A perfect storm

26 July 2019

“This stands out as the toughest time … The GFC was a tough time, but that was dealing with clients who were impacted. Now it’s the advisers being impacted.”

This observation by the Association of Financial Advisers’ (AFA’s) general manager, policy and professionalism, Phil Anderson, may sound dramatic but, given the current low levels of positive sentiment held by advisers about the industry, it holds true.

Advisers have faced a “perfect storm”, according to both the AFA and the Financial Planning Association (FPA), of factors contributing to plummeting optimism, as the Banking Royal Commission, the Financial Adviser Standards and Ethics Authority’s (FASEA’s) reforms, the banks exiting wealth, and the general stresses of financial services in general have combined.

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Wealth Insights’ Adviser Sentiment Index for 2018 backed this up; in their role as a financial planner, less than half of surveyed advisers believe times are good or very good, 40 per cent believe they’re average, and 19 per cent think they’re bad or very bad.

For many advisers, too, this has turned into something more concerning than just low sentiment. The FPA’s chief executive, Dante De Gori, says, anecdotally, he has heard of increased mental health concerns amongst its members, and Anderson has noticed the same.

For advisers, sometimes professional help is needed to make sure that the current flurry of change faced by the financial planning industry doesn’t lead to even lower sentiment and mental health.


The main culprit for poor adviser sentiment is, interestingly considering the current fuss around FASEA, last year’s Banking Royal Commission.

According to Investment Trends’ 2018 Planner Business Model Report, which was based on surveys of around 900 advisers, 99 per cent of advisers felt they’d experienced some negative impact from the publicity surrounding the Commission. This included the cost of advice, trust levels in advisers, the number of planners in the industry overall, and the propensity for consumers to turn to planners for advice.

Anderson says that the Commission changed perceptions of advisers too, contributing to the strain many were feeling: “Clients used to trust advisers and now [many] don’t … they’re looking at them differently since the Royal Commission”.

Amongst the FPA’s membership base, stress, concern and anxiety amongst planners increased over the last 12 months, especially at the start of this year and end of last. De Gori believes that this timing was triggered by the bad publicity surrounding the Royal Commission and then its final report.

Then there’s practical changes to advisers’ bottom lines stemming from the Commission also contributing to declining sentiment. The biggest is the loss of grandfathering; while this won’t impact all advisers, the rapid loss of that revenue stream is proving crippling to the sentiment (and possibly businesses) of some.

Indeed, the AFA flagged this consequence of the change with the Government in a submission to the Federal Treasury on grandfathering this year. On the push to rapidly phase out the commission structure, it wrote:

“We are deeply concerned that there are unintended consequences playing out right now that impact the financial integrity of financial advice practices and in turn the emotional health and wellbeing of honest hard-working financial advisers.”

The group warned that it wouldn’t just be older advisers impacted either, going against a perception that it’s more senior members of the profession clinging to an outdated payment structure who are most impacted.

Rather, the AFA said that the emotional wellbeing consequences could extend to “those younger advisers who have recently acquired businesses with debt, based on the valuation of recurring revenue, including grandfathered commissions”.

A further cost to business following the Royal Commission is increasing professional indemnity insurance, as the sector seems riskier to underwrite. With the Government recently telling the Australian Financial Complaints Authority (AFCA) to look at complaints back to 2008, too, the willingness of insurers to engage with the market for the prices it used to, looks set to continue.

“All of these things are combining to make people look at the value of their business differently,” Anderson says, adding that a non-Royal Commission triggered impact is rising business costs in general.

On top of this, FASEA’s education reforms are also causing strain to advisers, translating into negative sentiment as many claim they will either leave the industry, or have to undertake extensive study to be able to stay.

The uncertainty around the reforms for much of the last two years also hasn’t helped: “Uncertainty is a key contributing factor to stress, and the longer that went on [around FASEA’s reforms] the more it had an impact,” Anderson says.

“The perception that FASEA wasn’t consulting advisers, and then they weren’t contactable for a period” contributed to stress about the reforms, De Gori adds.


Financial services in general also has a bad reputation for sentiment even in calmer times. Within the industry, 26.3 per cent of employees experienced a very high level of stress at their job, up from the national average of 24.8 per cent, and 47 per cent reporting ongoing stress at work, above the national average of nine per cent.

The same studies, which are sourced from SuperFriend, found that the proportion of employees in the industry who didn’t particularly like doing their job was 6.8 per cent above the national average, and there was also less optimism in the industry that workplace mental health and wellbeing would improve in the foreseeable future.

Indeed, SuperFriend chief executive, Margo Lydon, observes that the targets and expectations placed upon advisers aren’t realistic, as “society puts an expectation on financial services to continue to perform year on year on year”. This goes against human needs of renewal and refreshment, and she believes that a shift in this perception of the industry is therefore needed.

Then, there’s the fact that many advisers work for small businesses or own them themselves. With the shift away from large dealer groups and toward smaller licensee firms, the number of planners running or working for SMEs is growing – and it was already a large figure compared to other industries to start with.

According to the Bank of Queensland’s 2018 Business Balance Report, over half (53 per cent) of SME owners experienced emotional strain from family and friends because of their business, up from 49 per cent in 2017. Further, 13 per cent had been diagnosed with stress, depression or anxiety in the last year and 34 per cent were struggling.

It makes sense then, that industry bodies are seeing evidence of growing pessimistic sentiment amongst this cohort. De Gori says that stress and negativity is impacting some SME owners, especially as often these businesses are reliant on grandfathering.

