financial advice

Advisers experiencing higher workloads

Investment Trends adviser business model

Financial advisers are growing their client base and profits through higher fees and cost management, despite industry exits and concerns about proposed changes.

More financial advisers are expanding their client base and experiencing higher profitability in their practices compared to previous years amid a growing exodus of professionals from the industry, according to a new report from Investment Trends.

The 2023 Adviser Business Model report, based on a survey of over 600 financial advisers conducted between April and May, revealed the majority of these professionals are now handling larger client workloads, with each adviser averaging 120 active clients, up from 113 a year earlier.

Moreover, nearly 38 per cent of financial advisers have seen their practice profitability improve, attributing this boost to higher fees and more rigorous cost management techniques that have significantly increased their profit margins over the past year.

Despite a 9 per cent increase in the cost of providing advice during the reporting period, from $3280 in 2022 to $3580, advisers have, on average, raised their upfront fees by 25 per cent to $4000 and their ongoing relationship fees by 18 per cent to $4700.

“It’s encouraging to see the positive business outcomes advisers are experiencing. As things stand, new client acquisition is, on an average basis, no longer loss-leading and those advisers who see growing profit margins have the largest client books,” Investment Trends head of research Dr Irene Guiamatsia said.

The report noted these upward trends took place as around 1000 advisers exited the profession between 2022 and May 2023, according to data drawn from the Australian Securities and Investments Commission’s Financial Advice Register.

The report also examined advisers’ views on the Quality of Advice Review, with 53 per cent of respondents perceiving the proposal to allow superannuation funds to provide financial advice as having a negative impact on their business.

“Advisers – and the industry as a whole – have worked very hard to address issues around conflict and it is natural to see some hesitancy around what some may construe as a return to old ways,” Guiamatsia noted.

“The sector faces the important challenge to chart a cohesive path to a future state where different advice delivery mechanisms that can cater to different client groups and different life stages coexist harmoniously – ultimately supporting a growing cohort of Australians with preparing for retirement.”

In contrast, an overwhelming majority (83 per cent) of those surveyed believed the proposal to streamline ongoing fee renewal and consent requirements into a single form will have a positive impact on their business.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital