Advisers facing a perfect storm

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Heathcote principal Clayton Coplestone says advisers are facing a 'perfect storm'.

Monday, September 6th 2021, 6:12AM 1 Comment

He says advisers face a number of challenging issues, and the answers are not abundantly clear.

FSC research suggests that about a third of advisers are looking to exit this industry in the next five years, yet there is no clear sign that people are lining up to become advisers.

While he acknowledges there are "some really talented new people spilling out of banks, who are well-trained"  but there are not the numbers to replace the impending exodus.

This comes at a time when the demand for advice is outstripping supply.

The number of people looking to exit is not too much of a surprise to Coplestone as research shows the average age of advisers is 57 and many will be looking to retire.

However, one of the challenges is how will new entrants fund any purchases? Coplestone estimates buyers will need $1 million or more to purchase books assuming they are sold on multiples of between two and two and a times revenue.

In the past institutions were buyers of advice businesses, but they have clearly stopped becoming buyers, he says.

Added to the challenge facing advisers is that research shows many advisers are sitting on big client bases, but not doing a lot of servicing of these people.

According to the FSC 70.2% of advisers have more than 200 clients. Digging a bit deeper 21% of advisers say they have more than 1000 clients and 15.4% claim to have between 501 and 1,000 clients.

The research says 19% of advisers meeting 80% of their clients annually.

Coplestone says advisers are carrying significant amounts of risk in the new regulatory environment. "Each client carries the same amount of risk," he says.

Under the new regime advisers are required to know their clients, he says, but the research indicates that is unlikely to be the case.

Coplestone says advisers with large books face the prospect of losing clients through a lack of service or from other advisers.

He says the advice industry has been blessed with good fortune over the years, and it has become a bit complacent. With the challenges ahead things need to change.

Tags: Clayton Copplestone

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