Could 50% of advisers exit industry?

As many as 14,000 financial advisers or close to half the industry may choose to exit over the next five years fuelled by the new Financial Adviser Standards and Ethics Authority (FASEA) regime and fall-out from the Royal Commission, according to Adviser Ratings.

The company said that if this occurred, it would represent $900 billion in client wealth.

The Adviser Ratings analysis claimed that on top of the Royal Commission and the FASEA regime, fragmentation of the institutional distribution model was also accelerating, with advisers churning from the major banks in 2018 at 270 per cent of the historical rate, while establishment of self-licensed practices had driven a 33 per cent increase in licensees over the last three years.

Commenting on the research findings, Adviser Ratings managing director, Angus Woods described the advice industry as being “in extraordinary flux”.

He said the impending withdrawals of major institutions from advice were compounding the impact of historic adjustments to adviser business practices driven by regulatory reform, predominantly Future of Financial (FoFA) and FASEA.

The Adviser Ratings research pointed to almost 7,000 advisers having left the industry since 2015, with the future attrition rate expected to increase and described IOOF and AMP as being the majors most at risk from adviser churn motivated by FASEA.

“Similarly, stockbrokers and life-focused licensees are the industry groups with most attrition risk since they have the lowest adviser educational levels, with Bell Potter requiring more than half of its advice workforce to be requalified for 2024,” it said.

“The adviser exodus, together with an ageing client demographic, is putting pressure on advice practices to modify business models for sustained growth. “With the large majority of advised clients transitioning to retirement and beyond, advisers need to have the skills and capacity to service that demographic,” said Woods. “However, winning millennials at the other end of the spectrum requires a very different value proposition.”




On a pure fee for service arrangement with no commission and no ongoing trails, most firms would be unprofitable and cease to exist. This is a possibility, and then when you add on extra education time and cost for most advisers - it would appear nonviable for many.

Gez - I respectfully disagree with your comment. There are a number of us (and that number is continuing to grow) that have been pure FFS for quite a while now. Our profit margin has been b/n 20 to 30% yoy for the past 4 years. I do agree with you however that moving from a commission and trail only to FFS would be non-viable for many businesses because there will be a lot of pain in the early years BUT there is substantial gain if you take a long term view. I get that there are many obstacles for businesses to overcome when transitioning from one system to another but at the end of the day only they can decide whether to adapt or exit stage left. In time FP will be viewed as a profession but it will take decades to achieve that position. Best of luck to all.

There is a difference between non-viable and being less lucrative. Everyone likes to convince themselves that its the former as they don't want to change, when really its the latter as its better for them $$ wise...

I don't really see the problem.
Go do what is necessary to be qualified.
A lot won't, so less competition and you will be able to charge more.
If you have been in this business for 10+ years and have done nothing to improve your Quals then maybe you were asleep at the wheel.

You don't see the problem because you're asleep at your own little wheel.

Well then tell us what is your problem.

The sad fact of life is, as so many others have written on these posts, most clients don't like to pay fees. When the introduction of fee for service only payments were introduced in the investment advice sector, did anyone think that the fee for service was going to be any less than the original commission based payment structure ?

In a seriously now over-regulated financial services industry, future educational requirements that ignore existing education qualifications for long standing professional financial planners will be the death knell of the industry. For many, this is a bridge too far !
If the proposed banning of initial and trail commissions in the Life insurance industry is successful, it will wipe out many those businesses that have built long term client relationships .
Then who will service the client needs then,.... the Life companies ?
The Royal Commission has only touched the tip of the ice berg that has seen how the life companies treat the life insured at claim time or when it's necessary to reduce benefits and gouge additional premium, with no consideration to the loyalty of that customer to their brand.

Lawyers, doctors, dentists, plumbers, surveyors, engineers, and many more are paid fees (and a service is provided for the fees paid). Most clients don't like to pay fees for services not delivered. No client will be displeased to see the end of trailing commissions and the rest of the rip-offs.

Financial advisers will have to step up and argue that good advice costs. But independent professional advisers have a good story to tell about helping people manage their finances, investments, and superannuation.

Doctors are subsidised by a labyrinthine system which includes the Medicare Levy, Private Health Cover and the PBS (for products prescribed), courtesy of the taxpayer.

And in saying that, how many times have we heard "I can't believe I paid that specialist $400 for 15 min of their time".

