The pressures on financial advisers have eased, but many are still contemplating a move from their current licensee to a self-licensed model albeit at a reduced rate, according to research conducted by Investment Trends.
As part of its “2022 Adviser Business Model Report”, which looks at the business support needs of financial advisers, Investment Trends found that while the population of advisers continued to fall from 20,000 in 2021 to 16,500 in 2022 due to the ongoing effect of regulatory change, the move to becoming self-licensed had started to taper off.
Investment Trends noted this was due to advisers considering the benefits of operating under their own licence with the added costs and compliance requirements that accompany that shift, and of the 37 per cent of advisers planning to leave their current licensee in the next year, 70 per cent intended to move to a self-licensed model.
Investment Trends research director Dougal Guild said: “Decreasing net promoter score is in part driving the increasing number of advisers across both the ‘aligned’ and ‘majority independent’ segments [whose] intention [is] to leave their current licensee to be part of a self-licensed practice.
Guild added the compliance burden, providing affordable advice and regulatory change were the leading areas of pressure for advisers, and these issues, along with the ongoing structural changes in the sector, had continued to drive up the cost of providing advice, with the break-even point for full advice to a typical client rising from $2850 in 2020 to $3280 in 2022.
The report found despite the ongoing changes, practice profitability increased and 46 per cent of advisers stated they were more profitable this year compared to 34 per cent in 2021.
“This is encouraging as it indicates advisers are adapting to the ‘new world’. Contributing to improved practice profit margins is a continued move by advisers focusing their efforts on acquiring and retaining higher-value clients,” Guild said.
“The more successful advisers appear to have better adapted to regulatory change and new technologies to address this cost/profitability issue. They primarily service wealthier clients and are prepared to pay for tech solutions to enhance their advice offering and bolster profitability.
“Overall, practices’ net profit margins are moving in the right direction. Advisers are refocusing efforts on new business post the COVID and FASEA (Financial Adviser Standards and Ethics Authority) disruption. This, combined with an increasing focus on higher-value clients, has delivered record high levels of new inflows.”
