Supporting financial planners to stay the course

02 September 2020

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

Multiple research reports are raising the alarm about planners leaving the advice profession in numbers. While it’s definitely a challenging time, the future for financial planning professionals may not be as bleak as it seems. And with support services and advocacy for policy reform, the FPA is committed to helping members prepare for the rising demand for financial advice.

As Adviser Ratings and Investment Trends both publish reports on falling numbers of licensed financial planners, concern is growing about the shrinking financial advice capacity needed to support Australians at this difficult time. In its Adviser Musical Chairs Report for the second quarter of 2020, Adviser Ratings reported a 5.2 per cent fall in the number of financial planners, which is a net loss of 1,198 advisers for the quarter. According to the report, this represents an annualised reduction of 21 per cent in adviser numbers for 2020, compared with the 16 per cent decline seen in 2019.

A closer look at the numbers

At the Financial Planning Association (FPA), our policy team has undertaken further analysis of this fall in financial planner numbers in recent months. Working with data taken from the Financial Adviser Register at 1 June 2020, around 6,500 planners have left the register since 2019. We estimate that around one third of these are individuals who sought to join the register before 1 January 2019 to be considered ‘existing advisers’ by FASEA, but haven’t renewed their registration for the current year.

We also identified a small number of planners leaving due to retirement, but the largest group do seem to be financial planners ending their career early. While we don’t have comprehensive data on their reasons for leaving, we expect that many are struggling with their chosen career due to difficult business conditions, changing industry structures, issues with the accountants exemption/limited license AFSL regime and the impact of reforms including FASEA education standards and more onerous compliance requirements.

Another report from Investment Trends has offered a different view on changes in the number of financial advisers leaving the profession. In its 2020 Planner Business Model Report, Investment Trends suggest that ‘true’ planner numbers are holding steady in 2020. While acknowledging that planners are facing a difficult operating environment of “regulatory landscape, disruptions from major players entering and leaving the wealth management space and the recent pandemic-induced market volatility,” the report goes on to say that only 4 per cent of those surveyed intended on leaving the profession this year.

What’s challenging financial planners

Although financial planners may be persevering through these difficulties, many of those surveyed acknowledged the significant issues they’re facing due to growing compliance obligations. It was the top challenge identified by the Investment Trends survey, with well over half of financial planners (67 per cent) citing it as their biggest business headache, followed by providing affordable advice (46 per cent).

But while compliance and affordability may be key challenges for financial planners already in practice, it’s the path to becoming qualified that’s most likely to be a problem for new planners coming on board. At the FPA, we’ve heard from our professional community that managing the professional year requirement from FASEA is a major hurdle for new graduates as well as a potential disincentive for those considering a career in financial planning. This is supported by the Adviser Ratings report which identifies the introduction of the professional year as the number one deterrent to entering financial planning. Their data shows that of 56 per cent of financial planning students who graduate, only half (28 per cent) go on to work in an advice firm.

Meeting demand for advice at a challenging time

Up until June, only around 50 new financial planners have joined the profession this year, compared with a total of around 300 in 2019. This is a real concern for the FPA as we are highly aware of the importance of having a strong pipeline of new graduates to take up a career in financial planning and replace those retiring. This concern is amplified by reports that the COVID-19 pandemic is creating even greater demand for financial advice among Australian consumers. Adviser Ratings highlights this trend in its report and point out that the early access to super scheme has played a major part in driving this demand.

Support for a thriving profession

In response to the many challenges facing financial planning students, graduates and professionals, the FPA is continually reviewing the support we offer to meet the changing needs of our members and wider profession. We are committed to delivering tools, resources and services designed to enhance financial planning businesses and improve client engagement. Given that COVID-19 has added to the many complexities confronting financial planners, it’s important for our members to be aware of these services they can access.

Education and career

To support financial planners getting started in the profession, and with ongoing education to meet FASEA and CPD requirements, we offer a whole range of options for learning support. Our FPA Learn portal is designed to make it easier for members to complete FASEA requirements and prepare for the Financial Adviser exam. We have also recently launched My CPD, a new platform giving members access to more than 300 hours of FPA accredited CPD from over 100 suppliers. Plus we offer a number of ways for university undergraduates to engage with their professional community and plan for their future career, including our Career Ready Webinar Serieswhich has been running during August and September 2020.

 

To help financial planning practices take on new graduates wishing to become fully qualified, we have recently launched a workflow tool for creating and tracking a training plan for Professional Year candidates. The platform offers licensee, supervisor, and candidate views of each step on the Professional Year pathway including the FASEA exam, structured and unstructured training elements, and the resolution of ethical dilemmas. To use the tool in your practice get in touch with education@fpa.com.au.

Practice Management

Integrating technology into their businesses can help members reduce costs, manage change and maximise efficiency. Via our Fintech hub, the FPA offer guides, checklists and insights on fintech solutions and digital SOAs. We also offer our comprehensive Professional Practice Program for eligible financial planning businesses. Joining the program brings your practice the benefits of being a recognised leader in professional and ethical standards, through our referral programs and partnerships. You will also have access to the FPA READY Index tool providing your practice with powerful data-driven diagnostics, allowing you to benchmark your business, further improve and strengthen your practice across five key areas:

  • Risk and compliance
  • Efficiency and technology adoption
  • Aspirations
  • Differentiation to meet client needs
  • Yield

The FPA READY Index is produced by our partner CoreData and is available exclusively to FPA Professional Practices.

Advocacy

In addition to providing resources and support for members as they learn and develop their businesses, the FPA is also very active in addressing the compliance and affordability challenges. Our new Policy Platform document Affordable Advice, Sustainable Professioreleased in 2020, lays out an ambitious advocacy agenda for the next five years. With recommendations ranging from simple cost-effective regulation to licensing of individuals to tax deductibility of financial advice, the report is very much focussed on the compliance and affordability challenges that are of concern to our members and our broader professional community.

As the economic landscape, legislation and technology shape the future of the financial planning profession, the FPA will continue to advocate for positive change. We are committed to facilitating a policy foundation and providing member resources that will see financial planning thrive as an essential and valued profession for all Australians.

Visit your FPA Member Centre for full details about your range of exclusive member resources, services and tools. 

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