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Thriving in the ‘brave new world of advice’

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5 November 2024 by Jasmine Siljic, Money Management

Article link: https://www.moneymanagement.com.au/news/financial-planning/thriving-brave-new-world-advice

Adviser Ratings has pinpointed five key trends characterising the future of the Australian financial advice profession.

The research house’s quarterly Musical Chairs Report for Q3 2024 explored several themes that are currently emerging in the advice sector.

These are:

  • The age of the independent adviser
  • Technology as the great enabler
  • Regulatory ability 
  • Client impact
  • Talent wars
It stated: “As we navigate this transformative period, one thing is clear: today’s financial planning profession looks very different from yesterday’s financial planning industry.
“Those who can adapt to this new landscape – embracing autonomy, leveraging technology, and putting client needs at the forefront – will be best positioned to thrive in this brave new world of financial advice.”

The age of the independent adviser

The report noted that the total number of advisers working in privately owned firms of any size is 11,124, representing almost three-quarters of the market.

In contrast, some 1,646 currently work in a diversified firm, and this has steadily come down from 3,102 in December 2021. Some 209 work in a bank, down from 327 at the end of 2021.

Adviser Ratings explained: “The shift towards privately owned licensees suggests a future where independent, personalised advice is king. This could lead to more tailored client experiences but may also present challenges in terms of scaleability and standardisation.”

Two major announcements that have led to greater independence in advice include Rhombus Advisory’s separation from Insignia Financial in July and AMP’s sale of its licensees to Entireti, set to complete by the end of 2024.

Technology as the great enabler

The research firm added that the ability of small and medium-sized practices to effectively service their clients will hinge on their adoption of technology.

“Struggles with data accessibility, manual movement of data between systems, and implementation and reporting bottlenecks will continue to push up the cost of advice unless they are solved.”

Adviser Ratings recently highlighted strategic technology integration and digital tools as a key element for those looking to build a scaled advice model at a lower price point.

Regulatory ability

The quarterly paper stated that regulators will also need to adapt as the industry becomes characterised by a larger number of small, independent players.

“We might expect to see new frameworks that expand on ASIC’s Financial Services and Credit Panels emerging that are better suited to overseeing a more distributed, independent and professional advice ecosystem,” it said.

“This awareness of the need for regulatory adaptation will help the audience feel prepared for the future.”

Ensombl CEO Clayton Daniel told Money Management last month that the rise of self-licensed advice practices is making it more difficult for ASIC to monitor the advice sector as its enforcement spotlight is spread across a greater number of licensees.

Client impact

Advisers and regulators aside, clients are also set to feel the impact of an evolving advice landscape, Adviser Ratings continued.

“These changes could mean access to more personalised, innovative advice solutions for clients. However, it may also lead to a more fragmented market, potentially making it more challenging for consumers to compare and evaluate different advice offerings.”

Talent wars

Finally, the report wrote that the clear preference for privately owned advice models could see intensified competition for top advice talent. As a result, this could lead to changes in compensation models, professional development and work culture as firms compete for highly skilled candidates.

BT previously found that three-quarters of advisers were struggling with staff recruitment due to the shortage of advice professionals alongside a small pool of new entrants.

Adviser Ratings concluded: “The future of financial advice is being written now, and it’s clear that independent, client-focused and technologically empowered advisers are holding the pen.”

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