Increased adviser quality and rising demand for advice about to accommodate “Good Advice”
As of 16 December, Minister Stephen Jones now holds the delicate document of transformation that is the Quality of Advice Review. The challenge will be juggling the protections of consumers and the quality that is now being dispensed by advisers to that of addressing those in actual need of human help with their finances.
Alongside consumer surveys across multiple research houses, the “real demand” for advice is none so evident than the volume of queries coming from the Adviser Ratings “find-an-adviser” platform and its white label offerings. In the space of 24 months, we have seen an uptick of 71% in consumers seeking out a financial adviser.
As Australia and the globe most likely embark on a recessionary 12 months, despite the march northwards recently in equity markets, and with consumer confidence sitting at 30-year lows (80 in December 2022 – Westpac-Melbourne Institute Index) and the Volatility Index remaining stubbornly in the mid-20s, half eaten fingernails are likely to be the main course for the first six months of 2023.
Prediction: Consumers Wanting More Financial Assistance (not the boldest call we’ve made)
Figure 1: Quarter by quarter breakdown of adviser leads through Adviser Ratings and partners (2020-2022)
* December 22 quarter numbers from December 2019 extrapolated against prior months and previous December quarters
So, as most likely will arise from the QAR recommendations, the “Good Advice” recommendation (if implemented) will be given a thorough test fairly quickly. This is the fine line the Government will face - what does “Good Advice” look like and how quickly can it address the incoming force of want from the public. Superannuation funds are the most likely to fill the gap given noises that have already been made and the banks reticence to quickly jump back into the velodrome of “fast advice”.
There will be a see-saw between advisers offering “Best Advice” and the rest offering “Good Advice” and the premium paid to have funds managed and advice dispensed by a professional. Notwithstanding the blowback of burdensome compliance and the exodus of advisers, those left standing in the industry have a far higher quality score as measured by ARdata’s beta Adviser Quality Score™ (AQS) 4 years ago. The better managed practices and higher quality practices have come out of washing machine that was set to a heavy duty cycle.
One of the variables of the AQS is the commercial credit score of each practice (data partnered with credit agencies and augmented with ARdata), measuring likelihood of adverse credit events against individual practices and/or directors. Even in the last 12 months, the improvement in this variable has leapt when compared to other industries given low debt levels in practices.
All this adds up to how these good quality practices will price themselves one “Good Advice” comes to the fore.
Figure 2: Percentage change in commercial credit scores of 6,000 advice practices in Australia (Jan 22 – Dec 22)
But the playground will be plentiful – will there be enough equipment in the playground and what type to satisfy the demand.
