The top 10 per cent of advice businesses have increased their revenue per client by 50 per cent over the last two years, despite the wider industry stagnating according to researcher Business Health.
The company’s recent Future Ready IX report found that over the last two years the disparity between firms with the most notionally profitable clients and the rest of the industry has been widening.
“Revenue per client for the most profitable firms increased dramatically in the last two years,” Rod Bertino, Business Health owner, tells Professional Planner.
In 2019, the top 10 per cent of firms averaged $4,046 of revenue per client, per year, Bertino explains. This figure increased to $6,384 in 2021.
“What that’s showing is that the most profitable firms have either reviewed their pricing or been able to add additional services,” Bertino says.
This is in stark contrast to the wider industry which is largely unchanged from $3,558 in 2019 to $3,543 in 2021.
“One of our key findings was that despite all the headwinds overall, average revenue per firm has remained steady,” Bertino says.
“While the marketplace has remained steady, the most profitable firms have found a way to increase the revenue per client.”
The data was gathered from over 230 independent advice practices.
Advisers need to be wary of evolving client needs
In a webcast covering the report, Bertino said while clients remained loyal and valued the relationship they have with their adviser, their advice needs are changing relatively quickly.
“Advice businesses need to understand that and align a service that matches those changing needs,” Bertino said.
“The pleasing thing to us was that clients have remained loyal to their advisers, they have stuck through Covid. Through the fear and uncertainty, they’ve looked to their adviser for guidance.”
Over 43,000 clients were surveyed about their adviser for the report.
“The number one rated attribute in the clients’ eyes isn’t the technical ability of the adviser or the quality of advice, it’s the depth of relationship they have with the adviser,” Bertino said.
Because of that loyalty, advisers need to make sure they adapt their offering to the evolving needs of client.
“Clients’ needs are changing,” Bertino said. “Over half of the clients within the average advice business are now aged over 60 and almost one in two are no longer gainfully employed.”
The researcher said this change was a “dramatic demographic shift” that more advisers need to be aware of and prepared for.
Older clients still need their adviser, Bertino explained, but for different reasons as they age.
“A 75-year-old client no longer has needs for accumulation, super and insurance products, but they still have a very real need for advice.”