Lawyers, Doctors, Dentists, plumbers, surveyors, engineers and many more (including people working for super funds, ans stock brokers) don't need to do fact finds and 50 page SOAs. I would be happy to trade commissions for NO SOA's????? What about others. or are they not professional???? However as I view the industry, we still have a stragne unequal playing field. I say your found is great and provide intra fund advice, I have to do an SOA. A Super fund Financial adviser does not need an SOA, I say buy BHP, I have to do an SOA. My stock broker says the same thing, and no SOA.... My doctor says I need an operation - no SOA. My plumber says a new hot water system - no SOA. I would like to see a recognition that our legal framework is oppressive and so fees just keep going up. People are happy to pay for good advice. But in my experience good advice does not require an SOA. ASIC require an SOA, but do not need to explain why we are the only industry that needs to do SOA's????

Pretty simple why we need SOA's, RobinBris. We manage people's money for a living and there has been too many cases in the past where the adviser's interests were put before the client.

That’s right, and society hates them all unreservedly for their opaque charging methods.

Watch 4 Corners tonight, they have an expose on rampant over charging by outlying surgeons, the AMA is unsure how to do anything about it, but they are going to crack down.

Name me a client that loves their accountant charging per hour?

Name me a homeowner that accepted the ‘I charge $30 in 15 min increments’ quote from a plumber?

Name me an engineer that deals with retail clients on a daily basis, or one that felt their trip to the dentist was both pleasurable and affordable...

I know you have ties to some sort of Industry fund backing, which I have zero issue with - I send them plenty of clients that don’t fit my business.

Do yourself a favour and scratch the surface of the kickbacks and perks in the medical industry, or the tyre industry of all things (it’s basically a cartel), or look at the CFMMEU and David Hanna in QLD using a client’s construction money to build his own house!

My point is, as an industry we aren’t alone in the world. Where an economy and a market exist, so too will buyer groups and seller groups, indeed they underpin it. So don’t hang up stale, hated and outdated “professions” as a shining beacon of success in a modern democracy, because end users hate them, too.

I have not ties with industry funds. I like competition and choice. See Productivity report recently released.

I think the report is underestimating the impact of the average age of advisers and I think is wrong. I think the figure will be more like 75%

@Tel B,
You obviously like those imposing new educational requirements just don't get it.
There are many who have tertiary degrees obtained many years ago that have also obtained CFP status that for some inexplicable reason are no longer going to be recognised under FASEA.
Most of those advisers have survived in a completely over regulated financial service system where the regulator and the government are looking for the perfect human being.
Most have adapted to this over regulation and constant change since the year 2000 for one very good reason, for most, it was providing professional advice that took into account the client's best interest.
The issue at hand is that governments from both sides of the political divide departed from the professional education standard of completing between 8-12 subjects at Deakin University via the FPA diploma program and encouraged a plethora of RTO's offering 4 day courses with an open book exam for a green keeper one day to be an RG146 compliant financial planner the next.
That's where a lot of this rubbish has eminated.
Since I'm one of those with an education that went back to University in my 50's to study Tax Law, and as a CFP none of my previous education counts even though I'm required to do 40 hours a year CPD plus being registered with the TPB has added another 20 hours a year of CPD requirements, in total 60 hours a year.
I like so many others have not been sleeping at the wheel, in fact I've done anything but.
Your view that if there are less advisers in the market place you should charge more is why in many cases this industry is in such a mess. Greed/conflicts tabled with poor advice seems to be the genesis of the financial sector malaise.

There is a reason AMP's value has fallen through the floor, and 3 of the big banks have dumped their financial planning businesses. Whatever you think about the ethic of these companies, they have examined the situation very carefully. and concluded the industry is nonviable. Ignoring the conclusion of well resourced and knowledgeable people should only be done after very careful consideration. Yes there may be fewer advisers, but this industry is at crisis point. Client's are struggling to see value as the fees increase, and ASIC will struggle to see value as fees increase and therefore become more militant. So more regulations, more fees and the circle of death continues......

The banks have concluded the "Product Sales Industry" is non-viable. They've never had a financial advice business it's always been product sales. The financial planning industry is well and truly viable, just charge a fee for your SOA and an ongoing either asset based fee or flat fee for your service. If they do go and remove the ability to establish ongoing service arrangements, as has been mentioned in the royal commission, then you just charge for your ongoing service either upfront or in arrears, over whatever period you like, annually, half-yearly etc. The money can still come out of super if you're advising on super and provided you're actually giving the client a service they'll be happy to pay for it. Once the banks do exit their product sales businesses there will be a lot more clients for the real Advisers to look after, so I don't really see the problem. Removal of life insurance commissions is a different story altogether and would be a disaster for the advisers and clients, the only winners will be the insurers.

