High turnover continues as financial advisers battle economic, regulatory hurdles

The high level of turnover amongst advisers in the financial services industry continues as economic and regulatory pressures take their toll.

These were amongst the findings of the 2012 user survey conducted by Astute, the company that provides data integration services, including the assimilation of information from companies offering life insurance, disability and investment products for use by financial advisers when undertaking authorised financial planning for their clients.

Biddie Biddulph, Managing Director of Astute commented: “Financial intermediaries continue to face significant challenges, driven mainly by the fluid socio-economic environment and regulatory requirements.

“While high turnover levels are a continuation of the trend identified in 2011, it is interesting to note that last year they were more pronounced amongst independent financial advisers (IFAs) whose numbers are declining, compared with the growing number of advisers employed by banks and life assurers.”

For the first time in the eight-year history of Astute’s industry survey, a comparatively drastic decrease in IFA numbers was observed against sharp increases in the life office community and banking sector. While the survey indicated that 3 950 new recruits were appointed in the industry during the past year, there was a net loss 3 050 advisors, which constitutes a turnover in adviser numbers of 16.2%.

“These trends pose a challenge for sustainability in the industry, given that adequate levels of professionalism will be harder to achieve with a high turnover of people,” said Biddulph. “A disturbing effect of the turnover of financial advisers is that only 29.7% of intermediaries in the industry have more than five years of experience, down from 32% two years ago.”

He noted that 2012 represented a departure from previous years when adviser numbers in the banking sector showed decline.

A recruitment drive was confirmed by most banks last year, with life offices also net recruiters of financial advisers, or in a consolidation phase following recent growth.

Said Biddulph: “The survey results showed that turmoil in the IFA group continued from the previous year with the actual numbers of financial advisers in this user group declining, and the turnover ratio showing a sharp increase over the last two years.

“High turnover can be attributed partly to retirement, but is also due to the fact that the barriers to new entrants are much higher. New regulatory requirements, together with a lack of support systems, are behind a continuation of the trend towards greater numbers of experienced IFAs leaving the industry.”

The Astute user survey found that most IFA practices offer clients life and risk products from assurers, as well as healthcare and short-term insurance products. Bank advisers, on the other hand prefer to focus on investment products in addition to risk products.

Referring to the survey, Biddulph said: “It was encouraging that professional financial advisers who rely on the quality of the information and services that we provide rated Astute highly in terms of our ability to add value to their practices.

“We’ve expanded our offering and can now assimilate information online from companies offering life insurance, disability and investment products. Advisers have been quick to exploit Astute’s efficiency benefits as a one-stop provider of financial product information.”