Last Friday, Dec 10, FASEA released the results of the November FASEA Exam, which will be the last for 2021. We can now be more precise with answering the most common question across the advice profession, that is ‘How many advisers will be practicing as we start 2022?’

We have reviewed the figures and concluded that the number of current advisers will fall to 17,227. As of Dec 9, 2021, we had a total of 18,572 in our database*. This will see some 1,345 additional advisers drop off the ASIC financial Adviser Register (FAR) on top of the 2,065 that have already fallen off this calendar year to date.

We expect the numbers to start dropping off progressively over the coming weeks and into the New Year. We also believe that the number of advisers will continue to decline in 2022, to between 15,000 and 16,000.

There have been a small number of assumptions to get to this final figure and all of the calculations are listed below. The tricky part is calculating the number of advisers are current on the FAR and have failed twice or more in 2021. This group has the right to keep practicing as an adviser until they pass the exam through to Sept 30, 2022. - We came to the conclusion that 1,444 advisers fall into this category.

All the details and calculations are shown below along with some commentary as to how the numbers could fluctuate.

Some Background
When the FASEA Exam was introduced, the rules were very simple - if you want to be an adviser from 2022, you need to pass the FASEA Exam by jan 1, 2022.

After a shocking loss of advisers at the end of the financial year, the rules started to change and now, advisers who fail the exam twice or more in 2021 can continue to try and pass the exam through to September 2022. It is our understanding that the advisers who have failed twice, will remain on the ASIC FAR and be able to provide advice - See ASIC Release They will cease being an adviser on the FAR is they fail to pass the exam by Sept 2022.

As a result of the changes above, it does make it a little more complex to work out how many advisers will be on the FAR from jan 2022. Below are a series of calculations with many of the numbers coming directly from FASEA via their media release and our own data.

Step 1 - What we do know today
The table below highlights the current state of play. The numbers are from FASEA, except for C - Number passed and Current on FAR*. FASEA say ‘Over 15,500 are recorded as Active on the FAR’. We are of the view that the vast majority of new advisers who commenced since 2019 as a Provisional Adviser (some may now be an adviser in their own right) have passed the exam. By adding in the new advisers, we estimate that the total number of advisers who have passed the exam and current is 15,783 as of Dec 9, 2021.

Step 2 - Estimating Number of Advisers Failing Twice or More
In order to calculate the number of Advisers that will be on the FAR from January 2022, we need to estimate the number of advisers who may have failed at least twice and secondly, how many of these are current on the FAR. As we can see from Table 1, not everyone passing the exam is current. We are assuming that the vast majority of advisers (90%) who have failed to date will have failed twice. It is would be in the interests of most advisers who failed once to at least have one more go before year end and therefore build a buffer of time before exiting or having another go.

Step 3 - Estimate Total Number of Advisers Starting January 2022
Having estimated to the number of advisers who have failed at least twice and are on the ASIC FAR to be 1,444 (H from table 2), we simply add this total to the total of the number of advisers who have passed and current, 15,783 (C from Table 1). This gives a grand total of 17,227. Currently we have 18,572 advisers, indicating a loss of some 1,345 advisers between now and the ASICs reporting during January.

What Could Change The Estimates?
The estimates have been pretty consistent all year indicating that the likely pass rate would fall somewhere between 15 and 16,000 for year end. With FASEA providing more opportunities and incentives to advisers to at least try the exam, we have fallen on the higher side of the estimates with a pass rate of 15,783 of current advisers.

There has been some guess work around the data with regard to calculating the number of advisers who have failed twice and therefore remain on the FAR. However, even if the estimates are not close, the variance overall would not change substantially as the bulk of advisers have already passed the exam or resigned. We could see some further heavy losses if major groups pull out of advice. For example, we have seen heavy losses at CBA over recent weeks as they close down their advice business.

There is also talk more broadly of the Great Resignation, with many people opting to change their lifestyle as we continue through Covid. We do get quite a few comments that many advisers have passed the exam but opting out of advice anyway - It’s all become too hard and laborious for some and they are deciding to call it a day.

We may also see a burst of new advisers. FASEA are indicating some 430 new entrants can be approved as Provisional Advisers. We have allocated 277 to to our figures, so possibly another 153 could come on over the coming weeks. We have also estimated 2,167 to have passed the exam but not current on the FAR. Potentially, many of these advisers could be reappointed.

Summary
Overall, I don’t think these figures are surprising and most people involved in advice would be expecting similar numbers. The numbers are in stark contrast to 2018 when we had 27,993 current advisers. This means a net loss of over 10,000 advisers in 3 years, while the number of new advisers is only 277 for the same period of time.

The big issue facing the advice profession post 2021 will be finding new advisers to replace an ageing workforce. Since the banks exited, so did the adviser nurseries. To date, there is not one major company or sector in the adviser market that has positioned itself to generate much needed new advisers.

*Our Database excludes timeshare and most FX Advisers