Financial adviser numbers at five-year low

There were 19,382 financial advisers operating in Australia as at 30 June 2021, the first financial year since 2015 that ended with numbers falling below 20,000.

Almost 9,000 advisers have exited the industry since 2018, approximately a 30% decline, according to Rainmaker Information's latest Financial Adviser Report.

In the last year alone the number of Australian Financial Services Licensees (AFSLs) fell from 2,125 to 1,907, a 10% decline, of which advisers that are part of a bank-owned licensee fell 39.6% in the same period.

The larger AFSLs are seeing the biggest reduction in their adviser numbers. The number of advisers representing AFSLs with one or two advisers actually increased by 0.6% in the last calendar year and AFSLs with three to 10 advisers only decreased by 3.9%.

The RainmakerLive Adviser Movements Pipeline has found the follow movements to 31 August 2021.

"This adviser exodus has been associated with the massive disruption now befalling the financial advice sector," said Alex Dunnin, executive director of research and compliance at Rainmaker Information.

"The regulatory disruption that Australia's financial advice sector is facing is due in large part to the huge push by government, regulators and other stakeholders to improve the quality of financial advice."

With several new pieces of legislation being introduced from 2017 to 2020, this corresponded with the industry shifting from a gradual incline in the number of financial advisers into a rapid decline.

"We are yet to see the evidence, however, of how all these regulatory changes have improved the outcomes for those who seek financial advice," said Dunnin.

The key legislation introduced since 2017 includes:

• The Financial Sector Reform (Hayne Royal Commission Response) Act 2020. Passed in December 2020, the Act requires advisers to:
• Obtain consent to continue a service fee arrangement with a client every year.
• Provide a statement confirming that their practice is not independent, should they receive any form of commission.
• Provide evidence of consent to super fund trustees when deducting fees for advice from a member's superannuation account, under a non-ongoing fee arrangement.

• Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019, passed in April 2019.
• Product issuers must identify the target market for their products and advisers cannot distribute a product that does not have a target market determination.

• Corporations Amendment (Professional Standards of Financial Advisers) Act 2017, passed in April 2017.
• All existing registered financial advisers have until 1st January 2022 to pass the Financial Advisers Standards and Ethics Authority (FASEA) exam. In cases of noncompliance, their licensee will be required to remove their authorisation to provide advice and notify ASIC.

• Financial Sector Reform (Hayne Royal Commission Response - Better Advice) Bill 2021, pending.
• This Bill will have implications ranging from registration of financial advisers, moving to a single disciplinary body, to additional penalties and sanctions for breaching obligations under the Corporations Act.