Friday, 10 August 2018

How many Financial Advisers are there in Australia?

Given that I'm currently doing a Diploma of Financial Planning course and have also enrolled in a Master of Financial Planning course with the goal of eventually starting up a Financial Planning business, it seemed prudent to do some research into how many financial planners (advisers) there are in Australia, and whether the market is under- or over-supplied. While the aging and growing population suggests an increasing need for financial advisers in Australia, offsetting this is the fact that the number of financial advisers seems to have been growing rapidly - from around 18,000 in 2009 [Ref: Ripoll Report] to 25,386 registered advisers on 1 April 2018. However, the supply of registered financial advisers may dwindle in coming years due to the combination of more stringent educational and other requirements coming into force on 1 Jan 2019, and the aging of the existing cohort of financial advisers. (And the current 'bad press' from the Royal Commission combined with removal of commission-based fees is making financial planning much less attractive proposition to new entrants).

Comparing the number of medical practitioners to the number of financial advisers is quite interesting:

In 2015 there were 102,805 registered medical practitioners in Australia. Of these 83,427 were GPs and 49,060 were specialists. This equates to a rate of 112 FTE GPs per 100,000 population in 2015 [ref:1].

In comparison, as at 1 June 2017 there were 25,386 financial advisers registered in Australia [Ref:2], which corresponds to a rate of around 34 financial advisers per 100,000 population. Then again, most people would see their GP a lot more often than they consult a financial adviser!

Estimates [2] suggest that around 30% of the Australian adult population use, or have used, a financial planner or adviser. From this, one can calculate roughly how many clients the 'average' financial adviser has serviced:

100,000 x .3 (have seen an adviser) x .8 (ratio adults in population)= 24,000 adults per 34 financial advisers, or 705 clients per adviser on average.

Of course, many adults will have only seen an adviser once in their lifetime, so the number of clients serviced per annum per adviser would be significantly lower than this (on average).

The number of prospective new client's per adviser can be roughly estimated by the 48% of Australian adults that have indicated that they have unmet financial advice needs [2]. This corresponds to 100,000 x .48 x .8 = 38,400 adults per 34 financial advisers, or roughly 1,130 prospective new clients per adviser on average. Of course many of these prospective client's would not be willing to pay for financial advice, despite having a perceived 'unmet need' for such advice. Similarly, many client's would only require a single SoA from an adviser, or perhaps an update every 5-10 years. So the average number of new client's per adviser per annum is more likely to be around 100, which seems a realistic 'guestimate'.

The total revenue of the financial planning sector is around $4.6b pa [2], which equates to approximately $181,200 per adviser. Again, this seems in line with advertised pay rates for financial advisers, allowing ~50% for costs and AFSL fees/revenue sharing. (In the US the median annual salary for financial advisors was $90,530 in 2016).

ASIC noted that 2.3 million adult Australians had received advice from a financial planner in 2015/16 FY, which corresponds to 90.6 clients per adviser, which is in close agreement with my estimate from 'first principles' above ;)

So, a long-term goal of having 1-2 clients per week seems realistic. The somewhat depressing statistic is that apparently a response rate of 2% to marketing campaigns is common, which means a *lot* of marketing is required to get any prospects, and only a fraction of prospects may become a client. For a start-up financial planning business run on a part-time basis, the question then is how many clients, and what fee structure, is required to 'break even'?

References:
1. https://www.aihw.gov.au/reports/workforce/medical-practitioners-workforce-2015/contents/how-many-medical-practitioners-are-there
2. https://financialservices.royalcommission.gov.au/publications/Documents/features-of-the-australian-financial-planning-industry-paper-6.pdf

Investing in 'Spaceship Voyager'

There are many reason for making an investment, but probably one of the least rational is because it is 'cool' or 'fun' (imho). Doesn't stop me doing it though! So, don't take this as any sort of recommendation, just a 'fun' little investment option I found out about today and thought I'd share.

