Harry Mitchell

The financial advice profession is booming, and practice revenues are soaring despite fewer advisers servicing fewer clients.

The 2023 ‘Financial Advice Efficiency Report’, conducted by Iress and Business Health, found the average total revenue of all practices surveyed had increased from $1.1 million in 2021 to $1.6 million in 2023, an increase of more than 45 per cent.

High-profit practices – defined as having a profit margin of at least 50 per cent – generated an average profit margin of more than 60 per cent, while the rest of the industry averaged only 27 per cent.

However, this is despite total revenue for high-profit practices averaging $1.4 million – less than the average for other practices of $1.7 million – but average revenue per adviser is $77,000 higher ($577,000) in high-profit practices.

The report surveyed 122 practices and found these gains despite a shrinking employee base which is servicing fewer clients.

Iress wealth management CEO Harry Mitchell tells Professional Planner this shift is a result of advisers maintaining clients who are willing to pay for services, rather than operating the subsidised advice models of the past.

“We’ve shifted from a large number of planners being in the big institutional, transactional referral base from the bank channel into the advice channel,” Mitchell says.

“There’s a shift in how advisers look and the customers they’re dealing with. You don’t have that long tail of B, C or D clients that you would get in the big banks.”

The average full-time-equivalent (FTE) employee per practice has dropped to 5.6 in 2023 from 6.8 in 2021, while the average funds under advice per adviser decreased from $83.4 million to $78.8 million.

The research found practices that communicated with their top clients more than 10 times a year achieved a 114 per cent profitability increase.

Research from Business Health released at the start of 2022 found the most profitable advice practices were surging, while other practices stagnated.

Business Health principal Rod Bertino previously identified practice benchmarking as a necessity for advice practices to improve, particularly if they didn’t have access to peers in their licensee network to share knowledge with.

Hurdles getting lower

In 2021, 60 per cent of those surveyed identified compliance and legislative burdens holding back growth which has fallen to 47 per cent, according to the latest report.