Adviser numbers might halve

It has been predicted that the number of advisers in the market could drop by up to 50% as the new regime beds in.

Wednesday, April 19th 2017, 6:00AM 3 Comments

by Susan Edmunds

Michael Dowling, president of the IFA

The review of the Financial Advisers Act is in its final stages.

Soon, advisers will fall under the Financial Markets Conduct Act, will all have to work for licensed entities and will be bound by a code of conduct and disclosure requirements.

Many of the details of the regime are yet to be worked out and will not be evident until the new code is revealed.

That includes things such as the qualifications that will be required for advisers.

But Michael Dowling, president of the IFA, said it was likely that people currently working as registered financial advisers would drop out.

He said the Australian experience, and that of New Zealand when the Financial Advisers Act was first introduced, would indicate that 20% to 50% of RFAs might decide not to make the transition.

That would be a problem if they were not replaced swiftly, he said.

"It's difficult to get the level of experience, let alone get them into a new qualification."

Graeme Edwards, AIA's acting chief executive, said there could be a drop in headline RFA numbers but that might not reduce the head count at the front line.

“I expect that will reflect those that focus on investment or mortgages and sell the odd policy deciding to focus just on their core business and refer those leads out. The advisers that are currently actively writing insurance will adapt and continue to prosper so I don’t foresee a significant drop the ‘active’ adviser numbers.”

Regulation expert Angus Dale-Jones said there was an opportunity to improve people's view of the industry and encourage new recruits in, "in a competitive way so advisers compete with other careers as something people aspire to do".

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Tags: Financial Markets Conduct Act

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Comments from our readers

On 19 April 2017 at 11:49 am Brent Sheather said:

Overheard in the Hartley household last night “honey I have shrunk the advisor industry”.

On 19 April 2017 at 12:53 pm Ron Flood said:

Is this another version of the 'Chicken Little" story?

On 21 April 2017 at 3:53 pm dcwhyte said:

While I agree with the thrust of the article there are one or two points worthy of clarification.

1."Advisers will have to work for licensed entities" - true, but in many cases, their own trading entity will likely be the licensed entity. The possible inference that advisers will become FAR employees, lose their independence and professional discretionary capacity is misleading.

2. Adviser attritiion - in 2004, ASIC expected many more license applications to be submitted, and therefore made the incorrect assumption (as Indeed they frequently do) that upward of 30% of advisers left the industry. Closer, more considered analysis revealed that many advisers had joined up with Dealer Groups and the departure total was less than 10%. In NZ, no doubt more changes wlll see some retire, sell-up, or leave. I doubt if it will be anywhere near 50%. As in Australia, NZ Advisers are resilient and adaptable, and while I expect some rationalisation, some timely exits, and some taking the opportunity to hang up the pen, I seriously doubt the premise of the headline.

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