Australia is set to experience an exodus of advisers so massive in the following years that even by 2030 the industry will still be recovering from it, according to a whitepaper.
The knowITdigital whitepaper said it was probable that the eventual reduction in numbers would be somewhere between 35% and 50% at the peak, resulting in an eventual adviser population of between 12,500 and 15,000. There were 25,386 financial advisers registered in Australia in April 2018 according to the Hayne commission.
The study suggested that the number of advisers in the industry in 2030 will be lower than is currently the case. While the exodus of the early 2020s will not have been fully reversed, it said a steady flow of new, younger advisers will see the numbers back above 20,000.
The Professional Standards of Financial Advisers reforms will reduce the competition in the advice marketplace, but the post-banking royal commission and Productivity Commission reforms will shrink the size of the marketplace"
"This lower baseline of adviser numbers will reflect the reduced areas in which advice can be provided to middle Australia in 2030," the whitepaper said.
Further, the whitepaper cited a CoreData report that "clearly identified that advisers' level of desire to leave the industry was split along age demographics".
More than half of advisers aged 60 or older surveyed planned to leave the industry in the next five years, while this percentage fell in each 10-year age bracket, down to less than 5% of advisers in their 30s, and almost no advisers in their 20s, planning to exit the industry.
"The upshot is that adviser numbers can be expected to drop significantly in the short term, led by the large departure of older planners and that the average age of planners will reduce significantly," said the whitepaper.
Australia's financial industry has been caught in a string of scandals including charging fees for no service and charging dead clients life insurance. The Hayne commission revelations have prompted an overhaul of the sector, which will also impact the market.
"The Professional Standards of Financial Advisers reforms will reduce the competition in the advice marketplace, but the post-banking royal commission and Productivity Commission reforms will shrink the size of the marketplace."