Professional year (PY) advisers offer limited value to practices looking for advisers because of the costs associated with supporting them and the longer time commitment it takes to train them, according to Guideway Financial Services.
Speaking to Money Management, Guideway Financial Services’ head of client services, Daniel Hicks said provisional advisers were not appealing enough for firms despite declining adviser numbers and rising demand for advice.
“To become qualified as an adviser, you need another adviser to take you on… but there’s not really much upside for that,” Hicks said.
Last week only six provisional advisers were appointed in Australia while the total number of advisers dropped by 59, according to Wealth Data, while the number of advisers in top groups had shrunk by about 5000 in the last three years, according to Money Management’s TOP Financial Planning Groups research.
Hicks said part of the reason PY adviser appointments were not meeting the shortfall of advisers was because of the risks that supervising advisers would need to take on to support them.
He said the risks stemmed from the fact advice provided by a PY adviser, who were often very young, fell under the responsibility of the supervising adviser. And they could not provide advice until they hit a six-month milestone.
“In the past, you could hire people who were more mature and comfortable relating with older, wealthier clients,” he said.
Hicks said advisers were also too time poor to support new graduates as they were busy keeping up with increased demand.
Another reason for the shortfall, Hicks said, was because the scale of graduate programs at large advisory firms had reduced as big banks left the industry or cut back their advice businesses.
Comments
Well, I think this was obvious from the start.
Unless you are prepared to work for little or no pay, or had a relation that was a FP, then what incentive is there to take on someone new. Especially now where it is largely 'user pays' then clients will be reluctant to pay 'fees for no experience'.
Once the great "drop off" occurs in Jan 2016, the PY will lead to the eventual collapse of the advice industry. This is because, as the article points out, taking on a PY candidate only takes resources out of a business with ZERO guarantee the person you have helped through it will actually stay with the business. Once adviser numbers drop to a certain level and god knows that that will be after Jan 2026, companies that rely on scale (ie. a certain number of advisers in the industry) to operate will start to close and this will have a snowball effect on other businesses. Take away the PY and limit the advice areas new entrants can give advice on in the first year and then change the parameters over time as they become more experienced.
There is no "shortfall" of licensed advisers. Regulatory settings are pushing consumers away from licensed advice, towards dodgy direct products and unregulated advice. There is plenty of growth in these areas to meet increased consumer demand.
There is minimal need for education in the burgeoning unregulated advice sector. Much less a PY.
… gosh and in the same edition as “industry hard to sell to new entrants”. Could they be related? Hmm.
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