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The Government’s Future of Financial Advice reforms will lead to changes in recruitment strategies, directly affecting adviser numbers, according to industry experts.
One of the key reforms recommended by the Treasury is the prospective ban on commission-based payments and the introduction of the fee-for-service remuneration model across the sector. This has prompted recruitment specialists, such as Simon Mortlock from eFinancialCareers, to suggest the type of skills sought from financial planners will change.
According to Mortlock, the change will make demand for revenue-generating advisers even stronger than in recent years. The head of BT dealer groups and licensee select, Neil Younger, agreed with Mortlock.
“Certainly, as we get closer to July 2012, dealer groups want to make sure the people they recruit are comfortable working in the fee-for-service environment.”
In terms of base salaries, recruitment experts predict that, with less emphasis on bonuses and commissions, the move to a fee-for-service model will lead to higher salaries.
But AXA Financial Planning national manager Paul Williams doesn’t expect changes, because planners still receive revenue by charging fees — although Younger noted there had been upward pressure on salaries.
“I don’t know if fee-for-service can be attributed to that. What I know is we’re working with a limited pool of talent,” Younger added.
Younger expects as many as 20 per cent or more experienced advisers to leave the industry, similar to the outcome of the financial services reforms between 2002 and 2004.
Younger said it was the impact of the whole regulatory change package rather than just the shift in remuneration models that would push some advisers away.
“There is a need for a number of practices to change their business structure, and for some that change may be too significant; many will take the opportunity to retire or sell their business,” Younger said.
Given the number of years of preparation provided for in the changes, very little to no exits — other than ordinary numbers — will be seen, Williams said.
He said there might even be some modest growth in adviser numbers, because many would see the introduction of fee-for-service as an opportunity rather than a threat.
“The industry has a great opportunity to reposition itself as a profession and attract more people,” Williams said.
