It’s not an easy time to be a financial adviser. Between regulatory changes and big firms like MLC getting out of the advice game, there’s definitely been a squeeze on advisers.
It’s not just your imagination. Rainmaker research found that the number of registered financial advisers decreased by about 15% last year.
The issues are myriad. Licensees are either reducing their headcount, like Evans Dixon announced in their half-yearly results (adviser numbers were down 14%), or getting out entirely, like MLC.
Is there a demand for financial advice?
At the beginning of the year, there was a bullish attitude toward the future of financial advice in Australia. SuperRecruiters put out research showing that wealth managers were actually looking to expand or stay reasonably static.
“A third of wealth management organisations recently surveyed said they expected to hire more employees this year (32%),” said Sally Humphris, SuperRecruiters executive director.
“Two out of five (42%) expect to maintain staff numbers at current levels.”
At the time, none said they planned to downsize. “Though 16% said they expected to replace some roles with technology.”
SuperRecruiters wasn’t talking specifically about wealth management or financial advice, but more broadly. The underlying principles are the same, however. We have an ageing population with a growing net wealth who is looking for the right thing to do with it in uncertain times.
Where are there opportunities for growth?
In reporting on adviser departures, Elizabeth McArthur at Financial Standard noted that advisers associated with institutions were disproportionately affected by redundancies.
The number of advisers associated with institutional or insto-aligned licensees reduced 22% or by 4253 in the 12 months to December 2019 to 12,976.
Meanwhile non-insto aligned advisers only fell by 5% to 11,083.
Many of the people Industry Moves has been talking with have started up their own businesses, like Wade Ritchie, who started Rich Life Advice after nearly 15 years as a private client adviser with Shadforth Financial Group.
There are still opportunities, though they are more difficult to find than this time a year ago. For example, Fitzpatricks Private Wealth has added a dozen staff over the last year, and five of them were women. That brings the total number of female partners in the business to 20%, which lines up research released by RMIT in Melbourne into women in financial advice.
A spokesperson for the business said, "Fitzpatricks follows a sustainable approach to their recruitment, which has been gradually built and appropriately thought out to best support advisers, including through back office support for their Leader Adviser Business model, so to ensure they spend more quality time with clients."
What points of difference are helping advisers stand out?
MetLife released their 2019 Adviser-Client Relationship Report in early March, which found that people who are already under advice are willing to make a change because of four key reasons: high fees, commissions, a lack of trust, and value.
Jeff Scott is head of advice strategy for MetLife Australia. "The recent spotlight on the financial services industry has caused clients to take a more active interest in the financial products and services they hold and question the value they’re getting from these relationships.
"Where clients don’t see value from their adviser, we’re seeing clients looking to either shop around or to stop seeing one entirely, meaning it’s critical that advisers put the right measures in place to get to the heart of clients’ concerns."
To Scott, the path to success is clear: be as transparent as possible and look to provide regular review with clients. It is similar to the way that Fitzpatricks operates, allowing advisers to make a personal connection with clients, and not treat them as a transaction.
Said Scott, "And the payoff is clear, with clients who undertake annual reviews tend to be more satisfied, loyal and likely to go on and recommend their adviser to a third party."
Promoting female financial advisers
As mentioned previously, women make up just 20% of the financial advice profession.
With more women taking a primary role in managing family finances, it would make sense to bring that number closer to parity to provide people with more options. Investment Trends found that, through 2019, the proportion of women investing has increased substantially, now up to 18% of active online investors.
Dr Helen Roberts of the University of Otago’s Department of Accountancy and Finance, says competitive sales-based structures, servicing client needs, difficulties networking, a dominant masculine management culture and the gendered nature of flexible work inhibit women’s careers in financial advice.
"These factors aren’t necessarily wrong from an employment law perspective, however we’ve discovered they significantly impact career progression and job satisfaction for female advisers," Roberts says.
Roberts offers some suggestions to bring up the number of women in financial advice in Australia in a paper co-authored with Dr Daniel Richards at the RMIT School of Accounting. Female Financial Advisers – Where Art Thou has been published in the Australian Journal of Management.
Among their suggestions:
- The industry could normalise temporary part-time work opportunities for all employees and provide a defined route for advancement from a part-time position to an advising role.
- Adviser partnerships (already operating in NZ) enhance work-life balance and should be considered in Australia.
- The removal of conflicted remuneration in Australia and/or an option for fixed compensation may encourage female FAP participation.
- Providing a variety of networking opportunities will allow females to choose a suitable time and environment to participate.
- Senior management needs to actively promote changes in culture to champion female recruitment and retention.
- Industry leaders and fellow FAPs need to develop strategies that allow women FAP’s selective networking techniques to flourish and ensure they build strong client bases.
The final takeaway from the report is the most interesting: the authors believe both the women themselves and the organisations they represent would thrive if conditions were “more suitable” for female advisers.
The future of financial advice
It is a challenging time, and with continually shifting regulations and expectations, that’s not likely to change any time soon. Organisations that are going to thrive will need to start to think differently about how they approach advice.
As MetLife’s Jeff Scott said, "If there’s a key takeaway from this research it should be that there is no such thing as a ‘set and forget’ client anymore. Client engagement should be the number one priority on every adviser’s business plan for 2020."