Adviser numbers reach new lows

This year’s data from Money Management’s TOP Financial Planning Groups research has proved this has undoubtedly been yet another challenging year for financial planners, with the number of advisers reaching new lows.

Planners continue to struggle with ever-increasing regulatory burden and higher education requirements, on top of rising costs of advice delivery. 

This has led many of them to flee the industry and, as a result, the collective number of those working for the top groups in the country has dwindled once again to around 11,500 from over 13,000 a year before. 

The figures were far from the levels registered in 2019 and 2018, with 14,500 and 16,140 advisers operating at the largest groups, respectively. 

What is more, the overall number of current advisers, as listed by the Australian Securities and Investments Commission’s (ASIC’s) Financial Adviser Register (FAR), slipped below the 20,000 threshold this year.

By contrast, over the five years to 2020, these figures were much higher and ranged between 21,500 and 22,500.

SO, WHAT’S NEW?

The past 12 months have confirmed that many experienced advisers continued to feel discouraged by new Financial Adviser Standards and Ethics Authority (FASEA) education standards and the necessity to sit the exam. 

It has also become obvious for a growing number of financial groups that the industry has failed to attract younger talent to fill this gap.

Additionally, the shrinking numbers had further driven up the costs of advice for consumers, making it even harder to obtain for less-affluent clients. The shortage of advisers is coinciding with the time of the long-expected intergenerational wealth transfer which is set to be one of the largest.

In November last year, the advice affordability problem was finally noted by ASIC, which  acknowledged the difficulties around finding the affordable personal advice of good quality and, in response to that, it launched the consultation process around making the advice more affordable.

On top of this, advisers have been haunted by higher operational costs, ongoing regulation changes, and between July to October this year advisers are subject to five new compliance requirements such as the design and distribution obligation (DDO) regime.

Also, the end of grandfathered commissions forced many to quickly adopt new fee structures and, subsequently, changed the current business models of many licensees. 

THE BIGGEST LICENSEE OWNERS 

Despite a temporary fall to the second position at the start of the year, AMP Financial Planning (AMP FP) has overall managed to regain its position as the single largest financial planning group in Australia.

When AMP FP dropped to 799 financial planners operating under its banner in March it was briefly overtaken by the National Tax and Accountants’ Associations (NTAA)-owned SMSF Advisers Network. 

However, the network had no active authorised representatives (ARs) that were financial planners as their primary role as all of its advisers were accountants. 

Since then, both groups have seen a further significant portion of their advisers depart.

The SMSF Advisers Network, which is one of the largest groups by adviser numbers right next to bigger players such as AMP and IOOF, continuously lost advisers over the last few months, in line with expectations as accounting firms accounted for the highest drops of advisers from ASIC’s register.

In May, the SMSF Advisers Network said the key reason given by its ARs for the departure was the ASIC industry funding levy. 

After the removal of the accountants’ exemptions on 1 July, 2016, the levy would see the group’s advisers who offered limited scope advice being charged the same amount as advisers running a financial planning practice. 

AMP reported it had jointly around 1,350 advisers on their books, at the start of July, and ran four Australian financial services licenses (AFSLs), including AMP FP, Charter Financial Planning, Hillross Financial Services, and ipac Securities.

The group, which is still recovering from the Royal Commission and saw six of its companies sued by ASIC for fees-for-no-service at the end of July, had earlier announced changes to its fee model for its aligned advice. This assumed the release of institutional ownership of clients from AMP FP to advisers, and the ability to transfer clients out of the AMP network, amongst others.

In a statement sent to Money Management, AMP said the group had already been through major changes and that it believed in a strong future of financial advice in Australia, following a period of significant structural change for the industry.

AMP’s director of advice, Matt Lawler, said: “At AMP we have worked hard to change and adapt our advice business to be a contemporary professional services provider. 

“This has required a number of difficult decisions and resulted in a number of financial adviser departures over recent years. We now have a core group of high quality and professional advice practices that need our support and we are changing the way we do business to create a new era in financial advice.”

At the same time, IOOF also saw a number of significant changes in its business including its acquisition of MLC Wealth in May 2021. IOOF is one of the largest groups in Australia by adviser numbers and has been racing with AMP over the last few months.

In May, 2020, MLC Wealth simplified its advice model by retiring the Garvan, Apogee and Meritum brands and rebranded them as the TenFifty community, with an aim to become a business-to-business (B2B) brand. 
The firm said Apogee and Meritum advisers remained in their respective AFSLs, while Garvan advisers remained on GWM Adviser Services (GWMAS).

Following this, MLC Advice became the new brand for NAB Financial Planning under the GWMAS AFSL as MLC Wealth transited into a standalone business outside of National Australia Bank (NAB). 

After IOOF acquired MLC Wealth, it said the acquisition combined with the first phase of its Advice 2.0 strategy, resulted in the effective closure of Financial Services Partners (FSP) with all businesses having transitioned off the licence by 30 June, 2021. 

