As many as 14,000 financial advisers or close to half the industry may choose to exit over the next five years fuelled by the new Financial Adviser Standards and Ethics Authority (FASEA) regime and fall-out from the Royal Commission, according to Adviser Ratings.

The company said that if this occurred, it would represent $900 billion in client wealth.

The Adviser Ratings analysis claimed that on top of the Royal Commission and the FASEA regime, fragmentation of the institutional distribution model was also accelerating, with advisers churning from the major banks in 2018 at 270 per cent of the historical rate, while establishment of self-licensed practices had driven a 33 per cent increase in licensees over the last three years.

Commenting on the research findings, Adviser Ratings managing director, Angus Woods described the advice industry as being “in extraordinary flux”.

He said the impending withdrawals of major institutions from advice were compounding the impact of historic adjustments to adviser business practices driven by regulatory reform, predominantly Future of Financial (FoFA) and FASEA.

The Adviser Ratings research pointed to almost 7,000 advisers having left the industry since 2015, with the future attrition rate expected to increase and described IOOF and AMP as being the majors most at risk from adviser churn motivated by FASEA.

“Similarly, stockbrokers and life-focused licensees are the industry groups with most attrition risk since they have the lowest adviser educational levels, with Bell Potter requiring more than half of its advice workforce to be requalified for 2024,” it said.

“The adviser exodus, together with an ageing client demographic, is putting pressure on advice practices to modify business models for sustained growth. “With the large majority of advised clients transitioning to retirement and beyond, advisers need to have the skills and capacity to service that demographic,” said Woods. “However, winning millennials at the other end of the spectrum requires a very different value proposition.”