Education standards to exacerbate advice business sell-off

“Education standards and the FASEA exam deadline during the year will see an increase in advisers exiting, and we expect some will be single-owner businesses that will seek to sell,” Centurion Market Makers said.

“We expect enquiries in this respect to pick back up closer to the cut-off date for non-university-qualified advisers.

“We caution advisers in this position that a rush of books onto the market at a time where there will be far fewer buyers will attract lower prices and leave some advisers without a solution.

“A planned process to exit the industry is always preferable, and leaves advisers with more options than a rushed exit.”

In a recent address to the House economics committee, Easton Investments managing director Nathan Jacobsen also said the group’s data indicated that even including the drop-off in demand for advice as fees climbed higher, demand would still dramatically outstrip supply in the sector in four years’ time.

“Our modelling suggests that, in 2025, there will be over 3 million households in Australia who will be prepared to pay for the advice as it currently costs, but the population of advisers will be down to about 15,000 and will only be able to service 2 million households,” Mr Jacobsen said.

“Advisers’ average fees are increasing, and advisers are increasingly shifting to clients who can afford to pay more fees because their services are in demand and there are fewer of them.”

Mr Jacobsen said while it was “a great time to be in business” for the advisers who chose to stay in the industry after the introduction of the FASEA regime, the social impact of the educational standards would be significant, as middle-class consumers were locked out of advice.

“For the country, it’s not a great outcome. I’m a firm believer in the value of financial advice, and I think an accessibility issue is building,” he said.

“It may be a temporary dislocation which is just a product of the pace of new entrants, and obviously, it will correct itself at some point, but in the next five years, we certainly do have an accessibility issue.”