SMSF specialists have increased their level of profitability over the past 12 months by increasing initial upfront fees to clients and moving away from a model where this was seen as a loss leader to be recouped by ongoing fees, according to research examining SMSF practice management issues.
Investment Trends head of research Irene Guiamatsia said SMSF specialist advisers, which the firm defined as those with 20 or more SMSF clients, were asked, as part of recent research into the SMSF advice market, how their practice profitability has changed in the past year.
“We find on a net basis all SMSF advisers seem to have seen more of an increase than decrease, but it is much more positive for SMSF specialists,” Guiamatsia said today during a presentation at the SMSF Association Technical Summit 2024 in Sydney.
“So 65 per cent of those who have over 20 SMSF clients have seen an increase in revenue,” she added, noting that in contrast 28 per cent of SMSF generalists reported a growth in revenue from clients.
She said the chief driver was an increase in upfront fees and while this was happening across the industry, it represented a shift for the SMSF sector.
“I’m not telling you of a trend that isn’t already happening, but quantifying it because it is now a two-year trend because of the bump that we see in the past year where there is a steep increase in upfront fees, which is significant,” she said.
Figures presented during the session showed the average upfront fee charged by an SMSF specialist rose from $2600 in 2022 to $3600 in 2023 and $3750 in 2024, while ongoing fees also increased from $4050 in 2022 to $4550 in 2024.
“We’ve always seen throughout our adviser research that new client acquisition tends to be loss leading and the fee was lower than the actual cost of advising, but they were getting a margin on the ongoing relationship,” Guiamatsia said.
“Advisers have changed the mindset around that and have been better able to set upfront their value to a new client and charge their fee price accordingly.”
