Demand for associate advisers rise but grads left behind

graduate new entrants provisional advisers recruitment

13 July 2023
| By Rhea Nath |
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Going into the third quarter of 2023, the advice industry appears to be pivoting to re-adopt the associate adviser role popular prior to the Hayne royal commission, offering mentorship and 18–24-month development plans into full advice roles. 

However, demand for graduates is limited in the private sector, according to financial planning recruitment and management consultant Recruit 2 Advice despite a push for more people to join the industry.

“We see this client shift as a response to increase capacity to absorb the referrals and new client demand [...] with an 18–24-month development plan into full advice roles for the associates, with mentoring and professional year (PY) offered,” the firm said.

“On the supply side, candidate demand for associate roles is extremely high with limited market growth presenting limited opportunities in recent years.”

Advice firms have previously discussed the problems with running a PY and supervising candidates as well as how long it takes candidates to complete the program.

The recruitment firm identifies three different styles of associates and PY candidates available in the market, namely, up-and-comers with strong client service and paraplanning skills sets; career changers with parallel industry experience; and re-entry of advisers on hiatus during COVID-19, such as mums homeschooling their kids. 

Recruit 2 Advice’s adviser demand overview for Q3 2023 found the demand for experienced financial advisers remains strong, particularly for senior advisers with strong relationships skills. 

This is to meet the organic growth enjoyed by many practices and inorganic growth, such as acquisitions, that is needed to meet growing client demand. 

“On a very positive note, we are seeing 50 per cent newly created roles which points to demand-driven growth across the industry, while the remainder are to replace advisers moving to self-employed or changing careers,” the firm elaborated.

“Advisers and firms well set in the market with a good reputation are currently inundated with referrals and approaches from new clients.

“We are hearing anecdotally and firsthand many practices experiencing high levels of client referrals often excessive to their capacity or ability to keep up. This is leading to sandbagging or pipelining in many instances, leading to discussions around creating a new role for a senior or associate financial adviser.”

It noted this trend bodes well for the industry in the medium term and for professionals looking for new opportunities.

The firm found the sweet spot or mid-range in adviser salaries remains $130,000–$140,000 plus super. Total employment cost sits at $140,000–$150,000 plus bonus for achieving client retention and revenue targets, plus gateway measures such as compliance audits. 

Recruit 2 Advice explained: “Employers are increasingly willing to structure advisers’ overall earnings linked to the financial performance of the client book and business in general. 

“Further, in many instances clients are willing to increase upfront remuneration to $170,000–$180,000 to secure the best talent in the market, capable of managing high-net-worth and sophisticated clients with complex servicing requirements.”

Earlier this year, Business Health research with almost 100 practices found an adviser with more than five years’ experience earned an average salary of just under $150,000, including superannuation.

Junior advisers, or advisers with less than five years’ experience, earned an average of $97,872 with a bonus payment of $7,414. However, less than half (42 per cent) of the firms actually employed junior or less experienced advisers.

According to Recruit 2 Advice, looking ahead, the single greatest challenge facing the industry is in mid-level client service roles with limited or no supply in many regions. 

“The flow-on effect of the group exits of banks and institutions switched off graduate entry supply channels and that has started to bite. We see outsourcing not only becoming a popular option but in many instances the only option,” it said.

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My experience as a PY adviser after several years doing client service and admin in the industry wasn't great. After months of searching for someone to support my PY, the best I got was an offer for $50k p.a. and the larger firms I applied to (passing cognitive tests and chasing them for months) would tell me that an internal candidate had made it through. One firm asked me if I would do 2 more years of client service before considering me for the PY.

I could complete a PhD faster than I could become an adviser!

Some other firms wanted me to be both an admin person and experienced paraplanner, with no promises about progressing into the PY...

Some closing thoughts:
1. Anyone who secures a good gig straight out of university with no relevant experience is benefiting from a degree of luck/connections.
2. I am absolutely jealous of the older generation who had better job opportunities, more support (with mentoring), better real wages and who were able to get started with much less education (that was also much cheaper).

I say this as a practicing financial planner. Do a Masters of Taxation or something similar and move to accounting. You have a much wider opportunity in relation to work and a much better future than you would have in financial planning. Please note that the issues you advised remain relevant in accounting but there is much wider potential to get work, particularly in relation to corporate roles.

In other words what has happened to you, whilst negative and undoubtedly disappointing and hard to deal with from a mental health perspective, is actually a win for you in my opinion. I regret becoming a financial planner every single day and am comfortable this is not me - it is the industry / profession.

Your experience isn't that different to mine about 10 years ago.
In the last 2 years of my FP degree (I started studying Accounting, but decided after the first year I wanted to do FP), I worked at an FP arm of an accounting firm. It took a lot for me to get that position - I started on $35k, just so I could get an opportunity. Back then, my employer didn't even understand how my qualification was sufficient to meet RG146 (it was the norm to do a DFP then - probably should have been a warning sign). My job was admin/paraplanning, and so when I was finally finished my degree, I was excited that I might already have my foot in the door. I requested, bargained, pleaded away to get an opportunity to do some proper FP work and become an AR (and hopefully make some alright money), and kept getting pushed back - the FP boss told me this wouldn't be available until I was 'absolutely perfect in my role' (mind you, had helped him realise and fix plenty of his own mistakes).
So I left. I hopped around a couple places until I found somewhere willing to give me a go. 8 years on and I've finally found the place where I intend to stay.
All that to say, this industry has been tough for a long time, at least as long as I know of. A lot of competing egos, more empty promises than I can count, and every excuse under the sun to drag you down. These are the times it sucks, and I'm sure I could have made a lot more money in the meantime doing something else. I've finally started making the kind of money I should be making, and now have a pathway ahead to make more, and improve the lifestyle of my family.
So, bunker down if you plan on continuing down this road. There will be a lot of bumps on the way, but there are some good times as well - arguably, these might be much rarer than they used to be (I could be talking out of pocket there). It's easier to get out early, but it's up to you if it's too late to change. My advice would be to grow a thick skin as quick as possible, and be prepared to cop some filth, but stay strong mentally and you will overcome with time and perseverance.
Best of luck mate

Submitted by Anon on Mon, 2023-07-17 16:38

I agree we've made it too hard to enter this industry. The expectation now is you leave school, do a Bachelor of Financial Planning and upon completion aged 23 you walk into a role as an Adviser earning $150K plus. Australia as a whole is not ready for the 24 year old Graduate to be telling a 32 year old with their first kid and a mortgage valuable life lessons. Sad to see you knock back plenty of good opportunities. During my own career, I took a $40,000 pay cut and worked in client service for 2 years and I worked practically for free for 6 months on the promise of buying a business at discount that never happened. I spent two years as a paraplanner earning about half I made in another role. Upon setting up my own business I made nothing in the first two years and spent the next 5 years paying off the mortgage I took out to feed myself.

Submitted by Anon on Mon, 2023-07-17 17:28

Your situation begs the question of why none of your employers for the several years you were doing client service and admin were willing to support your PY?

The costs and risks to advice firms of supporting a PY adviser are considerable. Most would be unwilling to support a PY who hasn't spent a couple of years working for them in junior roles. It's not so much about gaining generalised experience, it's more about showing you have the aptitude and cultural fit to become a successful long term employee in their particular firm.

1 employer - small company (handful of employees, no junior roles). I tried applying to larger firms and most asked for someone who worked in another large firm. I broadly agree with your comment.

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