The cost of financial advice has rocketed 40 per cent in the last three years as more planners leaving the industry due to stricter regulations.
The Adviser Ratings 2022 Financial Advice Landscape Report reveals that the median fee per client at the end of 2020 was about $3256, rising to about $3529 a year later, a rise of 8 per cent.
While the report remains unpublished as of press time, the details were already reported by The Australian Financial Review.
In 2018, the median cost of financial advice was only about $2500. The highest adviser fee detected by the research body was $12,000, while the lowest was $800 per year.
In a previous version of the report, Adviser Ratings Chief Executive Officer Mr Mark Hoven said that advisers are charging more because of the rising costs. He also confirmed the growing demand for advice as baby boomers move into retirement and there are fewer planners.
Based on Adviser Ratings estimates, another 4,000 advisers left the industry last year or around 16% of the workforce.
Last year, the big four banks also left the wealth management industry. ANZ, National Australia Bank, Westpac, and Commonwealth Bank decided to exit the industry due to stringent regulations.
NAB was the last major bank to join the “Wexit” after offloading its licensee subsidiaries in the $1.4 billion sale of MLC Wealth to Insignia Financial.
The Big Four still have their financial advisers, but each has less than 100 advisers on the books.
Small financial advisory firms are now dominating the industry with the number of organisations employing an average of 10 advisers, increasing from 61% to 71% of all firms authorised to give financial advice.
The skyrocketing costs and a decreasing supply of licensed advisers have affected the number of Australians getting professional advice. Adviser Ratings estimates that only 10.1% of the adult population in Australia have ongoing advice services, down from 13.8% in 2018.
This dwindling figure is expected to go down despite the demand for financial advice at a steady rate with 29% of Australians expressing their need for professional advice.
But instead of shelling out thousands of dollars to pay a professional, many consumers have instead turned to social media influencers who publish unregulated financial information on digital platforms like blogs, Facebook, Instagram, YouTube and TikTok.
Recently, the Australian Securities and Investments Commission (ASIC) has warned “finfluencers” that they could face imprisonment and heavy fines if they don’t obtain proper licenses or quit promoting stocks and investment funds in their channels.
Adviser Ratings analysts expect the problem to get worse before it gets better, and cited the fact that Australians want advice but cannot afford to pay the fees.
Around 65% of Australians said they don’t want to pay higher than $500 for adviser fees, while only 6% are willing or have the capacity to pay $2,500 a year or more.