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Financial Advice Landscape
Netwealth webinar May 2020
Business Climate
The industry challenges are daunting
14%
Low trust and ethics
82%
High education gaps to achieve new professional standards
$11b
Only 1 in 8 Australians trust financial advisers “a great deal� (ASIC Report 627)
4 in 5 advisers need further study by 2026 to stay a financial adviser
Poor historical compliance / high remediation costs All major banks, AMP and IOOF have set aside billions in compensation since 2014
30% 60% 50% The new financial adviser
High adviser turnover 1 in 4 advisers are switching licensees or leaving the industry each year
Revenue challenges and falling valuations Removal of grandfathering and LIF could impact revenues by up to 60%
Licensee growth Licensee 5-year increase has placed significant pressure on regulators and
increasing risk for consumers
The opportunity to serve consumers remains strong Demand For Advice in Australia
Financial Literacy Levels of Australians
C o n s u m e r s
C o n s u m e r s
Current concerns of advised consumers Top 5 concerns:
1. 2.
Loss of income / Cash Flow / Debt Management
3.
Job Security / Job Keeper / Redundancy
4.
Early access to Super
5.
Health / Mental Health
Market Volatility / Investment Performance / Uncertainty
What advised consumers think about their future
End 2021
22%
End 2020
8%
0%
18%
20%
19%
10%
20%
41%
61%
30% I don't know
40% No change
50% Worseoff
12%
60% Better off
70%
80%
90%
100%
Advisers stepping up to help consumers affected by COVID-19
73% 68%
C o n s u m e r s
55% 44%
Redundancy or loss of earnings due to COVID-19
Other financial hardships due to COVID-19
Advice on early access to super for a fee, which the government has capped at $300
Pro Bono advice on early access to super
Mass privatization of industry by bank exits leaves capital vacuum
Institutional Exits
Smalls rule? 93% of licensees authorize only 27% of advisers Number of Licensees 2015-2019
Adviser Distribution by Licensee Type in Q1 2020
400 New 350
Discontinued
Number of Licensees
300 250 200 150 100 50
0
2015
2016
2017 Year
Musical Chairs
2018
2019(*October)
Musical Chairs
Adviser exits, entries & licensee switches Exits & Entries By Licensee Type 2014-Sep 2019
Advisers Switching Licensees 2014-Sep 2019 2 014
2014
2015
2016
2017
2018
2 015
2 016
2 017
2 018
2019
2 019
2,174
3,165
1,700
2,714
601
654
757
630
531
➔ SwitchedIn
1,037
595 413
415
403
341
2
0
➔
135
735 846
678
794
910
1,094
784 898 1,405
487 670
837
877
960
823
379 639
400 614
578 517
640
877
820
308
331
299
295
878 800
735 846
815
487
784
823 1,096
898 1,094
1,489
Institutionally Aligned
Institutionally Owned
800 927
1,013 1,275
Privately Owned InstitutionallyOwned
379
517
571
2,064
Institutionally Aligned
368
271
400
413
1,275
Privately Owned
626
577
927 1,013
787
146 31
164 413
866
➔
153
Ceased Advisers
1,128
SwitchedOut
➔ New Advisers
1,579
1,403
1,348
1,310
Professionalism
Education remains a long and winding journey FASEA Education Pathway Status of Industry 2019 50%
Proportion of Advisers
40%
30%
20%
10%
0% Approved degree pathway
Relevant degree pathway
Non-relevant degree pathway
No degree pathway
Category / Pathway
Pathway Requirement
Approved degree
1 subject – FASEA code of ethics atAQF8
Relevant degree
3 subjects at AQF8 + 1 FASEA approved subject
Non-relevant degree
Approved graduate diploma (7 subjects atAQF8)
No degree
Approved graduate diploma (8 subjects atAQF8)
Non-Relevant & No Degree Pathway Status of Top 20 Licensee 2019 M3 Bell Potter AMPFP FinWiz Charter Synchron Garvan Hillross CFP Morgans ANZFP NABFP Interpract Capstone Merit Stateplus GPSWealth SMSFAdvisers Count JBWere 0%
10%
20%
30% 40% 50% Proportion of Advisers in Licensee
60%
70%
80%
Adviser revenues challenged on many fronts Grandfathering penetration (Dec 2018)
Grandfathering removal impact
Fee structures
Average FUA per client
Advice Business
Average Client Fees
Advice Business
Advice practices trading as going concerns or �tuck-in� books Practice Distribution Dec 2019
Practices as Willing Sellers (17%, 1,500 practices, $190b FUA)
6+ Advisers 6+ Advisers
52
113 7.1%
10.1%
5.1% 8.1%
4%
8.1%
19.2%
Practices as Willing Sellers by Practice FUA
Practices as WillingSellers by Practice Size
28.3%
46.5%
47.5%
Practices as Willing Sellers by Licensee Type
35.4%
36.4%
27.3%
17.2%
$5-$20million
10.1%
$20-$50million
8.1%
$50-$100million
28.3%
$100-$200 million
27.3%
$200-$500 million
19.2%
$500 million +
Aligned Institution Private
7.1%
1 Adviser
46.5%
Institutionally Aligned
35.4%
2-3 Advisers
36.4%
Institutionally Owned
17.2%
4-5 Advisers
8.1%
6-10 Advisers
5.1%
10+Advisers
4.0%
Privately Owned
47.5%
2,074 578 6,193
Valuation Multiples for Tuck-In Practices
1 8
The new advice model and the rise of robo
Digital Advice
Service providers facing a new paradigm (NPS scores) Platforms
Researchers
Life Insurers
Planning Software
Industry Vendors
Advisers
The 2019 “average� adviser
2 1
Adviser: Qualification_Types
Practice: Practice_SMSFs
For further information please contact Mark Hoven
Practice: Practice_Name
+61 413 614 640
Location #01
mark@adviserratings.com.au
www.adviserratings.com.au www.pro.adviserratings.com.au A Personalized Neural Network for Each User
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