The Disappearance Of Financial Advisers In Oz

SMSFundamentals | 11:45 AM

A vanishing breed: The disappearance of Australia's financial advisers

-Number of financial advisers in decline
-Trend contrasts with increased need for financial advice
-New rules have made life much harder for financial advisers
-Market is seeking solution through multiple alternatives
-Industry stakeholders are calling for regulatory reform

By Lily Brown

For years, financial advisers have been trusted guides, helping Australians manage their money, invest wisely, and plan for the future. But now, they are disappearing.

In 2019, there were more than 28,000 registered advisers across the country; by 2025, this number stands at less than 16,000. This isn't because people no longer need financial advice; quite the opposite.

The problem, according to Julien Meinrath, a former financial planning veteran turned financial coach, was a convergence of three main factors:

-ongoing legislative changes,

-the fallout from the Royal Commission (more details on that later),

-and the demographics of the adviser population itself.

By the time the Royal Commission hit, many advisers were in their mid-50s and nearing retirement. Faced with the need to make significant changes such as getting a master's degree (a new requirement following the Royal Commission) late in their career, "many simply chose to exit rather than reinvent themselves," says Meinrath.

The inadvertent counter-effect of a regulatory squeeze

Financial advice has always been regulated, but after the Royal Commission into banking and financial services, the government cracked down hard.

Investigations revealed some advisers were charging fees without providing services, giving bad advice, and steering clients toward investments that benefited the advisers more than the investors.

The response was a wave of new regulations designed to protect consumers, but these rules have also made life much harder for financial advisers.

Some key changes include:

-Higher barriers to entry: Financial advisers must now pass an exam administered by the Australian Securities & Investments Commission (ASIC) and meet stricter educational requirements. According to Meinrath, "The qualification requirements jumped dramatically. Suddenly, there was talk of advisers needing to have a master's degree. For people nearing retirement who'd never studied formally, it just wasn't worth the economic cost."

-Fee-for-service model: Moving away from commissions, advisers must obtain explicit client consent annually for ongoing fees. However, Meinrath observed, to get around the sticker shock for clients, a lot of businesses simply rebranded the fees. "What used to be a 1% commission became an establishment fee'. Same amount, just a different name," he explains.

-Increased compliance costs: More audits, enforcement actions, and rising professional indemnity insurance costs. Meinrath confirms, "There's no question, the cost to comply has become enormous. Throughout my 15 years as an adviser, that burden only grew."

-Dismantling of large dealer groups: Major banks exited wealth management, forcing advisers to either become independent requiring costly new licenses or leave the profession altogether. Meinrath, who worked at Westpac, recalls, "The banks owned the whole vertical. Westpac had BT Funds Management, Commbank had Colonial. When the Royal Commission happened, they tried to unwind those positions."

While these changes were meant to fix the industry, they have made it much harder for advisers to do their jobs. Many experienced professionals have chosen to leave rather than deal with the added stress and expense.

"While regulation is essential in a sector like financial advice, successive governments have imposed complex and often duplicative obligations that drive up costs without delivering meaningful improvements in consumer protection," says Daniel Gara, a 25-year veteran of the advice sector, co-founder of AdviserLogic and financial technology leader. "A rationalisation of the regulatory framework could reinvigorate the sector."