2018 has been a big year so far for Australia’s financial planners – for reasons both good and bad. The Banking Royal Commission is an unavoidable topic when discussing the current landscape of the industry but it is just a component of the sweeping changes ahead of us over the next few years. The pressing question is, what are these changes, what is bringing them to bare and how will they alter our industry?
Changing education standards
One of the great drivers of reform will be the industry increasing its level of professionalism, most notably via the proposed changes to education standards by the Financial Adviser Standards and Ethics Authority (FASEA).
While deliberations are ongoing and we are yet to hear of a final decision on what will be implemented, there’s no doubt we are due for change and that will bring with it some upheaval. Some in the industry have stated they believe up to 50 per cent of our current planners will move on due to these changes. While this may be a high mark for disruption, we are sure to see a material number of adviser exits in the coming three to five years.
That current lack of clarity leaves us in somewhat of a holding pattern – awaiting a final guideline on exactly which revised standards and prerequisites will be implemented and, more importantly, how they will be applied – this limits how much we as an industry can prepare for this wave.
Despite this, there are some things we know for sure. Change is coming, and all indications suggest that it is likely to shrink our talent pool. Moreover, an increase in education standards, while beneficial for our customers and our industry, will inevitably lead to increased education costs. When coupled with rising costs of compliance, some mid-tier firms are going to have to make a decision around increasing their fees on advice.
A growing need for financial planning
Consider this industry change in the context of a large shift in the makeup of our labour force and that change is set to be amplified. Australia is fast approaching a major shift in workforce demographics – we’re due to see the 5.3 million baby boomers currently actively participating in the workforce retire over the next 15 years. That’s a significant amount of our economy transitioning into the next phase of their lives, with many needing succinct and effective financial advice for the changed financial circumstances they face in retirement.
When you then consider that we’re facing an inevitable decline in the number of financial planners able to meet the demand for those services, sadly, many of these retirees are likely go without the financial advice they may desperately need.
A bright future for the industry
Despite these challenges, it is an exciting time for us as an industry – technology is set to fundamentally change almost every aspect of how we work, from the insights on which we can base our decisions, right through to how we communicate with our clients.
Technology will play a role in further building client oversight, sharing real-time information on how any investment is performing while allowing us as an industry to convey major shifts within seconds to our clients.
Taking a step back – financial planners are building an enhanced platform, for a growing market, set to need a more comprehensive and dedicated service into the future. When these factors are considered, we’re set for an exciting future.
Within our industry exists some very talented minds, working to provide a more efficient and comprehensive service for their clients. While the Royal Commission has shone a light on a sect of financial planning that must improve, the clear majority will remain diligent supporters of their clients’ financial goals.
2018 has brought with it major changes for us all, while laying the groundwork for further transformation of the financial planning industry. But rest assured, this transformation will only support our growth as an industry, helping us and our clients secure a strong financial future.
Matt Swieconek is managing partner, financial planning at Findex.