This article explores a number of positive and negative factors which are impacting, and will continue to impact financial adviser salaries in Australia. We expect financial adviser salaries to have modest wage growth in the coming 2-3 years.
Factors Negatively Impacting Salaries
There are a number of factors which are negatively impacting financial adviser salaries in Australia. Some of these factors which are detailed below include changes to client commissions, increases in compliance costs, and increases to licensee fees.
Change to Commissions
The changes following Future of Financial Advice (FOFA) and the Royal Commission into Banking and Finance, have ended ongoing ‘no-work’ revenue for financial advisers. Advisers can no longer receive either built-in trail commissions or stamping fees on Listed Investment Company (LICs) Initial Public Offerings (IPOs). Furthermore, upfront insurance commissions have been reduced significantly in the last 12 months with advisers only able to receive a hybrid commission payment option. This year the Life Insurance Framework (LIF) reforms are set to be announced. This may further impact the structure of personal risk insurance commission payments.
Following the Royal Commission into Banking and Finance, compliance costs have risen substantially. This has resulted from businesses reviewing advice documents with extra caution to ensure best-interest duties are met for their client. Furthermore, a number of large organisations undertook remediation projects, which drove compliance professionals’ salaries higher by up to 50 per cent.
Financial Adviser licensee fees have increased substantially over the last 12 months, with some dealergroups increasing their fees by as much as 300 per cent. From research undertaken, most licensee fees range from $20k – $50k per year. This has been caused by higher compliance fees, and dealergroups no longer receiving volume bonuses (kick-backs) from product providers.
Factors Positively Impacting Salaries
There are a number of drivers which will have a positive effect on financial adviser salaries in Australia. Some of these factors which are detailed below include higher education requirements for financial advisers, the demand for financial advice (given an aging population), and the high number of financial advisers leaving the industry.
To become a financial adviser, you now need to complete tertiary education (relevant degree), undertake a 12-month professional year, and pass a national exam. This has created a higher barrier to entry into the industry, meaning there will be less supply of financial advisers in the future. Furthermore, existing financial advisers need to pass the national exam by the end of 2021, and need to a complete the new education requirement by 2026 to remain licensed. A high percentage of financial advisers has communicated to RIVA Recruitment they will not complete the new education requirements. This means they are planning on leaving the industry or plan to change their role within financial services.
Demand for Financial Advice to Increase
Baby Boomers Reach Retirement
Most people tend to seek a financial adviser when reaching a significant change in a life event. With an ageing population in Australia, the demand for financial advice is likely to increase as baby boomers approach retirement. This will create a higher demand for financial advice over the next 5 to 10 years.
Super Guarantee to Increase
Australia has one of the largest retirement pools in the world. With super guarantee set to increase to 12 per cent in the coming years, Australian’s will have higher superannuation balances. With higher super balances, Australian’s will require, and can afford financial advice.
Current Financial Adviser Salary Guide
Financial advisers’ remuneration varies substantially between organisations. It is also important to note, a number of firms are moving away from paying bonuses to financial advisers. Firms now prefer to review base salaries more regularly, often on an annual basis. A recently published Financial Adviser Salary Guide provides insight into what financial advisers are currently being paid.
RIVA Recruitment specialises in financial services recruitment across financial planning, funds management and superannuation. We are based in Melbourne at 3/162 Collins Street. int