Spaceship Voyager is an app for your phone that lets you invest in an Australian Index Fund (ASX200) option, or alternatively in a some-what managed Fund (Spaceship Universe) that invests in 100 global companies that have been selected as less prone to disruption (i.e. investments such as Alphabet, rather than Encyclopaedia Brittanica). One thing I do like is that there is no minimum investment amount (investment and automatic savings plan are via direct debit from the bank account you link to) and no fee on the first $5000 you invest. I chose to invest $100 initially, with a monthly addition of $100. So, after four years or so I should reach the $5000 threshold to start paying a fee of 0.10% (for the Universe Fund) on my balance over $5000. If I'd invested in the Australian Index Fund option the fee for amounts over $5000 would have been even lower (0.05%).

They say they invest directly in the companies in the fund, rather than via an ETF, so I have absolutely no idea how this would be possible given the lack of any fees on the first $5000 of each account balance, and the likely small size of this Fund (it only launched in April 2018 as far as I can tell). But I wish them all the best (especially as they now have some of my money!).

On the downside, the PDS states that the parent company doesn't guarantee withdrawals, so if the whole scheme goes 'belly up' you're likely to loose your investment. But I suppose that's the case with many investments - if you want a government guarantee to get your money back you have to invest in a bank savings account.

Anyhow, the Fund/App is a cool idea, the colour scheme is great (purple!), and the theme (space) appeals to me. I did get a referral link when I signed up, but since I can only send it direct to my friends (I've sent it to DS1 in case he is interested), I can't spam it here. But if you really want to get an extra $20 for opening an account before the end of August, and plan on opening an account with them, I suppose you can email me or drop a comment on this article and I'll send you the link/referral code.

Subscribe to Enough Wealth. Copyright 2006-2018

Thursday, 2 August 2018

Another change in my WSU enrolment

After being initially told I was offered a conditional place in the Master of Financial Planning at Western Sydney Uni, and then having to enrol in the Graduate Certificate course instead, when my employment experience was 'not deemed to be specific enough to financial planning', today I received another email saying 'Congratulations - you have met the conditions' to enrol in the Masters degree course. After checking to confirm that this was correct, I then had to go through the online enrolment procedure again in order to enrol in the Masters course. Hopefully this is the last time WSU admin changes their mind!

Subscribe to Enough Wealth. Copyright 2006-2018

Wednesday, 1 August 2018

Net Worth: July 2018

Networthiq seems to be off-line at the moment, so this month's snapshot of my net worth is brought to you by networthshare (in a slightly different format)...

My geared stock portfolio increase modestly, while the estimated valuation for our home continued to decline slowly. 'Experts' are currently predicting a further decline of 0%-15% over the next 1-2 years, so this is likely to be a drag on my net worth performance until at least the end of 2019. My retirement savings showed a relatively strong rise, probably due to the larger exposure to international share markets than is this case for my geared share portfolio (i.e. the decline in the value of the AUD vs USD boosted the AUD value of our investment in the Vanguard 'High Growth' index fund.
Subscribe to Enough Wealth. Copyright 2006-2018

Thursday, 19 July 2018

Earn a bonus $75 on your savings at RateSetter


I started using RateSetter back in March, and I've been saving $100 (automatically transferred from one of my bank accounts) every month and investing it at around 9%pa using the 5-year lending option. While such peer-to-peer lending is obviously much more risky than investing your money in a bank savings account, the higher interest rate is (hopefully) commensurate with higher risk. Also, if you invest in 5-year lending, only some* of your investment will be locked up for the full five years.

At the moment, RateSetter is offering a $75 bonus^ if you join RateSetter using this referral link and invest $2000 or more in the 3-year Income or 5-year Income lending market before 16 September 2018. So, if you were thinking about saving some funds in a RateSetter lending account, get in quick for the chance of a bonus $75!