No, they have determined their ROE/ROIC is better elsewhere (unfortunately something a lot of 'advisers' wouldn't understand). They serve shareholders and that's it. They never said it wasn't viable.


I am awake and I bet driving a lot better than you! I have improved my Quals. Now doing a Masters. I run a planning business which is very successful with about $200M of FUM. How are you going?????

Clients don’t like to pay fees? Who likes to pay for anything in this welfare-State Country? I have been fee-based for ages. In operating that way pre-FoFA I was done over many times by people operating “for free” but taking 3% entry commissions, or using “nil-entry” products. But I survived. FoFA levelled the playing field and we prospered.


I am affected by the changes much like you. I am not whinging, I am adapting.


I bet what I charge is lower than 50% of other advisers.


I run my own AFSL so have no back-door support like a lot of you out there.

Great comment... Unfortunate most planners dont have your attitude... We wouldnt be in this mess in the first place.

Yes well said. A lot of advisers just don't care about the industry they work in. Just look at the FPA and the changes that could so easily be made there. Planners have been compared to cowboys for years and just going out and doing further study would of lifted our position in the community considerably. Risk Advisers could have avoided the problems they face now by doing a Tafe course or a simple Diploma to Risk. Mortgage Brokers are the next in the firing line. To quote a client, "when you see a Doctor you expect minimum education, a minimum amount of training and supervision and when things go wrong there is a redress. However when you see a planner you're taking you life in their hands and it's a mixed bag of chocolates as to what you get" You're spot on saying many advisers have been asleep at the wheel.

Existing well run financial planning businesses can certainly benefit from this political regulatory mess, but the barriers to entry for future self-employed planners keeps growing. At the same time the employment opportunities for everyone else are looking increasingly dismal.

@ Hedware, & Tel B
Your comments are interesting, because lawyers and accountants have been subject to scrutiny over fees. What's the right hourly rate for fee for service ? Is it $100per hour, $200 per hour, $300 per hour ?
Does someone with 2 degrees charge twice as much as someone with one. Is the advice twice as good ?
The question of verifying billable hours hangs over many of these so called professions you want to compare yourselves with.
That's why the Law society and CPA have had to deal with a plethora of complaints for over charging.
This fee for service is just as conflicted as commissions when abused.
You pay a plumber the going rate of $500 per hour these days because having a blocked toilet, a leaking gas main or a broken water pipe leaves you no other choice.
I'm not so sure that client's will ever be in the position where needing a financial planner will compare with you needing a plumber.
As an aside, how much do you charge a client when they have a claim ?
Even at a conservative hourly rate of $100 per hour very few claims are settled without an adviser being involved under at least 20 hours.
That's what ongoing trail brokerage is supposed to compensate an adviser for but I guess you two have found a better way to be paid.
I'm not so sure that charging a client an exorbitant amount to settle a claim hasn't got a moral aspect to it.

Well fees verses commission as a base argument is a toss.

If someone charges you $3,000 to handle an investment of $100,000 and the other (commission pirate) charges you 3% then “what’s the difference?” I say none as long as it is clearly explained to the client. But as I said earlier I lost deals to people who operated for “free” whilst I was pure fee based for investment work. The bank based planners were the worst at this and they are now getting what they deserve. The Bank planning culture was toxic and tainted from the start. No sympathy from me for these people.

I don’t believe there are many pure “hourly rate” planners out there. We quote the client for each piece of business we do. Some deals work - some don’t – that’s business. We have a couple of simple ongoing service packages; they can take them or leave them. We have been running structured reviews for almost 15 years. Small clients (yes we do talk to ordinary people) are discouraged from paying for ongoing service on simple things that can just be reviewed every couple of years. I would never compare Planners to Lawyers. The Law nowadays is an ugly business and I wonder how anyone with a moral compass can do it. 95% of Lawyers get the rest a bad name.

The investment planners got reamed by FoFA and today are required to do a lot of unnecessary compliance nonsense because the regulator thinks it is needed. I present as my example, my requirement to keep an empty soft-dollar register. I don’t have any soft-dollar so why should I have to keep an empty register? ASIC really have been a hoax in how they have “managed” this industry. They shot at the lifeguards while the sharks ate the swimmers.

On education standards I am fairly acidic. I have interviewed people for planning positions and most of the highly qualified people are useless with breathing clients. Working with clients takes skills that are not taught in University. Not having a product to sell makes it easier, but you need an inner toughness to survive in Planning. That is why the old life insurance people are often good at this business as they know how to deal with people through good and bad. But I am not saying that they were all good either!

