Clayton Coplestone, who promotes fund managers through his firm, Heathcote Investment Partners, has predicted that there could be 3000 AFAs in New Zealand by the end of the year.

There are currently just fewer than 2000 AFAs, so their number would have to increase by 50% in only a year for his prediction to come to pass.

“My perspective is that pre-regulation there were arguably 7000 people out there claiming to be financial advisers.  Regulation scared a lot of them off; some retired and some went to QFEs,” he said.

Coplestone said a continued improvement in market conditions would likely prompt a number of advisers operating under the safety of QFEs to strike out on their own as AFAs.

“When markets rebound there’s natural optimism and enthusiasm at market level and at consumer level people think ‘maybe I need to be in the market’.  People will be more disposed to take on financial advice,” he said.

“Also, interest rates have fallen to a level where lifestyles are being affected.  People can no longer rely on term deposits to provide adequate income so they have more incentive to seek advice.”

Professional Advisers Association chairman Peter Leitch said he would be very surprised if such an increase in the number of AFAs occurred this year.

“Share markets have improved although there needs to be more sustained improvement in underlying factors for people to go out and invest a whole lot of money and if they did, would they do it through an intermediary?  I don’t see that happening at all,” he said.

And Leitch said an avalanche of advisers moving out of QFEs and into the AFA space was unlikely.

“Are there people within the QFE environment who could be AFAs?  Yes there are but what people in those environments don’t have as much exposure to is what is the reality of an AFA in terms of the cost and pressures of being in business,” he said.

“People aren’t exactly busting down the door to become a financial adviser in New Zealand so it’s hard to see where they’ll come from.  I don’t think there are going to be 500 people currently RFAs who decide to become an AFA.”