Last Matched Rates on RateSetter:
1 MONTH 5.0% at 14:36
1 YEAR 4.0% at 14:31
3 YEAR INCOME 7.4% at 13:19
5 YEAR INCOME 9.0% at 15:06
GREEN LOAN 6.5% at 14:25

* Investing in 5-year loans, you get a monthly repayment of interest and capital into your holding account (which I reinvest each month), so the initial investment isn't locked away for the entire loan period.

^ You will get a $75 bonus and so will I. Full disclosure ;)

Subscribe to Enough Wealth. Copyright 2006-2018

Saturday, 14 July 2018

Putting the cart before the horse

Instead of working on my DFP assessment tasks, yesterday I compared various business bank accounts that might be suitable for a small start-up. I found that most banks are charging $10 per month for their basic business account, and most have very limited features (for example, the St George one provide a debit card). In the end I decided to apply for a business account with BankWest, as I already have a CC account with them so I didn't need to provide any additional 100-pt identification information. I just logged in using my normal ID and password, and had to provide my ABN then pick which of the business names I was opening this account for. I also selected the option to get a debit Mastercard on the account, and a 'token' so I will be able to authenticate and transfer transaction data into an accounting package (Xero and MYOB are supported). The account has no minimum opening balance or monthly fee, and the debit card and security token should arrive in 5-10 business days. The next step will be to confirm if the data export is compatible with the basic admin module in Midwinter (the Financial Planner software package required by the AFSL that I intend to become an authorised representative of).

I also looked up options available for accepting client payments - it looks like the cheapest option initially will be to setup a Paypal merchant account (free) and just pay the 2.6%+$0.30 fee per online transaction initially. If my business succeeds at some stage it will be worth getting a 'pay here' card reader (A$99) and benefit from a lower (1.95%) transaction processing fee. Again, I'll have to check if the Midwinter admin module works with the Paypal invoicing option and so forth.

This morning I spend a bit of time fiddling with DNS settings to get the domain name I had registered a few years ago with Dotster to 'point' to a test index.html page on my hosting account with GoDaddy. And then wasted a bit more time looking up 'best financial planning website designs'. Quite enjoyable, but not getting my DFP assignments done ;)

Oh well, back to the textbook...

Subscribe to Enough Wealth. Copyright 2006-2018

Thursday, 12 July 2018

How to get a government guaranteed return of 1000% on an investment*

Now that DS1 has turned 18, he could get an effective return of 1000% simply by making an undeducted contribution (after-tax) into his superannuation account this year of $2. This is because the Super co-contribution paid to low-middle income earners has a minimum amount of $20.

However, as the maximum co-contribution amount of $500 will be paid if DS2 makes a contribution of $1000, I'll make sure I give him that amount to put into his superannuation account this FY (while he might get a job to earn some money during the summer vacation, I doubt his top priority will be to lock some of that money away until his retirement!). Even with a return of 'only' 50% is well worth making the effort. And, with around 50 years to benefit from compound interest and a superannuation tax rate of 15% on investment earnings, the $1500 added to his superannuation account balance at age 18 will have a significant effect on the amount he has available to fund his retirement.

* of $2

Subscribe to Enough Wealth. Copyright 2006-2018

Wednesday, 11 July 2018

Correction - enrolling in GradCert in Financial Planning ;)

On the bright side, HR responded very quickly to my request for a 'statement of service' and provided the requested document the very next business day. On the down side WSU admin has then decided that my work experience wasn't "specific enough to financial planning" (despite the WSU handbook stating that one of the options for qualifying for admission to the Masters course was "Successfully completed an undergraduate degree, or higher, in any discipline AND have a minimum of five years general work experience in a related field." - not sure how 20 years experience working for a company that services the financial sector doesn't meet this requirement, but I can't be bothered arguing the point with university admin). They did confirm that I'll now be receiving a full offer (unconditional) to enroll in the Graduate Certificate in Financial Planning instead. So this is not really an issue, as the four courses required for the GradCert are the first four courses out of the twelve courses required for the Masters degree. So it shouldn't end up costing any more or taking any longer to eventually qualify with the Masters degree. In practice all it means is that I will get an extra testamur to hang on the wall, plus I'll have to apply for entry into the Masters degree when I complete the GradCert (and apply for advanced standing/credits for the courses completed).

