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
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