Produced in partnership with Colonial First State.
No-one can deny that demand for advice currently exceeds supply. While new advice models are on the rise, there are more obvious and immediate solutions to close the gap.
For example, if Australia’s existing 15,500 advisers could increase their capacity and serve an additional 42 clients per year, an extra 650,000 people would receive advice.
It’s not an unrealistic goal, according to Colonial First State group executive for distribution Bryce Quirk, who cites research showing that the average adviser has 110 ongoing clients but aspires to serve 152.
The main obstacles to this goal are inefficiencies, ongoing compliance requirements, and capacity constraints due, in part, to a local skills and talent shortage.
“Advisers are on a transformative path, aiming to lift profitability and increase their ability to help more clients,” Quirk tells Professional Planner.
“Many see simplifying operations and reducing the cost of servicing clients as key strategic priorities.”
Last year, CFS commissioned independent research firm Empower Business Advisory to conduct a comprehensive study of advice businesses to quantify their cost-to-serve, understand their pain points, and identify opportunities to better support clients.
The report found a strong desire among advisers to boost revenue by 54 per cent per client over the next three years, primarily by reducing their cost to serve. By doing so, advisers anticipate that they can help 50 per cent more clients annually.
Many have a clear plan to achieve their objectives too.
Not surprisingly, technology plays a central role but not necessarily the type of technology that commonly springs to mind.
Expensive CRM systems and AI aren’t the only way advisers can achieve meaningful operational and cost efficiencies.
While these solutions are critically important, for the average practice with limited inhouse technology capabilities and budgets, a more practical solution is better use of existing technology, such as their investment and administration platform.
Optimising the use of existing technology can speed up processes, eliminate mistakes, and give advisers back valuable time, the report found.
This is particularly important given technology providers, like platforms, are continuously upgrading and enhancing their functionality, which key people in a business may not immediately realise because they are so busy.
“Technology like AI will absolutely make a difference and is already speeding up some processes but just knowing how to get the most out of the existing tech in your business can deliver enormous efficiency benefits,” Quirk says.
“Businesses are leaving a lot of value on the table because their back office isn’t humming, due to factors like staff turnover and people unfamiliar with products and systems, and AI can’t solve those problems.”
To help advice businesses get across the range of features and upgrades to FirstChoice, CFS recently launched a Business Optimisation Service, dedicated to educating and training advisers and support staff to optimise their use of the platform, particularly the new Elemnta onboarding tool and managed accounts.
“Product partners can play a key role in helping advisers create capacity in their business by optimising [existing] technology and efficiency executing key tasks,” Quirk says.
“But it’s not just about advisers. Whole teams should be supported.”
According to the CFS Advice practice profitability report, which surveyed over 300 advisers, those that use the CFS FirstChoice platform as their primary platform have a higher number of ongoing clients per adviser; 136 compared to 110 for users of other platforms.
They also believe they can potentially service more clients; 213 compared to 152 for users of other platforms.
That said, the report found an inverse relationship between client numbers and portfolio size, revealing that the more clients an adviser had, the smaller the average portfolio size.
For example, advisers managing 20-50 clients each have average balances of $929,000 per client, compared to $439,000 for those managing over 150 clients.
But wealthier clients are not necessarily more profitable clients.
Despite having an average client portfolio size 26 per cent smaller than the industry average, primary CFS FirstChoice users had a higher proportion of profitable clients; 85 per cent compared to 82 per cent for users of other platforms.
Almost 70 per cent said that their choice of platform helped them reduce their cost-to-serve.
“We’re seeing more advisers target high net worth individuals, but the size of a client’s portfolio isn’t an indication of their profitability because they may be more demanding and take up more of an adviser’s time, which drives up their cost of serve,” Quirk says.
“Practice revenue might be higher but targeting this segment may introduce additional costs to the business and drain capacity.”
When it comes to profitably servicing specific client segments, platform choice and the number of platforms used can definitely make a difference, Quirk says.
“In most situations, if there is one simple process that everyone follows, that will deliver the greatest efficiencies, so businesses that use one platform, or primarily use on one platform, can expect greater efficiencies and less errors than those that use multiple platforms,” he says.
“There’s definitely an argument that [using] fewer platforms enhances efficiency, but advisers need to take into consideration the unique needs and objectives of their clients.”
Interestingly, the CFS report found that only one in five advisers believe their primary platform is well suited for all their clients.
Pain points
Providing advice has never been more expensive, due largely to the onslaught of regulatory changes in recent years.
Higher interest rates, inflationary pressures and rising employment costs haven’t helped either.
According to the Colonial First State Advice practice profitability report, only 24 per cent of advisers manage to serve all their clients profitability.
In other words, over three quarters of advisers have unprofitable clients.
To address this issue, businesses need to understand their cost to serve and the activities that consume the most time for advisers and support staff.
The task that takes the most time to complete is onboarding new clients, based on the CFS report.
On average, advice businesses spend an hour and 15 minutes establishing a new client account on a platform. Some advisers spend over two hours.
This is due to the numerous steps involved including filling in application forms, organising rollovers, and investing funds. Fortunately, this task only needs to be completed once at the start of the relationship.
Among recurring tasks, preparing for a client review is the most time consuming, taking 45 minutes on average.
This includes collating all relevant information and generating necessary documents.
“There are certain parts of the advice process that platforms can influence, such as the implementation of advice and ongoing client service,” Quirk says, claiming that process improvements to FirstChoice have shaved 34 minutes off the time it takes for advisers to onboard clients.
“With many advisers operating under significant pressure, process improvements have the potential to help them achieve higher job satisfaction, work/life balance and mental wellness,” he says.
“Platforms are well positioned to support advisers to drive efficiencies and achieve their business goals. This, in turn, would empower advisers to spend more time on strategic initiatives such as expanding and revamping their value and service proposition, and enhancing the client experience.”
Making quality advice accessible and affordable to more Australians requires a multi-faceted response that encompasses growing adviser numbers, fostering different advice models and propositions including digital advice, reducing the compliance burden, and driving practice efficiencies.
“There is a strong desire among advisers to expand their capacity to help more people and grow their businesses, and it is in everyone’s interest to support them to achieve their goals,” Quirk says.
