The financial advice sector in New Zealand has been shaped massively by the ongoing FSLAA changes, and recent FSPR numbers have shed light on what the adviser sector looks like following the introduction of licensing - including the number of newly licensed entities, and the rate of de-registration.
FSPR statistics from 2010 onwards showed that a large number of advisers registered at the start of the Financial Advisers Act, and a consistent number of advisers registered each subsequent quarter.
It also showed that most of the advisers who registered in 2010 have remained on the register, which suggests that the advisers who had been in the profession before the Financial Advisers Act have generally remained in the industry - however, there has also been a significant turnover of advisers since.
The tenure of advisers changed after the Act was implemented, with newly registered advisers tending to have a tenure of 2-3 years, compared to the 5-6 of those who had been advisers before 2010. The number of deregistered financial advisers also saw an uptick in 2012, but that number stayed fairly stable until 2012.
Commenting on the FSPR figures at an FSC ReGenerations Reimagined session, Mark Banicevich, Partners Life head of industry engagement, said that there was a lot of expectation that the FSLAA legislation would lead to a “mass exodus” of advisers from the industry, and there has indeed been a spike of de-registrations in the third quarter of 2021.
“That spike is probably largely from when the Ministry went out and said that any financial adviser who wasn’t engaged by a FAP by June 15 would commence de-registration proceedings,” Banicevich said.
“So that large spike probably represents those advisers. But throughout the period in between, we’ve seen a fairly balanced number of people who have been de-registering each quarter.”
“The Financial Advisers Act has very much individualised financial advice,” he continued.
“The regulation was very much on an individual basis, and there were 9,670 advisers on the FSPR as of March 01, 2021, and about 2,000 of those were Authorised Financial Advisers (AFAs). The AFAs had some very individual requirements, and the Registered Financial Advisers (RFAs) had less onerous obligations. Now, the obligations have become more entity-based, so we’re starting to see a picture of how the entities have come together.”
FSPR statistics currently show around 3,000 financial advice providers, 567 of which don’t currently engage any financial advisers within their organisation, and around half of those are sole trader FAPs.
As of the beginning of October, just over 1,500 registered FAPs only engaged one financial adviser, and at the other end of the scale, only two FAPs are large entities which engage over 500 advisers.
Around 700 advisers are currently holding and managing their own license, without any assistance from another group or FAP.
“We can see quite an even spread across different sized entities,” Banicevich said.
“There are a lot of advisers being engaged either directly or indirectly through these larger entities, but there is still a significant number down at the other end.”
“Interestingly, looking at the data from Australia, I had always thought that their landscape was very much dominated by the large firms and everyone had big licenses, and there weren’t a lot of small players. However, it seems like their layout is quite similar to ours,” he added.
“You have small entities and a few large entities, and although the large entities engage the biggest volume of financial advisers, there is still quite an even spread, much like what we see in New Zealand.”
Commenting on the current licensing landscape in Australia, Financial Advice New Zealand CEO Katrina Shanks said that the regulatory overhauls have created a “massive gap” in the industry with advisers dropping out, and a lack of new entrants coming to take their place.
She said that the Australian industry had come out “quite battered and bruised” following the Royal Commission, and so they’d started their regulatory overhaul from a difficult place - something which was not the case in New Zealand, and this has created a very different adviser environment.
“[The Australian advisers] have had to sit exams, get a graduate diploma, do 40 hours of CPD, etc., and they’re seeing a loss of their experienced financial advisers,” Shanks said.
“They have an average age of 54 for financial advisers in Australia, and a lot of those advisers have not wanted to stay in the sector. But they’re also not seeing much coming from the bottom either, and because of the reputational damage, it’s not being seen as a ‘go-to’ profession. There’s going to be a massive knowledge gap between the exodus at the top, and the lack of new advisers coming in.”
“What we’re seeing in New Zealand is quite different to that,” she said. “We’re a totally different environment, we’re a vibrant profession, and I think the legislation, regulation and licensing will lift the standards here.”