Anderson adds that increasing costs to running businesses also may be more keenly felt by those in small businesses, which may particularly contribute to negative sentiment as some independent practice owners plan to fund their retirement with their business.

The Investment Trends report showed signed of struggling profitability growth; while the report found that more than half (53 per cent) of surveyed advisers had seen their business’ profitability improve in 2018, that was down from 72 per cent in 2014.

“Being self-employed is a great thing when things are going well, but when they’re not … that can cause greater anxiety,” Anderson says, encapsulating this issue.


The list of things that individuals can do to improve their mental wellbeing is well-traversed, but advisers struggling to stay positive in the current landscape of change could do well to remember them.

CommSec Adviser Services recommends taking time out, looking after your body with good diet and exercise, improving sleep hygiene, avoiding isolation, asking for help, supporting your staff, quieting and clearing your mind, and setting realistic goals.

Lydon backs this up, saying that health, sleep, and having a sense of belonging and connectiveness are vital to strong mental health. These may seem like baby steps, but she notes that “it’s small, incrementally applied changes that you work on consistently that make the biggest long-term change to mental health”.

There are also individuals and businesses within the industry who are handling its current period of change well; flourishing, even. Lydon recommends “looking at those doing it well and learning from them”, as “some will be having a much easier time in this period of substantive change, so look at them and see what they’re doing to cope well”.

Anderson believes that having conversations and engagement around the issues causing stress within the industry helps, as advisers stay informed and can then feel more control. De Gori also says this; he has found that some members thought the education requirements they needed to undertake were actually more extensive than they are, lessening their stress when they learnt the truth.

“People need to look after themselves … and others around them, and they need to keep engaged. They need to remember why they chose this profession in the first place … and hopefully we can start to turn things around,” Anderson says.

Of course, there’s a point where negative sentiment about the profession may become something more serious for some, and Anderson says that in these cases, professional help is where some people need to start.

He encourages advisers to call the AFA in these situations, with the AFA Care program providing confidential coaching and wellbeing service for members, their staff, and their families.

The FPA also runs a similar service, with its Wellbeing program, launched in May, this year, offering members confidential support by qualified counsellors and psychologists by phone, live chat or face-to-face. It also provides access to a library of health and wellbeing resources, aimed at prevention.

De Gori notes that some bigger organisations may have these structures in place, this service could help the numerous planners in small businesses.
Employers stepping up

Planning businesses also have a crucial role to play in improving their employees’ sentiment. It’s in their interests to do so, too; in a survey of 5,000 financial services and insurance workers, SuperFriend found that 66 per cent of employees believed that investment in workplace mental health and wellbeing would improve productivity, and 63 per cent thought it would reduce absenteeism.

Part of this can be through practical support. FASEA’s new standards, for example, are clearly causing stress amongst some advisers, and help from employers with both preparation and time to undertake the requirements. They can also offer more team-based activities to their employees, Lydon says, as “belonging and connectiveness, especially in times of shared challenges”, can help improve mental wellbeing.

Lydon also advises making sure that employees know their jobs are secure. One-third of financial services employees report their jobs feel insecure, which Lydon says can contribute to feelings of uncertainty, stress, and poor mental health.

She recommends employers minimise this insecurity, which doesn’t necessarily mean guaranteeing jobs, which may not be possible. Rather, she says that clear communications and co-designing solutions with staff to deal with the change advising firms are facing can help.


While adviser sentiment toward the industry is generally low at the moment, that doesn’t mean there aren’t pockets of optimism. Amongst some, there’s a sense that the current period of change is an opportunity to improve – indeed, Lydon observes that neurologically, change opens up our creativity.

It’s also an opportunity for businesses looking to run their businesses ‘right’ for the new advice world to seize on the growth that the banks and other advisers exiting wealth offers. “Following the Royal Commission, independent advice seems to be the flavour,” De Gori says, meaning advisers in that space are well-positioned.

“A lot of self-licensed actually feel quite optimistic that they don’t have the baggage of the banks and are quite nimble, so their main concern is how to attract enough quality advisers to meet the growth opportunities,” he adds.

Anderson, too, has noticed that there’s some “highly educated and nimble advisers who aren’t reliant on commissions” within the AFA’s memberships, and that they’re looking positively toward the future.

He also notes that there’s some positive signs that advisers are moving proactively to overcome the stresses associated with FASEA; nearly 600 advisers registered for the first exam, and “it will make a difference when they start to get results” to fears about the reforms.

Anderson adds, however, that one of the biggest contributors to improving sentiment could be 12 and 24 month extensions to the exam and qualification requirements respectively coming into force, which he urges the Government to consider.

There’s also source for optimism in the fact that there’s a genuine need for advisers amongst Australians, and that it’s growing. Again looking to the Investment Trends’ survey, 97 per cent of planners’ clients say that their adviser has had a positive impact on them, and 31 per cent of surveyed Australians who aren’t advised signalled that they’d potentially seek a planner in the next two years.

There’s some education needed to translate these unmet advice needs into clients. De Gori says more transparency around fees and the value of advice would help, as would more information about what financial advice involves.

“There’s a lot of unknown in how to make the most of that opportunity, but the opportunity is there,” he says. “If you do adopt and change your business model for a post-

Royal Commission world, if you work to meet those education standards, then there’s a lot of opportunity there.” Surely a cause for some optimism.

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