Aussies’ advice spend to swell as ‘New Australian Dream’ takes shape

Australians are predicted to spend more than 25% more on financial advisory services within the next five years, as a wave of new, and younger clients demand greener, less property-focused portfolios, according to a new report by Deloitte Access Economics.

The increased advice spend, according to Deloitte, represents an up to $2.1 billion revenue boost for financial advisers – if they can ride the wave of external trends fast shaping the sector.

This spend also aligns with an expected swelling in the advisor customer base, with the Deloitte survey predicting an average 27% increase in advice clients over the next five years, representing 486,000 new individuals.

This growing customer base will need to be serviced with a diminished adviser cohort, with the industry losing nearly half its adviser cohort over the preceding five years, down 43% since 2019.

Deloitte predicts only a modest 1.1% per annum increase in adviser numbers over the next five years, reaching a total of just over 16,700 – still significantly down on the more than 27,900 advisers registered in 2019.

More than three-quarters of advisers say they will depend increasingly on technology to bridge this demand gap, enabling them to not only service a greater volume of customers but to also remain profitable. While they are a critical support tool, they also pose a threat to traditional advice models, with robo-advisers offering “an accessible and affordable alternative to [human] financial advisers for many Australians, due to their automation reducing significant overhead costs.”

The advice sector will be marked by a ‘big shift’ in industry priorities, practices, pressures and delivery modes, as external forces rapidly supersede the internal disruptions that have shaped the industry in recent years – from major regulatory changes and adviser consolidation, to shifts in licensee arrangements and cost pressures.

Deloitte, in its report, flagged seven ‘megatrends’ set to reshape the future of advice: 

• Skyrocketing retirement demand – A fast-ageing population and growing life expectancy will spur increased demand for advice, particularly for solutions that can support their retirement.
• Natural disasters and environmental volatility – The increasing prevalence of natural disasters will necessitate a change in asset risk management strategies. This, Deloitte said, will demand an ability to navigate client trauma, an urgent responsiveness from market participants and an ability to manage growing complexity in the services and solutions needed.
• The ‘New Australian Dream’ – skyrocketing property prices have increased the gap between property haves and have nots, denying many families the opportunity to get on the property ladder (not only as an investment, but also as stable housing). Deloitte notes that “the reliance on asset growth as a primary investment strategy will be under pressure from future policy and markets – forcing people to look elsewhere as the demand for wealth generation moves beyond housing.”
• The grey tidal wave – A major wealth transition is happening right now as baby boomers enter retirement, triggering a “landslide of asset transfers”. As younger, more tech- and green-savvy investors enter the advice realm, Deloitte sees a “growing demand for new products and strategies, including more holistic financial advice for estate planning, taxation, investment management, and intergenerational wealth preservation”.
• Digital delivery – of everything – Deloitte notes that an estimated 11.8 million Australians have unmet advice needs. Digital advice will be critical to the provision of advice to a broader cohort – and yet, just 40% of surveyed advisers said they were ambivalent or believed greater use of technology and automation was unimportant.
• The green wave – A growing demand for environmental, social, and corporate governance (ESG) commitments to be incorporated into investment strategies and financial planning.
• Digital assets and product proliferation – Over half (54%) of millennials have owned cryptocurrency at one stage and advisers must invest heavily to broaden their service offering and develop partnerships with digital asset platforms. Advice will need to encompass not only future product evolution, particularly in the digital space, but also security risks, risk management strategies, and tax implications.

Commenting on the report findings, Deloitte Access Economics finance lead partner John O’Mahony noted that advisers seeking to take advantage of these megatrends will need to be proactive in

“Advisers can avoid being edged out in an increasingly competitive sector by adapting and perfecting their unique customer profile, business model, specialised advice capabilities and technology selection.

“By embracing the megatrends and mapping their practice against the current landscape, advisers can carve themselves a sustaining market position.”