Australian financial planners could earn up to $15,000 a year of additional revenue by reducing compliance and administration activities to global averages, new research has found.
The CoreData Adviser efficiency: Business Processes in Australia report shows that almost a third of an Australian financial planner’s time is spend on compliance and administration, compared to a global average of less than 20%.
CoreData’s head of financial services, Kristen Turnbull, says differences in different countries reflect the rate of regulatory and legislative change and structure in those countries, but the global average includes the UK, where planners spend more time on compliance and administration than anywhere else in the world.
The estimate of potential additional revenue is based on assumptions of hours worked and rates of income per hour, and the number of hours spent on a range of business activities undertaken by financial planning practices in 11 countries.
“UK advisers are actually spending the most amount of time on administration and compliance, and they’ve obviously just been through a fairly similar and wide scale regulatory review with the Retail Distribution Review (RDR) over there, which has added to that,” Turnbull says.
“In the US they tend to focus a lot more time on the investment side, which is in part down to the difference in models, which tend to be quite investment focused rather than the more holistic advice models you see in Australia.
“But the key take-out from it is that if advisers can find a way to reduce some of this administrative burden, it has a tangible impact on the profitability of their business.”
Turnbull says there is a clear role to play for licensees and dealer groups in “freeing free up advisers to focus on tasks that are going to generate revenue, grow their client base and really focus on the tasks that matter”.
The CoreData research has found that aligned advisers spend more time than independent advisers and the average Australian adviser on compliance, while independent advisers spend more time on administration than aligned advisers and the average Australian adviser.
“There’s a lot of paperwork that comes with having your own AFSL and they tend to be smaller businesses, [with fewer] staff or support on that side to help them out,” Turnbull says.
“But as the research shows they’re missing out on a lot of potential revenue by spending almost a third of their time on these activities that do not generate any revenue.”
Turnbull says Australian advisers spend noticeably more time on the “remote management” of clients – writing letters and emails and making or answering phone calls – than their international counterparts; less time on face-to-face meetings with new clients; and less time actively seeking out new clients. Australian advisers also spend considerably less time than their international counterparts on meeting existing clients, managing existing clients’ investments, marketing, seeking new clients, and reading and education.
Generating income isn’t only about face-to-face time with clients, Turnbull says.
“Their time is being spent in these other areas, so it’s detracting from their ability to spend time in the areas that aid business growth – it’s not just the hours they can bill for, it’s about those marketing activities, social media, the things that in the long term are going to help grow your business,” she says.
What Australian financial planners do more of:
• Managing existing clients (phone calls, emails, letters, etc) – 26.3% v 18.9%
• General administration – 15.6% v 10.8%
• Regulatory compliance (paperwork and
admin relating to industry regulations/obligations – 14.3% v 8.7%
What Australian financial planners do less of:
• Meeting existing clients – 5.8% v 17.6%
• Managing existing client investments
(rebalancing, allocating new monies, etc) – 9.6% v 13.8%
• Seeking new clients – 8% v 10.4%
• Marketing – 2.2% v 3.8%
• Media/social media (reading trade magazines,
monitoring industry developments online, etc) – 2.7% v 6.5%
• Educating selves about new portfolio construction techniques – 3.2% v 5.7%
Source: CoreData
