The lack of qualified advisers in the near term means the industry is left with the challenge of lifting the capacity of advisers to handle more clients according to a panel.
Speaking at the Professional Planner Licensee Summit in Katoomba earlier this month, Elixir Consulting managing director Sue Viskovic said the lack of new talent in the industry means existing advisers need to service more clients.
“I see this as a huge challenge for the advice profession, to lift the capacity of advisers. Advisers are saying they can handle 80 to 100 clients per adviser – that’s just not going to cut it.”
She said six-month waitlists for clients to see an adviser are becoming commonplace.
“We know we’re not replacing enough advisers and that problem is only going to get worse before it gets better.”
Last November, Iress released the inaugural Advice Efficiency Survey which found an average of 133 clients per adviser.
In March, former financial services minister Jane Hume acknowledged the thin pipeline of new advisers which she described as ‘simply not enough’.
However, two months earlier she stated it was not necessary to “stem the bleeding any further” for adviser departures.
“The real question is how do we make sure we can bring that next cohort through, so we have a dynamic industry that is replenishing itself,” Hume said in January. “There’s a mass exodus of people leaving the industry and we always knew there were going to be people leaving the industry.”
Numbers game
When it came to how many advisers are needed for a practice to get the benefit of scale, Viskovic said it was likely less than expected.
“I’m not sure that 10 is the perfect number because I’ve seen firms that have five to six [advisers] and they’ve got a practice manager two to three days a week, so it doesn’t have to be full-time.”
Three to four years ago, Viskovic said, it was possible to build a profitable boutique business with only one or two advisers.
“We’re not seeing that so much anymore. In order to free up time to think, plan and change a one or two adviser practice is full to the brim with just doing client work. We’re seeing the move around scale.”
Speaking in the same session, Fortnum managing director and group chief executive Neil Younger said financial planning practices are getting better organised and corporatised.
“Progressive firms are bringing in general managers as they get larger. The professional service firm concept is something that more are looking into as a way to attract talent but also grow their capability with a proposition that is maybe not as traditional as we’ve seen in the licensing space in days gone by.”
Koda Capital managing partner Jonathan Ayres pointed to law firms as a model of professional services firm that could work in advice.
“What are the attributes that make a good professional services firm? It’s shared ownership and shared decision making. It’s ownership that matters so a large driver towards individual compensation. It’s independence and mostly importantly it’s culture.”
Target market
Even with the need to service more clients, practices still need to focus on their target market demographic, Viskovic said.
“Until you have more than five advisers, it’s very difficult to adequately service more than three or four client avatars and the type of proposition you’re delivering.”
Digital advice solutions will act as a placeholder for potential clients who don’t need a holistic offering, she noted.
“The likes of Paul [Feeney, founder of] Otivo and what they’re building out with that is… I hate the term gamechanger, but that is going to make a significant difference to a lot of firms who will be able to provide that simple advice for clients that don’t necessarily need or want the relationship at that point.”
She said this is the avenue practices will have to rely on if they don’t want to let those clients go.
“On one hand firms have to specialise and understand their target market, but somehow still be able to handle these people to build these relationships when they’re ready to engage properly.”
For Jane Hume to have stated that it was not necessary to stem the bleeding any further for Adviser departures, defies belief.
Ask any Australian if they would prefer to get Advice from an experienced or new Adviser and the answer is obvious.
There seemed to be a fantasy that the way to fix the issues of exiting experienced Advisers, was for new, wet behind the ears theory based young people who have not lived and breathed the ups and downs of economic and real life events that can have a major impact on current and future planning, to be the white knights who will ride in and save the day.
That has never been and never will be the real world, though the Utopian vision and brave new world that has been forced upon us, has resulted in totally avoidable chaos with severe financial and mental stress across the entire Country.
This is the end result when common sense policy is replaced with vested interest skullduggery dressed up as improvements, based on theory that was never going to pass the real world test.
There is a congo line of theoretical experts who have never lived in the real world, though have loud opinions, so why would they want to have their party spoiled by experienced people who could cut through the BULL—T and actually get things done correctly.
In Australia, there is a need for 25,000 specialist risk Advisers.
We are are now down to approximately 1,200 which certainly makes them busy when you calculate 12 million individual people and 1 million Businesses that need wealth protection advice.
Yet the solution has been to drive out quality Advisers and make it unviable for New Advisers to even enter the Industry.
Fawlty Towers script writers could not have written this black comedy better.
Australia is the ONLY nation in the world that has Annual Fee Consent renewals. Until they are gone, client servicing ratios will remain lower, compared to other countries that aren’t bogged down with such bureaucratic inefficiencies.