Financial advisers are looking to expand their client base which could lead to 650,000 more Australians gaining advice, if regulatory issues can be solved, according to research.
According to the Advice Practice Profitability Report, produced by Empower Business Advisory and commissioned by Colonial First State, advisers are looking to expand their client base from an average of 110 to 152.
With approximately 15,500 advisers taking on 42 extra clients, this would increase the total of Australians receiving ongoing financial advice to 2.4 million.
But the research found two-thirds of advisers cite hurdles to advising more clients, with inefficiencies in providing advice is the most commonly cited reason, followed by ongoing servicing requirements and capacity constraints.
The research found advisers are intending to simplify their operations and reduce the cost of servicing clients, while also aiming to increase revenue per client. Over the next three years, 54 per cent of advisers want to increase revenue per client and 50 per cent want to serve more clients annually.
In a media release on the research, Recep III Peker, founder of Empower Business Advisory and author of the report, said the industry is ready to undergo some major transformations over the next few years.
“We explored advisers’ strategic priorities for the next three years and found increasing capacity to serve more clients annually is one of the industry’s top priorities,” Peker said.
Capacity conundrum
Amid the government’s plans to reform financial advice laws to reduce red tape, there has been ongoing conjecture over whether practices will utilise extra capacity to take on more clients or lower their fees if their cost to serve reduces.
Just yesterday, Professional Planner reported that 56.5 per cent of the cost of advice went towards administration and compliance costs.
But appetite for financial advice is prevalent and is only on the up. At a time when financial advice is at its most expensive, existing clients consider it to be worth the money.
In October, the Financial Advice Association Value of Advice Index revealed nine out of 10 advised clients believed the benefits of receiving financial advice outweighed the costs.
At a roundtable hosted by Professional Planner, industry leaders debated whether there is a moral duty for advice practices to improve productivity and increase capacity due to demand.
The roundtable argued that if advisers are making the same amount of money with fewer clients, they may not have an incentive to increase their client base.
This lack of incentive also risked of undermining the purpose of the Delivering Better Financial Outcomes reforms, which aimed to reduce red tape for advisers so they can improve capacity to take on more clients and reduce the advice gap.
