Exit of banks from advice has seen advice businesses thrive

There has been a tremendous growth of financial advice businesses that provide high-quality services since the Hayne royal commission. 

NAB professional services banking executive Adam Holster tells Professional Planner that these businesses no longer have the conflict that “might exist within a full services financial provider like a bank”. 

“We’re really pleased with the opportunities that the banks withdrawing has created in the market for independent operators,” Holster says. 

The number of financial advisers who were not licensed by banks boomed after the banks exited the market, and they have thrived under alternative licensing arrangements, according to NAB client director Philip Pleasant-George. 

“[Advisers] can [now] basically recommend products and solutions that are no way otherwise perceived as being a slight conflict of interest,” he says. 

Pleasant-George says the main key takeaway from NAB’s 2024 Accounting & Financial Planning Report is that the advice industry has a bright future. 

“We’ve seen a deterioration in terms of numbers for the advisers, which [is] a great opportunity because there are less advisers and more clients who are available. They’re expecting the revenues to rise substantially going forward based on the volume of work they have in the pipeline.” 

He added that the report highlights hiring, retaining, and developing new staff is nominated as an ongoing challenge by 41 per cent of firms due to a shortage of available professionals. 

“[But] they found a very simplified way in which they can actually increase the bottom line and provide the clients with a very good service by outsourcing some of the back-office functions like paraplanning and report writing and other things,” he says. 

Firms also understand the importance of selecting and training the right individuals with the necessary skills for effective service delivery, according to Holster. 

“One of the most exciting developments is just around the investment that we have seen into the boring stuff – the new technology and systems to really make the provision of top-quality services be able to be delivered It’ll be clients at an effectively lower cost per advice provided,” he says. 

“There is a key role for an independent adviser to play in capturing that opportunity and to be able to deliver that in a way that is cost efficient and stacks up for their clients.” 

The NAB report shows that the revenue growth and expectations of the owners of financial advice firms is now better than the expectations of the owners of accounting firms. 

It says 29 per cent of financial planning firms say their revenue growth has been either good or very good over the past 12 months. In comparison, 22 per cent of accounting firms describe their revenue growth the same way. 

Additionally, the report says 41 per cent of advice firms expect revenue growth for the next 12 months to be good or very good, compared to just 27 per cent of accounting firms.

NAB never stepped away from advice 

Holster says the annual Accounting & Financial Planning Report came about for two reasons. 

“NAB has always had a really strong relationship with the financial planning industry,” he says. 

“Despite all the challenges and all the opportunities that have existed in the industry over the last couple of decades, we’ve never stepped away from it in terms of supporting our [customers] and helping them grow their businesses. 

“The second [reason is that] we just recognise that with so much change in the industry, and with such a large exposure to scale within the industry, the industry deserved an independent perspective. So, we knew that we have the scale within our client base to be able to go out and pose some questions to them that would help the industry more broadly, be able to get a sense of what was happening in the industry from their peers.”