Adviser career path needed
Some major changes will have to happen to New Zealand’s financial advice sector if it is to follow the United States’ lead and grow, commentators say.
Tuesday, December 22nd 2015, 6:00AM 
2 Comments
New research from Cerulli Associates shows the US adviser head count has increased year-on-year for the first time in nine years, by 1.1%.
"Many positive developments led to the headcount growth last year," said Kenton Shirk, associate director at Cerulli.
"From the adviser perspective, there is a heavier focus on teaming and onboarding rookie advisers into multi-adviser practices. Advisers are eager to hire junior advisers so they can refocus their own efforts on their largest and most ideal clients. There is also greater awareness and concern about succession preparedness."
But the firm predicts numbers will start to fall again by 2019 as more advisers retire.
In New Zealand, the number of advisers has been steadily dropping since the advent of regulation.
In June last year, there were about 1900 AFAs operating in New Zealand.
Over the year to September, 91 new advisers were authorised and 122 terminated their authorisations. There are now 1842 AFAs.
Terminations include people who have let their FSPR registrations slide or voluntarily removed themselves and terminated their licenses.
Massey University financial services commentator Claire Matthews said financial advice needed to become an attractive career option, “particularly for young people coming in”.
She said it was very hard for young people to start out as advisers. “There needs to be an apprenticeship model.”
Institute of Financial Advisers president Michael Dowling agreed. He said there was no clear career path for advisers. “Do you go from a qualifying financial entity adviser to a registered financial adviser to an authorised financial adviser?”
He said a clearer track would make it easier to appeal to young people studying at university. It was something the FMA had acknowledged in discussions about the FAA review options paper.
Attracting the right people to become advisers was vital, he said.
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Comments from our readers
Any career path must surely be dictated by the advisers chosen discipline/type of advice given, namely, insurance (F&G or Life) investments, financial, retirement planning etc
As an aside, it is unfortunate the IFA appears to consider AFA status as superior (when in fact it is largely irrelevant for mortgage broking and insurance advice). Perhaps this is why they have so few members these days.
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I imagine the reason you have become confused is there were two segments of the US advisory industry where numbers increased - Registered Investment Advisors (RIA) and Dually Registered Advisers. The report states that RIA numbers are expected to continue to increase until 2019.
An RIA is not the same as a financial adviser as we know them, it is more like a fund manager. An investment advisory business in the US is the same as a fund management house here in NZ - they pick stocks and run portfolios of assets.
So what this report is saying is that the number of financial planners in the US (what we would call a financial adviser) is falling and has been falling since 2008. However the number of registered investment advisors (what we might call fund managers) is increasing and is expected to continue to increase until 2019.
The US advisory industry is complex (and often quite confusing), and while NZ could learn a great deal from it and even copy some of its features, I don't think we want to copy the whole thing.
This misunderstanding of US advisory terminology is also what has the NZ advise industry in a spin about the term Robo Advice. This term is derived from the US term Investment Adviser, which as I explained above has a similar meaning/function to a fund manager here in NZ. So not a financial adviser.
If you are still with me, here are a couple of links explaining some of the above.
http://www.reuters.com/article/wealth-cerulli-advisor-headcount-idUSL1N0VL23920150211
http://www.financial-planning.com/blogs/dually-registered-vs-hybrid-advisors-2686104-1.html