Do you need a financial adviser?
Evaluating the benefits of seeking guidance.
Australia is running out of advisers.
The supply and demand curve of financial advice has shifted.
2019 saw the commencement of regulatory changes on financial advisers led by the Australian Securities and Investments Commission (“ASIC”), requiring financial advisers to register with them and meet new education and regulatory standards.
Since then, there has been a mass exodus in the financial planning industry. 2019 - 2022 saw a ~40% decline in the number of advisers, creating a noticeable shortage of advice available to investors.
Additional operating costs have resulted in advisers prioritising higher income earners or those with higher networths to sustain their books. Such clients tend to have complex financial requirements and therefore provide more scope to add value and justify greater fees.
This has decreased levels of serviceability towards middle income earners and arguably further exacerbates wealth inequality.
Analysis by Rainmaker provides several scenarios for the future of financial advice in Australia. The most optimistic (scenario 3) suggests that in the long-term forward projection that Australia in 20 years will still have about 12,000 financial advisers.
Alternatively, pessimistic predictions suggest that if adviser numbers continue to fall by 5% per annum, the industry could be left with only 5,500 advisers by 2044.

Figure 1: How many advisers will Australia have in 2044. Source: Rainmaker. Financial Adviser Report. 2024.
What do people not like about advisers?
Last year, Morningstar’s behavioural research team released a report ‘Financial Adviser Faux Pas: Inadvertent mistakes and their impact on adviser-client relations’.
Participants in the study were presented with a list of 15 behaviours demonstrated by their advisers and asked to rate their emotional response on a scale from “I really disliked it” to “I really liked it”.

Figure 2: 15 behaviours that may irritate clients. Source: Morningstar Behavioural Research. 2024.
The survey found 7 attributes that clients reported disliking the most about advisers (in order from most to least disliked):
- Not explaining fees
- Taking more than a week to complete tasks
- Using financial jargon
- Not considering a client’s values
- Not providing enough detail on investment options
- Making the client fill out long, complex forms
- Not providing holistic advice
For the rest of the actions in the survey, clients reported either neutral or positive feelings.
Understanding the fees
Fees are a common sore spot when seeking a financial adviser.
Research finds that costs are a core factor to building trust between a client and their adviser, yet there are many confused by the payment structure.
Cost structures differ across the industry and level of service you may be seeking. For clients with larger networths, fees are often based on a percentage, whereas clients at lower points of entry can be offered a flat fee for scaled advice. Regardless of the entry fee, there is often an ongoing advice fee that may be taken from superannuation either monthly or yearly.
Why would you need a financial adviser?
We are often the biggest detriment to our own returns.
Emotion and financial decisions go hand in hand. Emotions can often affect our investing strategy and cause us to deviate from actions that are in our best interest over the long term. Too often investors fall victim to the 24-hour news cycle, dialling into market volatility and last-minute adjusting their portfolios as they see fit.
Our annual Mind the Gap study aims to examine the gap between investor results and reported total returns of a fund. The study found that the average dollar invested in US mutual funds and ETFs earned 7% per year over the 10 years to Dec 2024. This was 1.2% less than the average fund’s total return (8.2%) over the same period.
This returns gap likely stemmed from mistimed purchases and sales driven by irrational investor decisions. The pandemic was a particularly difficult time for investors as many incurred heavy timing costs in 2020 (leading to an even wider 2% gap that year).
This is where a financial adviser might help.
Adviser alpha
Given the abundance of free advice available on the internet, the value proposition of formal advice is changing.
Vanguard published a study in 2020 where they attempted to quantify their ‘adviser alpha’ or the amount advice adds to investment returns. The chart below shows the quantified value-add of best practices in wealth management across various regions.
As illustrated, the most value add (1.5%) to the average client experience came in the form of behavioural coaching.

Figure 3: Quantifying Vanguard Adviser’s Alpha. Source: Vanguard. 2020.
The report concluded that advisers could improve their client’s net returns by up to 3%, with the primary value proposition being in financial planning and discipline and guidance, rather than by trying to actively outperform the market.
Besides the behavioural value-add, advisers also provide strategies on tax structuring, cost savings through cheaper product options and better investment performance that avoids reactive decisions.
Final thoughts
Just like not all investors are the same, not all financial advice is the same. Services can vary from behavioural coaching to securities advice, to more complicated tax structuring or estate planning.
It’s no secret that there has been a good deal of criticism for the formal advice industry. The decision you make will be based on an evaluation of your personal circumstances, taking into considerations factors such as fees, goals, net worth and more.
Such factors aren’t stagnant, and you may feel there are stages of your life that are better suited to DIY-ing it or seeking professional advice.