Industry challenged by falling advisers but growing demand

More consolidation of advisers is likely to emerge as increasing numbers leave the industry, according to Easton Investments. 

Speaking at the House of Representatives economics standing committee, Nathan Jacobsen, Easton managing director, said the firm had around 500 licenced advisers and that 160 had opted to hand back their authorisations as they were leaving the industry. 

Around 70% of these were accountants while the remainder were advisers who had sold their business or transferred it to a younger adviser. 

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For accountants, many felt the costs of the Australian Securities and Investments Commission (ASIC) levy were too high for it to be sustainable for them to keep giving advice. 

This was posing problems, Jacobsen said, as he expected the number of households seeking advice to reach three million by 2025. However, the number of advisers would be down to 15,000 by then. This would leave consumers seeking advice in alternative routes such as robo-advice.  

“It might be a temporary dislocation due to the small number of new entrants that might correct itself, but in the next five years then we have a problem,” Jacobsen said. 

Speaking to deputy chair, Andrew Leigh, he said he also expected to see more mergers and consolidation in light of this. 

“There will be consolidation in advisers themselves, they will merge and we will see a new adviser market emerge because of the rising costs,” Jacobsen said. 

“So, they will be better qualified advisers who are able to provide a better service, leading to better long-term outcomes.” 

Simultaneously, there was a problem regarding fees and the cost of advice, when asked by chair Tim Wilson, Jacobsen declined to estimate on a level of assets needed to make advice affordable.  

“There are limited opportunities for how to charge fees. Advisers are of a similar standing to a lawyer or an accountant so it is very hard to give that knowledge for a lower fee,” Jacobsen said. 

“An adviser would not be talking to someone who only had $20k because they would not have the cash available to pay the fees. 

“It’s no longer about how much you can afford to invest but whether you can afford the fee for the advice.” 

Wilson described this move towards higher fees as being “perverse”.  




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What is perverse is the witch hunt against advisers as a whole, forced to atone for the sins of the few.

There were 10,323 complaints in the royal commission into financial services, 9% of which were directly related to financial planning, yet we're seeing a constant tightening of the regulatory noose around financial planners' collective necks (commissioner Hayne in all of his wisdom chose to treat the industry as a whole and not differentiate between sectors).

The constant veiled threats of ASIC with it's new "why not litigate" approach, coupled with the looming spectre of an outrageously high penalty for an administrative transgression (forgot to give an FSG? That'll be $11,100 thanks) means that fewer and fewer people are going to want to continue in this profession, and certainly anyone with a modicum of intelligence (which I'm hoping covers the majority of university graduates) would think twice before committing to a career in this political minefield. Why would anyone put themselves at this much risk?

So, Chairman Wilson, unless the Government decides to start being reasonable and reduces some of the red tape (e.g. we could quite easily scrap the SoA requirement - given that advisers must by law act in a client's best interest, the SoA is now irrelevant - as long as adequate records are kept - and a large percentage of clients either don't read or struggle to understand these legislatively-mandated tomes), you will continue to see advice costs increasing and only being affordable to the wealthy few, which, ironically, is the complete opposite of the problem that the legislation purports to solve.

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