Anyhow, before this new course commences in September I'll be busy enough finishing off the Diploma of Financial Planning with IIT.

Subscribe to Enough Wealth. Copyright 2006-2018

Saturday, 7 July 2018

DS2 Selective High School result

The results of DS2's selective high school exam/application came out yesterday evening. We had a reasonable idea of how well he might do as he had done a few practice tests at a 'coaching' college last year, so we had not bothered including the top selective HS (James Ruse) in his three choices, as he had very little chance of doing well enough to qualify for a place (plus it would be more than an hour's commute each way from where we live). We had nominated North Sydney Boys HS as his 'first choice', Manly Selective (where DS1 attended HS) as his second choice, and Chatswood HS (which has both selective classes and some non-selective classes) as his third choice (in case he did poorly on the exam due his eczema). His local non-selective HS also has a 'gifted and talented' class available, so he had sat a separate entry exam for that class (and been accepted - we'll now let them know he won't be attending there).

Anyhow, his result wasn't quite good enough to get into North Sydney Boys HS (he didn't even get onto the 'reserve' waiting list, so the cut-off mark must be a couple of marks higher than his score), but he has been offered a place at Manly Selective HS, so that's where he will be attending high school. It is actually the most convenient selective high school from a transport viewpoint, as there is a direct bus that takes about 30 minutes, and the bus stop is only 5 minutes walk from our house. Manly also has a nice campus (not overcrowded) and good facilities with some nice playing fields both on campus and across the road from the school. So, overall, we are very happy that DS2 will be attending Manly. Now I just have to get DS2 to stop wasting so much time playing computer games, and spend a bit more time on something more productive...

Subscribe to Enough Wealth. Copyright 2006-2018

Friday, 6 July 2018

Enrolling in Master of Financial Planning course at WSU

My application to enroll in the Master of Financial Planning course at Western Sydney University has been conditionally accepted (I just have to provide a 'statement of service' to confirm the work experience I listed on my application form before term starts - this shouldn't be an issue, unless our HR department a) takes forever, or b) decides that it isn't company policy to provide this sort of thing). I'm enrolling in Session 4, which starts on 17 September. The course consists of 12 'core' modules (ie. all subject are compulsory, with no electives), and usually take 1.5 years full time, or 3 years part-time to complete. I'll be doing the course part-time and online, so I should be finished sometime in 2021.

The course is fee-paying, which for domestic students is A$24,000 for the Masters degree (I think - this is the cost listed on the WSU website, but they also put the cost of the Postgrad Certificate course (which is the first four modules of the Masters degree) at $12,000. So the quoted cost for the Masters degree might be for student's continuing on after completing the Certficate course?
Similar courses at other Australian universities cost a bit more, plus some of them require a 'relevant' undergraduate degree (Commerce or Accounting), whereas the WSU course only requires an undergraduate degree (any field) plus work experience in the financial industry.

I've ordered the textbook (Financial Planning in Australia: Advice and Wealth Management) required for the first course from Zookal for $120.12 (which includes free delivery). Comparing prices online, the major bookseller Dymocks was selling the older edition for a higher price ($168) and even the University co-operative bookshop is more expensive ($156 or $140.40 for co-op members).

Before this course starts I want to finish of the Diploma in Financial Planning I'm currently completing online at the International Institute of Technology (IIT), and also complete the couple of FinPlan short courses I've just started on Coursera. Looks like I won't have much time to play computer games for the next couple of months... ;)

Subscribe to Enough Wealth. Copyright 2006-2018