The Treasury-led Quality of Advice review may lead to the “biggest shake-up” seen in years for the advice industry, Adviser Ratings says, as efforts to reverse the sector’s decline continue.

Adviser Ratings made the prediction in a new report – its annual take on the state of the industry and changes that have shaped the provision of advice.

The report, 2022 Australian Financial Advice Landscape, says the industry could be at its “nadir” as far as regulation is concerned, potentially supporting a slow revival of its prospects and strong profitability for remaining practice owners.

“It has the potential to cause the biggest shake-up to the advice industry in decades, as the Government looks to cut the Gordian knot of regulation and start all over again with a clear aim to make advice accessible and affordable,” the report says of the Quality of Advice review.

“Although the quality of advice has increased, concerns remain over whether the scale of compliance is fit for purpose.

“This will be a theme of Treasury’s review, which will specifically look at how to simplify compliance to drive down duplication.”

Treasury has released the issues paper for the review, which will be led by financial services, life insurance and superannuation lawyer Michelle Levy.

Last month at the AIA Adviser Summit, Financial Services Minister Jane Hume said the last several years have been challenging for the sector as it coped with a raft of changes that have led to a “Gordian knot” situation for advisers.

She says there is a need to “go back to basics” and that “the Quality of Advice review under a Morrison Government will do exactly this”.

The Quality of Advice review aims to provide a report to the Federal Government by December 16.

Adviser Ratings says the wealth industry continues to see the effects of the Hayne royal commission, with an all-time low of active advisers at the end of last year.

The decline in adviser numbers has coincided with a rise in demand from Australians seeking advice to plan for their financial goals.

There were about 17,351 registered retail advisers last year, down from 20,674 in 2020, and the number of practices fell 15% to 6929 over the same period.

Adviser Ratings had predicted in its inaugural 2018 report that thousands more advisers would exit the profession over the next five years, leaving more than 15,000 in the industry and more than $900 billion of net client wealth in transition.

“The advice landscape was plagued by more regulatory uncertainty in 2021,” Adviser Ratings says.

“While the industry experienced a 16% decline in adviser numbers, we anticipate that 2022 could be the year that the advice profession turns a corner with respect to advice practices being afforded the opportunity to work on their business.”