How advisers are dealing with increased demand and capacity constraints

Tuesday 27th April 2021 Penny Pryor

Financial planners might be leaving the industry in droves, but the demand for quality advice is only rising post COVID-19, according to a study by MetLife. This, in turn, is creating capacity problems for advice firms looking to hire extra advisers to deal with the demand.

The MetLife Adviser-Client Relationship Report found that 42 per cent of people who aren’t currently advised say they are more likely to see a financial adviser now, than before COVID-19. It also found that 80 per cent of advised consumers with life insurance feel better about their current financial position as a result of having a financial planner.

“The pandemic has shown the importance of affordable, accessible financial advice for those who need it most. This year the experience ratings of advised clients was the highest we have seen in the three years this research has been running, with approximately 15 per cent increase in advisers receiving an excellent rating following a review,” MetLife’s chief retail insurance officer, Meray El-Khoury, said

On the ground

The research is backed up by the experiences of financial advisers who report capacity constraints and difficulties hiring appropriately qualified financial advisers to assist in their businesses. The ongoing regulatory burden on financial advisers is also putting limits on the time they have available to assist clients.

Financial adviser at Infinity Financial Advisers, Ben Travers, says that client demand is “absolutely crazy” and he hasn’t experienced work levels like this for a long time.

“The demand is absolutely increasing, from both new business and existing clients,” he says.

“Following the effects of Covid-19, we have seen two extremes. Firstly, those who have lost a job, had income reduced or been forced to find work in a part-time capacity. This has changed their situation, with some being forced to access their super early, or take on more debt.”

“The other extreme is retirees. The lack of spending is a real issue, with the big one being travel. They don’t need the full pension payments, with many opting for the Covid-19 reduced minimum. Many have cash levels building up [and are] now wanting further investment advice due to the low income environment.”

At each extreme there is a requirement for advice, and everywhere in between. “Once a client’s situation changes, we need to explore their entire situation, and deliver advice where change is needed,” Travers said.

Capacity constraints

But an adviser’s time is finite and there is also the training and ongoing education that they need to do

“I don’t know an adviser who doesn’t have capacity issues right now,” Travers says.

At Travers’ firm they are introducing separately managed accounts. This allows the advisers to provide quick investment decisions, within a strict mandate, once strategy has been discussed and decided on appropriately with an adviser. This helps sticking to a client’s risk profile in portfolio and allows more time to focus on strategy advice and meetings. They also brought on another financial adviser in September 2020 to keep up with demand. “

At financial advice practice Pivot Wealth, founder Ben Nash says they have taken on 75 new clients during the course of the past 12 months during which their team has grown from four to 15 to deal with the demand.

“When the initial COVID-19 hit, and during all the lockdowns, [we had] zero new clients for about six weeks but after that it was just like the floodgates had opened,” he says.’

But he has found it difficult to recruit financial advisers. He hired two in August to help out with the extra demand, but one backed out after being offered more at another organisation. He hired his last adviser through word of mouth and the XY Adviser network.

“I think that maybe people are a little more reluctant to change jobs off the back of COVID-19. I think it is sort of settling down a bit now,” he says.

Horses for courses

But for principal financial adviser at Brisbane-based Ethical Investment Advisers, Karen McLeod, it was the bushfires earlier last year during which she saw a massive increase in client demand as the obvious effects of climate change prompted many to switch to a more ethical approach to investing.

“We had a big surge in interest post bushfires which was early 2020 and late 2019, so compared to that, this is nothing, because most people [then] were just spurned on to ‘oh climate change is here we’ve got to move our money now’ which took everyone by surprise. So since then, we haven’t had as much inquiry volumes as the bushfires,” McLeod says.

McLeod’s business also advises a number of doctors and nurses who worked particularly hard during COVID-19 and just didn’t have the time to be seeking out financial advice or checking in with their advisers.

As more staff have adopted flexible working arrangements, Ethical Investment Advisers has been able to close one of their offices and use the funds saved to hire an extra staff member and to invest in tech for the business.

Adviser gap

With the number of advisers falling by 10 to 11 per cent each year – Rainmaker reported a net total of 2,638 advisers exited the industry in the 12 months to the end of March 2021 – the industry is heading for a real problem when it comes to providing affordable advice for all.

“A key point here, is that we are only talking about an advice gap right now,” Travers says.

“It’s not just an advice gap - we actually have an adviser gap. We need new, young professionals, or professionals from other industries, willing to have a career in financial advising. We also need senior advisors willing to mentor and coach the new blood via the professional year. Otherwise, we risk the gap widening.”

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