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The findings in the Advice Practice Profitability Report suggest that advisors are planning to grow their client portfolios, increasing average client numbers from 110 to 152. With 15,500 financial advisers each potentially onboarding nearly 42 new clients, the projections see the total number of Australians receiving ongoing financial advice climb to approximately 2.4 million.
However, expanding the client base comes with its own set of challenges. Two-thirds of advisers acknowledge hurdles in scaling their practices, with inefficiencies in service provision and capacity constraints being primary concerns. Additionally, ongoing regulatory servicing requirements put extra pressure on advisers looking to extend their reach.
To tackle these challenges, many advisers plan to streamline their operations and cut costs associated with client servicing, while simultaneously focusing on boosting revenue from each client. Over the next three years, 54% of advisers aim to enhance revenue per client, with 50% proposing to increase their annual client load.
Recep III Peker, founder of Empower Business Advisory and author of the report, reflected on these findings in a recent media announcement. He noted, “We explored advisers’ strategic priorities for the next three years and found increasing capacity to serve more clients annually is one of the industry’s top priorities.”
Navigating Capacity Constraints
As government conversations around financial advice reforms continue, there's ambiguity over whether practices will use this additional capacity to lower client fees or increase client intake—if servicing costs drop. A report by Professional Planner disclosed that administration and compliance overheads constitute 56.5% of total advisory costs.
The demand for financial advice is indeed rising, despite its currently high costs, reflecting a keen consumer interest. An October survey by the Financial Advice Association indicated that nine out of ten clients felt the advantages of financial advice outweighed its financial implications.
A recent Professional Planner roundtable shed light on the ethical obligations of financial advisers to improve productivity and cater to growing demand. Discussions pointed out a noticeable reservation among some advisers; they may lack an inherent motivation to scale their client base if their current earnings remain stable with fewer clients.
This mindset could counteract the goals of the Delivering Better Financial Outcomes initiative, designed to reduce bureaucratic red tape and empower advisers to better accommodate their clients, ultimately bridging the existing advice gap.
Published:Wednesday, 20th Nov 2024
Source: Paige Estritori
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