Despite the cloud of negativity that descended on the financial advice industry several years ago, some remain optimistic that the industry is entering a “golden age”.
Speaking at ifa Future Forum 2022, Stephen Prendeville, founder and director of Forte Asset Solutions, said that despite the increased cost, reduced profitability, talent shortages, and legislative uncertainty, the advice industry is entering a “golden age”.
While acknowledging the great deal of change that has befallen the industry and the accompanying pain that has been inflicted on advisers, Mr Prendeville said that with the exit of the banks, the degree qualifications requirement, vigilant authorities, removal of conflict, and improved transparency, “we have bridged the trust deficit that was created by the banks”.
“Our confidence may have been battered but the consumer confidence has grown. The need and rise in demand for advice have never been greater,” he said.
Moreover, the forced “reengineering” of advice businesses has led to “better businesses”, Mr Prendeville opined.
While flagging the exit of 10,000 advisers since 2018 as “the biggest issue” in the industry, Mr Prendeville explained that understanding how these losses came about is key.
“What we’ve really seen over the last three years of the exit of the banks is that the greatest exodus has been from the accountants’ sphere,” Mr Prendeville said.
“The second part has been salaried advisers and the third part, holistic advisers have been those that have revenue predominantly less than $500,000 and were exposed to grandfathered revenue… What it really meant is that we’ve seen the rise of independence.”
As a result, he said, “the quality of advice has never been better”.
Pointing to recent research from AI Data — which showed that the amount of “exceptional advisers” now stands at 14.8 per cent while only 3 per cent of the advisers that left the industry had the same rating — Mr Prendeville said, “those that shouldn’t be in the industry are not”.
“We’ve cleaned the house,” he said, noting that it was “the recession that advice potentially needed to have”.
Additionally, Mr Prendeville praised the current legal framework, noting that “it’s probably the first time ever that we’ve actually seen a relatively clear legislative environment”.
“We have been under legislative change and this is where the stress has come from. Not only for the three years but really for the last decade. It is with great hope and confidence that we look to the Quality of Advice Review,” Mr Prendeville said.
He explained that what he wants to see is less red tape in back-office procedures — a move that would free up advice practices to grow.
“What we want to see is relaxing in the back office of the production of SOAs and ROAs.
“The vast majority of businesses that I’m seeing within the industry can only onboard one client a month. If we can free up that back office, all of a sudden, we can actually grow.”
Mr Prendeville highlighted the proliferation of “significant” organic growth opportunities in the market given the reduction in competition and the overwhelming need for advice.
“So, where we are today, we’ve got the greatest amount of certainty, the greatest amount of opportunity. It’s the release of that back-office that is going to be the real game changer. And so, one, the reduction of red tape, and two we’ve got a proliferation of technology and significantly great opportunities out there,” he said.
He noted that while it may appear that as an industry “we’re on our knees”, “we’re not; we are rising and particularly in the independent space”.
While conceding that the industry does face some “immediate challenges”, Mr Prendeville said he is certain that on the horizon is the “golden age for advice”.
Author: Maja Garaca Djurdjevic – 18.11.2022