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Expect dramatic fall in FAP numbers: Greenslade

New Zealand could expect to get to as few as 400 financial advice providers by 2030, one training and compliance provider says.

Wednesday, November 13th 2019, 5:54AM 3 Comments

Transitional licensing opens later this month for the new financial advice regime.

David Greenslade, founder of Strategi, said by June next year, when the new rules take effect, more than 2,000 transitional licenses will likely have been issued.

Two years later, 1,300 of those would go on to become full licensees.

By 2025, that would have dwindled to 850 due to economies of scale and consolidation, he said.

Five years later there would be just 400 left after a wave of mergers, acquisitions and rollups.

"This is similar to other professions such as doctors, dentists, vets, etc where the industry transitions from small, single-advisory businesses to medical centre-type arrangements.”

He said it would signal the dawning of commercial reality for adviser businesses.

“Some advisers, because of their age and stage, will exit the industry before the end of the transition period. The majority that apply will carry on but then we’ll see the reality of economies of scale like any other industry.”

He said it would not be a problem for the industry, however.

Technology would be able to counteract any perceived lack of ability to service clients, he said.

As businesses became bigger they could hire professional managers, which would allow advisers to focus on advice.

“Good advisers can spend more time with clients and get good outcomes.”

Tags: FAP Financial Services Legislation Amendment Bill FSLAA licensing Strategi

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Comments from our readers

On 13 November 2019 at 10:12 am All hat no cattle said:
Healine: This could be bad!
Body text:: Actually this is probably OK. Normal process after this sort of thing.
Oh, and don't forget to buy lots of training and help with this stuff.

FWIW: Boomers are now 55 - 75 years old. The average age of advisers is well over 55, probably more like 60+.
Can't wait to find out for sure - hopefully the licencing process will capture some stats.

But if I'm right, then many who leave the industry over the next 5 years would have done so anyway. Perhaps regulatory change accelerates it, might be blamed for it. Might also be health, frustration, exhaustion, or simply cashing in the chips.

But it was going to happen anyway.
For a bunch of old hacks who have spent a career advising clients to prepare for the unexpected, for exit planning, for risk assessment, this industry sometimes leaves me wondering if some advisers need to go and speak with an adviser.
On 13 November 2019 at 12:00 pm John Milner said:
Along the lines of Warren Buffets quote; the only value of forecasters is to make fortune tellers look good.
Although saying that, David is usually right about a lot of things. They just take a while to feed through into reality.
Will technology fill the space of mere human advisers? Computer says no.
On 13 November 2019 at 5:40 pm Pragmatic said:
My crystal ball differs from the above.

Factors contributing to an increase in FAP numbers include the fragmentation of the industry (ie: the exodus of the larger financial institutions from wealth management), the regulatory desire for all advice dispensers to operate under the same acronym (eg: enticing peripheral advisers to convert to fully fledged FAPs), and the reluctance of the existing AFAs to evacuate the industry.

It is this latter point, that I suspect will make it difficult to forecast the rise/fall in FAPs, as many existing advisers operate relatively sound cottage industry businesses, with the intention of enjoying the benefits of these for the foreseeable future (despite the ongoing grumbles around compliance, scale, regulations etc).

Circling back to the fragmentation of the industry: the variety of industry egos, philosophies, approaches, personalities etc will make it difficult for individuals to operate in a collegiate framework for a lengthy period of time - especially when their own personal ideals are challenged... despite best intentions & regulatory scaremongering.

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