The increasing profitability of financial planning practices is outweighing concerns over the future legislative landscape and has advisers feeling optimistic.
According to Macquarie Practice Consulting’s 2012 Benchmarking Survey, healthy signs of growth have buoyed adviser sentiment during the past year, with boutiques leading the charge.
The survey, now in its fifth year, found seven out of 10 advisers expect to increase their profit during the next 12 months, despite revenues being slightly down in the last cycle.
Firms that hold their own Australian Financial Services Licence fared best over the past two years, largely due to their greater size offering economies of scale in the management of costs and adviser productivity.
Yet despite this growing sense of optimism, the survey found advisers are still aware of some of the challenges they face.
The top three challenges cited by advisers are legislative change (56 per cent), profitability (41 per cent) and attracting new clients (39 per cent).
Fiona Mackenzie, associate director for Macquarie Practice Consulting believes that while some of these issues present challenges for advisers, they can also be used as an opportunity to look at what needs to change within their businesses.
“If we look at the key concerns of advisers, they are all inextricably linked,” she said.
“Legislative change has been on the radar for advisers for the past couple of years. While there has been some concern about the potential impact of these changes, now that we are seeing more clarity around the regulations, many advisers are viewing this very much as an opportunity.”
Client numbers have been stable during the past few years, according to the 304 respondents who completed the survey.
In boxing parlance, the “tale of the tape” revealed an average of 481 clients per practice, 185 clients per adviser with 69 per cent of these active (128 per adviser).
It found an average of $93 million in funds under advice, with advisers generating $1710 in revenue per client.
“Many businesses are now looking at how they can increase their client numbers, particularly as a result of the ageing population and the need to therefore attract younger clients,” said Mackenzie.
“If advisers are doing a good job and are able to clearly articulate the value they add to their clients, this means they are likely to retain their clients for longer. It also increases their chances of getting more referrals as their clients spread the word about the positive experience they have had.”
In line with previous years’ results, the 2012 survey revealed that referrals from existing clients are the primary source of new business for 36 per cent of firms.
Predictably the survey reflects the flight from managed funds to fixed interest, cash and direct equities.