According to Money Management’s 2020 TOP Financial Planning Groups survey, FSP had around 140 advisers on its books as of July, 2020.

Another change at IOOF saw MLC Advice advisers being now licensed under Bridges Financial Services while TenFifty advisers were licensed under Consultum Financial Advisers. 

The last change was a transformation of Bridges Financial Services into a fully-employed network, with all self-employed advisers having transitioned off the licence by 
30 June, 2021.

THE CONSOLIDATION OF MID-TIER GROUPS

Money Management’s 2021 survey found that mid-tier financial planning groups were continuing to race to fill the void left by the banks’ exit, with some bigger groups bringing in more advisers, while others were focused on acquisitions and further consolidation.

In October last year, platform provider HUB24 announced its plans to sell Paragem to the Australian Securities Exchange (ASX) listed Easton Investment Limited, which at the time had three other licensees operating under its banner. 

This included Merit Wealth and The SMSF Expert which together had between 250 and 300 advisers who were all accountants.

On top of this, Easton currently owned GPS Wealth with 134 financial planners and 50 planners who are accountants and Paragem, with 76 financial planners. The acquisition of Paragem was expected to enhance Easton’s wealth solutions business by adding scale and supporting technology efficiencies. 

Also, the expansion helped ensure Easton maintained its position as the fourth largest financial licensee owner in the country, among the independent groups.

However, the recently-announced acquisition of ClearView’s financial advice business by Centrepoint Alliance has added some pressure to the race across this groups’ segment.

According to the data, ClearView’s two licensees, Matrix Planning Solutions and ClearView Financial Advice, had close to 180 financial planners combined at the end of the first half of the year. 

Meanwhile, Centrepoint’s Alliance Wealth and Professional Investment Services (PIS) had over 300 planners. The combined entity is expected to become the fifth largest group in the country and the second largest independent group, excluding IOOF, AMP and NTAA. 

Another ASX-listed entity WT Financial Group, the parent company of financial advisory dealer group Wealth Today, also made an acquisition earlier this year. 

WT Financial Group bought Sentry Group resulting from its earlier transformational restructure which looks to reduce the firm’s focus on business-to-consumer (B2C) financial services market and re-positioning itself as a B2B enterprise. 

The merged group would have 275 advisers, across over 200 practices in Australia, with further appetite for growth over the next few years to expand by more than double its current size, measured by adviser numbers.

The owner of InterPrac Financial Planning, Sequoia Financial Group, was another example of an independent group showing interest in further consolidation across the advice market and clearly communicated its intention to expand through acquisitions.

The group confirmed its plans to continue acquiring mid-tier licensee service businesses that had between 10 to 100 advisers and hoped to provide services to 1,000 advisers by 2025.

Sequoia’s chief executive, Garry Crole, said there were opportunities for acquisitions of groups with 50 to 100 advisers who struggled to be profitable and provide their service to advisers in a cost-effective manner.

Finally, in November last year Ord Minnett acquired independent private wealth firm E.L. and C. Baillieu.

In 2019, Ord Minnett went through an ownership restructure following IOOF’s planned divestment of its 70% stake in Ord to a consortium of Australian private investors.

Ord said its acquisition was strategic as it would provide the scale benefits and help expand its position in the financial advice sector, given E.L. and C. Baillieu’s private stockbroking businesses and adviser network. 

Including E.L. and C. Baillieu’s figures, Ord Minnett managed over $59 billion in funds under advice (FUA) and $13 billion in funds under management (FUM) as of January, 2021.

TOP TEN

All the changes in adviser numbers and moves between licensees have been reflected in the composition of the TOP 10 largest financial planning groups in the ranking.

This year’s data from the survey marked the arrival of a number of independent groups which managed to consistently grow their ranks and successfully lure in advisers looking for new homes. 

At the same time, a number of groups, particularly those with a high percentage of accountants, slipped down the ranking.

Easton-owned Merit Wealth, which last year occupied sixth place among the largest groups, this year reported it had only 217 ARs who were accountants and 31 active ARs who were engaged as financial planners as their primary role.

However, the 2021 TOP Financial Planning Group’s ranking saw an arrival of two independent groups which managed to climb up the ranks.

This included family-owned business, Lifespan Financial Planning, and Capstone Financial Planning which entered the TOP 10 for the first time. 

By contrast, in the Money Management’s TOP 100 Financial Planning Survey in 2012 both groups were ranked at 37th and 53rd with 122 and 70 advisers, respectively. 

As a result of the ongoing restructure of the business, IOOF-owned Consultum Financial Advisers has posted one of the highest jumps in the ranking. It catapulted from 20th place with 192 advisers last year to the sixth position this year, after growing its number of advisers to 380 advisers as of July, 2021.

Similarly, once-ANZ owned RI Advice, which currently operates under the IOOF banner, has seen a jump in adviser numbers from 185 to 253 this year.

The full ranking of the groups is available for purchase through the link below.