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Financial advisers told to expect people to leave the industry

Financial advisers have again been warned of a wave of retirements likely to occur in the industry over the next year.

Monday, February 28th 2022, 9:56AM 5 Comments

by Eric Frykberg

Mint Asset management head of sales and marketing, David Boyle, says there would be some advisers who did not want to move into a tough new regulatory environment. Many were in the later years of their working life and would think now was a good time to move on or sell their client book or just do something else.

It was not that the regulatory regime was too onerous, it was that some advisers, such as small, one-man-bands, would find it hard to comply with new requirements for a full Financial Advice Provider, or FAP, licence.

"They may not have the qualifications – the Level Five plus – and the cost in terms of time and money is for some, probably just too much.”

Boyle's warnings came in the wake of a report in mid February that one in five brokers had sought or were considering seeking medical help because of stress.

In addition, one in four were thinking of leaving the industry for the same reason.

Other brokers have complained that the Credit Contracts and Consumer Finance Act (CCCFA) have loaded them with expensive and time consuming paperwork for no real gain.
But Boyle thought getting the full FAP licence would be the main challenge.

The Financial Markets Authority (FMA) had been bringing in this since May 2021 and the process was due to finish later this year.

Some brokers would decide the game was not worth the candle.

So, would new talent come in to replace the old?

“I think that is a problem we have been struggling with as an industry for quite a while, and that is attracting new people as a vocation, something they would think about doing as a career.

“But I am hoping there will be new people coming after the change, possibly from the insurance or mortgage background, who will think, 'here is an opportunity'.

“This will happen over the next five years after the regulations have settled in.”

In another part of his webinar, Boyle warned of a constricting environment for giving financial advice.

“My fear is that you have an environment where everyone gives the same advice for everyone and that shouldn't be the case, because everyone's circumstances are different.

“I used the term, ‘homogenised advice' or having a ‘cookie cutter approach’, where 'this is how you do it for everyone'.

“That is certainly not the intent of the legislation, but people could think, oh well, I will just come up with five or six balanced portfolios of risk.

“That could work for a lot of people, but I think the real face to face advice needs to be personalised and take into account people's particular circumstances.”

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Comments from our readers

On 28 February 2022 at 10:56 am Barry Read said:
At RIVAL we are having these types of discussions with Advisers and Clients a lot more at the moment. A lot of Baby Boomers are looking to sell or get value from their businesses or other assets and the pandemic has been a factor in speeding up that thinking.

We are working with a lot of advisers who are thinking of moving on because of Regulation and Licensing deadlines in Sept. The good thing though is we can agree ways where they can stay involved in the business if they want too. Rather than just sell straight away and retire. Transferring knowledge and customer relationships is important.

One of the key ways we help one person FAPS is to combine Business Continuity Plans with Business Succession Agreements.
On 28 February 2022 at 11:35 am Elephant1 said:
I totally agree with Barry, there are a lot of advisers, at the tail end of their careers who came out of the tied agency model. Now their careers are coming to an end. And we have to find replacements.
On 1 March 2022 at 7:50 am Pragmatic said:
Whilst there is no doubt that advisers will leave the industry over the next 5 years (rf: "Unlocking the potential of New Zealand’s financial front line" FSC), I'd offer the following insights:

1. Despite regulatory compliance, life remains fairly buoyant for the majority of financial advisers - new clients, market volatility, time poor consumers. The ones who are really struggling appear to be the ones who are playing 'catch up' with the regulator's demands.

2. Legacy incomes mean that many advisers enjoy the on-going benefits of relatively low cost operations. It is rare to find other industries that offers this unique environment for workers.

3. A highly fragmented industry (geographically & philosophically) makes it difficult for formal dealer groups to establish much more than 'buyers' cooperatives.

4. The majority of financial advisers have built deep, relationship-centric entities that are centered around them as individuals. Unfortunately their final cheque will be the 'book' rather than the 'business' - as many of these entities are reliant upon them turning up to work. I'd expect 'book' values to continue to fall over the next few years - in line with a narrow group of potential buyers, and an ageing consumer base.

5. Whilst the dispensing of financial advice is a bit 'on the nose for new entrants', it currently provides the perfect storm: relatively low workforce numbers, ageing workforce, growing consumer demand, relatively low barriers to entry (albeit higher than they once were), departure of institutional participants, growing levels of financial complexity & confusion, relative inefficiencies across all aspects of the value-chain.

All industry's go through a life-cycle; my suggestion is that the NZ financial services industry is in an embryonic state when compared to more mature financial services jurisdictions.
On 1 March 2022 at 8:14 am Dirty Harry said:
I personally am more stay than go.

A buyer, not a seller.

When an adviser wants to sell up, where do they go? Who do they talk to? Likewise the buyers - who is the to go-to for linking the two?
On 7 March 2022 at 8:05 am mitsilad said:
I will have done over 49 years by the time the new regime starts. I had hoped to do 50 but I have decided that is long enough.

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