benefits to clients that would come out of a higher-skilled workforce.

But he said half of the existing clients in the market wouldn’t be able to find an adviser to take them on at all, as the liability made it not worthwhile.

But Fred Dodds, chief executive of the IFA, said that was an “uneducated guess”. The Financial Markets Authority had indicated there would be ways for small advice businesses to remain compliant.

Advisers might be worried at the prospect of having to navigate new licensing, competence and disclosure requirements, he said.

But he said it would make economic sense for advisers to stick in the industry earning money rather than to try to sell their books of business.

“If you’ve got $100,000 in revenue and you think it’s all to tough and decide to sell for $400,000 then put that money int he bank you might get $12,000 a year. Compare that to picking up a textbook and doing the study to keep that $100,000. Let’s not give up on advisers who might not be educated but are perfectly competent.”

Rod Severn, chief executive of the PAA, said there would be some attrition, but not 50%.

“Part of the problem is some of the untruths that are being spread around to try and get some of the smaller operators to join aggregation groups who will act as a FAP in the future. Whilst there is nothing wrong with the idea I think some of the information being touted is incorrect and designed to make the lone adviser think he/she cannot afford to remain alone. Whilst we have had John Botica and Derek Grantham ensuring members that is not the case, time will tell who wins the verbal contest.”

Tags: Financial Services Legislation Amendment Bill Fred Dodds Mike Moore Rod Severn

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Comments from our readers

On 8 February 2018 at 7:26 am Pragmatic said:
Whilst I don't dispute that the existing AFA network is an ageing workforce, I wonder whether Mike Moore's predictions consider:

1. Larger financial institutions re-calibrating their involvement in financial services, thereby releasing a younger qualified (compliant) group of participants to the advice space
2. A number of existing AFAs deciding that the new regulations aren't that onerous after all (ie: once the facts are known), and choosing to remain compliant so that they can continue to serve their clients

I tend to agree with Fred & Rod that these forecasts fall under the heading of 'speculation'...
On 8 February 2018 at 11:14 am retired blogger said:

Can we have some numbers from the FMA

we know there are 1800 AFA's

How many are over 60 ?

How many are over 65 ?

Making these numbers public would remove speculation

If the MBIE and FMA and the govt really want more mums and dads to be able to get advice, these numbers and ages are important

you cannot plan ahead without the stats (or so the census TV ads are telling us)

Put another way, if AFA numbers might fall sharply due to age and more regulation, perhaps officialdom might need to have a re-think
On 19 February 2018 at 3:39 pm Fins22 said:
Personally, I think the Banks, the Direct Channel Insurers, Corporate Brokers and the Government are trying to do away with Independent Advisers by making it to difficult for them.
On 20 February 2018 at 6:43 am Pragmatic said:
@Fins22: take a look at banking trends globally, and the uniqueness of Australasian banks having full ownership of the wealth management value chain. Once you've appraised this, look at the current Royal Commission that is unfolding in Australia, and finally look at the impact that Wealth Management has on the balance sheet of banks (specifically: reducing their ability to gear that part of their book). Factor in the negative PR that is associated with bank's involvement with wealth management, and the overall minuscule contribution that it makes to their bottom line.

In short: banks are currently reviewing their involvement in wealth management - not for the purposes of providing the best deal for the customer, nor to cut out the little guy - moreso to preserve and enhance their own interests. Ironically, the industry beneficiaries will be those advisers who are non-aligned, or (whilst aligned) put the client's interests firsts. Just saying.... there's more happening behind the scenes than we are privy too....

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