The nightmare scenario for most Planning practices is if they removed the grandfathering, and say removed asset based fees, or even worse removed products paying our fees, the world would be turned upside down. Even my business, which is pretty robust, would be dramatically challenged and several of my staff would lose their jobs. Client facing staff would be on six-minute-blocks and each have to prove their worth every month. If you are getting paid $100,000 a year then you had better be generating a minimum of $175,000 of revenue or your time on the gravy-train is limited. Those of you reading this who are employed planners, how would you fare?

The next in the line of fire will be total removal of commission in insurance. The Insurance companies will be the big winners here. The issue of “Churn” is nonsense as the Insurance companies could have stopped that, but it suited them at the time to maintain the Status Quo. But the upside will be that all of the people saying “we do it for free” will be on the same playing field as people who are fee based. That was the game-changer in FoFA with us. If there is one rule for everyone then the people who really have something to offer will prosper. But I have my doubts about people being willing to pay for insurance advice.

We write very little insurance but still have had three large claims which we have handled for the clients and not charged them at all as they were slam-dunk wins and went through easily. But that may change if the whole situation changes. I am aware that some of the big Super Funds and the Union Funds try to weasel out of paying claims and you have to play hard-ball with them. That takes time and you cannot do it for free.

Am I worried about the future? You bet I am. The academic fools heading the bodies that are proposing these changes have no idea about running a business that has to pay staff and pay overheads. They stick their snouts deep in the public trough and lecture to us from their high moral ground. They remind me of that Sailor Moon cartoon where Tuxedo Mask creates total devastation (or does nothing) and leaves with the quote “my job here is done!”

Pure Fee-For-Service is an unprofitable business model for providing financial advice to average consumers.

Nah, its not. I do it. You just convince yourself it would never work because it will be less lucrative than commission.

I think the key part of his statement is "average clients".
I have small balance clients that could never pay full fees for everything.
I should give them the flick, but they were loyal to me so I give them service way beyond what they pay.
But I have some super-rich clients (think $100M+ in assets) and they get charged.
Communism at work...the rich subsidise the poor!!!!!

Richardp, I suspect that if you find so called "Pure" Fee for Service unprofitable, its because you don't recognise what clients want and are prepared to pay for.
1 or 2 reviews a year isn't what clients want, they want you to responsible and accountable for their outcomes. That means being constantly vigilant. What happens if, between reviews, a fund manager loses an important team member, what happens if the laws change, what happens if Trump goes nuts? If you're answer is, "I'll ring you in 11 months for your next review and we'll chat", then you aren't getting it. If you do agree to the things I've just mentioned with the client, then you need to be paid to be constantly vigilant, so its not 1 hour at $300. If instead you say that you'll join "Team Client" to share the pain, and share the gain, then an asset fee approach resonates with clients. Have you notice accountants and lawyers are all moving away from time billing to value billing or to "fixed price" billing (fixed, but guaranteed to increase by 10% by year funnily enough). Read up on the Principle Agent problem and you find that alignment of interests is a recommended solution. Ask your clients what they really want then profitability wont be a problem.

Pure Fee-For-Service means there are no ongoing fees labelled as Fee-For-Service, no cross-subsidy from other business, no risk commissions, no grandfathered wealth commissions that have conveniently been forgotten, it means starting the year with zero booked income.

Correct, invoice for all SOA's and 'ongoing service' simply 12 month service agreements resigned each and every year. Completely feasible, doing it currently, just need to actually service every client which reduces the 'gravy train' so most advisers will kick and scream about it.

richardp - we don't cross-subsidise, 100% of all insurance comm is rebated and we don't have any clients with grandfathered products BUT we do have annual service agreements for which we charge an on-going advice fee which is an agreed flat fee between the client and the adviser and which the client agrees to each and every year. Your previous comment is 100% correct - a pure FFS model would not be profitable if you're providing advice to 'average' clients as they would not have the financial means to pay the initial or on-going advice fees that we charge. Our clients requirements are more complex than the average client. We (as in the Australian FP industry) will most probably follow what resulted from the RDR in the UK - the cost to provide advice will escalate to the point that only the wealthy will be able to access personal advice provided by a human adviser. The unwashed masses will have to make do with robo-advice or conflicted (but disclosed) sales product advice provided by the banks and industry funds). So...there will be less advisers (but better qualified) providing personal advice (at a greater cost) to less clients (because they will actually have to provide service to their clients). Just the total opposite of what the govt is trying to achieve. Can't see how this will be in the average client's best interest.

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