The great split in financial advice that is leaving everyday Australians behind

As such, she is one of the few advisers who can see clearly the major split that is under way in the Australian financial advice sector.

“There’s a genuine scarcity of advisers, particularly for what we consider the mum and dad population of Australia, those people who actually might be paying $5000 or $10,000 a year (for advice). The reality is that providing advice to mums and dads is no longer commercially viable,” Clarke says.

In the space of a decade, Australian financial advice has experienced dramatic change: with only half the number of advisers left in the business in the wake of the Hayne royal commission, there are now two distinct tiers inside the industry.

The top tier is typified by the Barron’s Top 150 Financial Advisers list: at this level, service is customised and complete, and clients are willing to pay high fees for high returns.

Below that upper layer, it’s a scramble. Even with substantial fees, advisers are increasingly selective and investors are finding it equally difficult to match their demands in the market.

“If I’m going to spend $5000 of my time doing the compliance just to ‘opt you in’ as a client, there is a lot of complexity,” Clarke says.

“The truth is, the level of service that an adviser can offer you here is not much. If you’re getting an annual review and a chat, that’s probably all your money’s buying you, which is incredibly disappointing.”

Most advisers will say they are open to taking on new customers, but in reality, most of them want to see significant wealth before they will deal with a new client.

Forget median superannuation savings in the order of $220,000. When most advisers look for business, they look to the sort of investors who have enough money, for example, to be hit with the new level of super tax; that is, those with more than $3m in their super accounts. Better still are clients who have more than $100m in various holdings.

The split in wealth management was clear last year when powerhouse Morgan Stanley Wealth Management moved to focus more sharply on the seriously rich.

The New York investment bank, which dominates the Top 150 List, struck a deal with stockbroker Ord Minnett to ease the transfer of wealthy (but not high-net-worth) clients to the broker. Under the terms of the arrangement, Morgan Stanley clients with less than $1m in assets were given the option to move their accounts to Ord Minnett. (High-net-worth individuals are still popularly defined as having more than $1m in “investible assets”, but in practice the figure is often closer to $5m.)

This article is from Barron’s Top 150 Financial Advisers 2025 published online and in The Australian on November 20.

The shift to wealthier clients is occurring across the broader financial advice sector. There are two key reasons why this change is likely to extend into the future.

First, put simply, the rich are getting richer, and this is particularly so in Australia.

As a recent Investment Trends survey suggests: “The wealthy are getting wealthier at an accelerated pace, driven by strategic investments, market performance and a keen focus on growth-oriented financial strategies.”

For example, if you want to make it onto The Australian’s Richest 250 list, you will need at least about $635m.

The second reason is the swelling ranks of the “mass affluent”.

A new report from Allianz Global Wealth released earlier this year says every Australian is worth on average $683,000, which makes us the third wealthiest population in the world, behind the US and Switzerland.

Most of the “mass affluent”, an estimated 700,000 people, have the bulk of their wealth in residential real estate and superannuation.

As the top end of the advice sector chases the “established affluent’’, a group with very widely diversified investments that stretch far beyond real estate and superannuation, suburban financial planners chase the rest of the market.

But the boom area in financial advice is at the very top, where family offices represent a whole new layer of wealth in Australia.

The family office sector now employs more than 30,000 people, about double the national population of financial planners.

Typically, a family office, which is a unit that concentrates exclusively on the investment activities of a family, is created when an entrepreneur sells out of a business.

Sometimes, that business has been built over generations, or more rapidly in the case of new areas such as software and artificial intelligence. On average, family offices need to have about $100m to make sense in terms of costs and salaries.

Roughly one in three of the nation’s family offices have more than $500m under management, and KPMG estimates there are more than 2000 offices across Australia.

What’s more, most of them have been established in the past 15 years. Providing advice to the family office segment has been a hot spot for several years. Many boutique advisers say their best talent is continually being headhunted to join these operators as advisers.

As the top end sizzles, the middle ranks are finding it difficult. Once the backbone of the industry, suburban advisers are also moving upmarket partly due to their own ambitions but also due to the need to survive.

In fact, market observers got a rare glimpse into how the financial advice market really works in a recent report from Centurion Market Makers, a consultancy that helps advisers who seeking to sell their practice.

As the report says: “It is very difficult to service a client with a fee under $3000 per year. Clients below this level generally detract from value.”

In other words, financial advice in Australia has become as much about the advisers ensuring you are wealthy enough to deal with them, as it is about ensuring they are competent enough to deal with you.

As this dynamic plays out, the move upmarket has been complicated by ructions in the area of so-called wholesale or “sophisticated investor” market.

Under current legislation, a sophisticated investor is anyone in Australia who has wealth of more than $2.5m, or an annual income of more than $250,000. When an investor satisfies that definition, they can be treated as a sophisticated investor. This means they can access a wider range of financial products without the need for standard disclosure documents. In exchange, they are entitled to less consumer protection under the law.

The sophisticated investor was a relatively coveted client until recent years, when an increasing number of advisers started to deal exclusively with these clients. For the adviser, the conversion of their client lists to those with the status of sophisticated investor meant a dramatic reduction in red tape and compliance costs.

At its best, this meant the adviser could spend more time servicing the investor on key issues such as asset allocation.

Unfortunately, there is evidence that the classification is often exploited: in some cases, advisers have classified investors as sophisticated without their knowledge.

As a string of scandals, including the issues around the First Guardian group, emerge, there is a push to clamp down on the sophisticated investor regime by raising the threshold for qualification. Consumer regulator ASIC wants the entry level lifted to $4.5m and the income level lifted to $450,000.

The government has promised to review the area, but for now, a big number of investors can technically qualify for sophisticated status because the defining level has not been indexed for inflation since it was created decades ago. It means the number of potential sophisticated investors has blown out from 30,000 in 2001 to 3 million in 2025.

Nonetheless, most ambitious investors will seek to be classified as sophisticated in order to maximise their options; while many planners will explore the option of lower costs by highlighting the attractions of wholesale investing.

No wonder, adviser and author Clarke told the Money Puzzle podcast recently: “At every level, advisers are working in a very constrained environment, but if you are shifting from retail to wholesale, well then that’s an entirely different world. You might find that you get access to quite different investments. It’s a bit like being led into a new community, not a secret community, but one that’s quite accessible to a lot of Australians right now.”

This article first appeared in The Australian as The great split in financial advice that is leaving everyday Australians behind