The latest Adviser Ratings’ (AR) Landscape Report has revealed advice affordability has led to 100,00 people being orphaned or ceasing to receive advice.
Based on six projects completed over five months and more than 40,000 surveys of financial advisers, the report found there were 100,000 fewer customers and 3,323 fewer advisers than 12 months ago.
This meant the number of advised Australians had fallen below two million for the first time since AR tracked the data.
The largest cohorts who opted out of advice were those aged 35-44 and 45-54 which reflected cost pressures and financial anxiety, a willingness to replace advice with technology or online information and a heavier reliance on accountants.
The cost of advice had risen to $3,256, a rise of 8% in the past year and a 40% rise in the past three years, although this had coincided with improvements in standard advice provided and the higher educational qualifications of advisers. However, only 6% of Australians said they could afford to pay more than $2,500 for advice.
It had also been driven by higher compliance and remediation costs which was causing advisers to position their businesses for more sophisticated clients.
AR said it expected the advice gap to grow as a further 2,387 advisers were likely to depart this year which would cause the number to fall below 15,000.
There were 6,929 practices in Australia (15% decrease on 2020) averaging 2.50 advisers per practice in 2021.
Angus Woods, chief executive of AR, said: “The advice industry has been in a state of flux for a number of years, and we continue to see that change today.
“The advice and wealth management industries continue to evolve, and the impacts across the board, from product providers through to consumers, is significant. Our research asks many questions on how Australians will receive advice in the future, and who will advise them. There is more change to come.”
