As the baby boomer generation start preparing to pass on their combined $3.5 trillion to their children, Australia has some challenges ahead. Who will be left to help guide that money once it changes hands?
Reports show that the demand for financial advice is going to skyrocket. About 2.6 million Aussies, who don’t have advisers right now, are planning to get financial guidance soon. This number has doubled since 2015. ASIC’s findings back this up, showing that 41% of Australians plan to seek financial advice in the future.
But here’s the catch: the number of financial advisers in Australia is dropping fast. From a high of 28,000 in 2019, it fell to just over 16,000 by the end of 2022. By 2029, we might have fewer than 5,000 registered financial advisers in Australia.
There are currently 3.2 million Australians accessing advice and if that number increases by 2.6 million, that will be close to 6 million Australians looking to be advised by the 5,000 remaining advisers. That would require each adviser to see 1,200 clients annually and take 25 meetings a week. This gives me heart palpitations just thinking about it.
At a macro level, this imbalance between demand and supply could have huge consequences. While this will be financially lucrative to the financial advisers who remain, the price of financial advice will skyrocket further to control demand, and those in need will be left unadvised.
At a micro level, if we’re unable to do our job which is often to tell people to “stop making silly decisions with your money”, these vast fortunes could be whittled away by those left unadvised, who will find it hard to navigate the complexities of being extremely wealthy for the first time, without their parents around who have typically helped guide them financially.
The financial planning profession has to attract and train new talent and make the rules simpler to get more people to become advisers. And we need to get ready for the influx of new clients. That will mean using all the technology and systems at our disposal to drastically increase the number of people we can help week to week. That will never get to 1,200 but we need to push it up from the relatively comfortable 100 – 200 clients most established advisers will service right now.
The current shortage of financial advisers is a chance for us to start promoting financial advice in schools and universities and the wider community as the noble profession it can be when done right. Australia’s future wealth is at stake.
