More Than 30% Advice Practices Close in Australia

In Australia more than 30% of advice practices closed their doors during the pandemic, while the broader Australian economy thrived, according to Adviser Ratings, which has delved into the industry’s “reinvigorated sense of purpose and direction”.

“A staggering 2,828 advice practices, constituting over 30% of the market, closed their doors,” Adviser Ratings says.

The firm says while there were 8,995 advice practices in 2018, this dropped to 6,167 in 2023.

While many sectors flourished or were bolstered by government interventions, “…financial advice practices paradoxically grappled with a legislatively-imposed recession, highlighting the complex interplay of industry-specific challenges amidst nationwide economic resilience.”

The research company adds that now, on the precipice of potential economic downturns and a massive generational wealth shift “…the importance of qualified financial advice has never been more pronounced”.

“The complexities of modern financial markets against a backdrop of geopolitical uncertainty coupled with a potential real recession across the broader economy, mean that individuals and families, now more than ever, need guidance in navigating their financial futures.”

It also points to the imminent transfer of wealth to younger generations as post baby boomers age, adding that this transfer not only represents significant monetary sums “…but also a shift in financial attitudes, investment preferences, and a need for advice that aligns with changing values.”

the government …has listed financial advisers as one of 66 occupations experiencing a severe shortage…

“Unfortunately, there are far fewer advice practitioners – so much so that the government, through Job Skills Australia, has listed financial advisers as one of 66 occupations experiencing a severe shortage.”

Adviser Ratings notes that despite the skill shortage, commercial credit rating agencies have pronounced the sector is in far better shape today “…with those practices left standing on average having a far better credit rating … than the average from several years ago.”

“Accordingly, perhaps the profession envisaged, as part of the endless reforms or the ‘scorched earth’ approach as described by many, is closer in practice than theory.”

Quoting four different financial planners, the firm highlights that with this drop in adviser numbers, advisers see the huge opportunity for those who are committed and who are refining what they do to meeting the changing needs of the population.

…while the reforms were initially disruptive, the tides are turning…

“The consensus among advisers is clear: while the reforms were initially disruptive, the tides are turning. The challenges posed by potential recessionary times, the focus on retirement and the generational wealth transfer have offered a renewed purpose and direction for the sector,” Adviser Ratings says.

It adds that it will take some time to replace the 2,828 practices lost in the last five years “…and the right adviser to service the hundreds of thousands of orphaned clients, let alone the influx of new ones.”

Click here for Adviser Ratings full report.