The advice industry is experiencing an unprecedented level of M&A activity, which can’t simply be put down to demographic change, succession planning and the pursuit of scale.
Those themes are certainly in play, but another key reason is a desire to acquire capability and capacity.
Over the past decade, the industry has been sapped of capacity.
As a result, the average adviser is managing just 99 ongoing clients, compared to 120 in 2023, based on research by Investment Trends.
While advice businesses have addressed the decline by putting a premium on their capacity and charging higher fees, the capacity drain means only a small percentage of Australians are receiving financial advice.
According to Investment Trends, 11.8 million Australians have unmet advice needs.
Advisers want to help these people. They also want to develop up-and-coming team members, expand their referral networks, and grow their business.
M&A provides opportunities to acquire clients, referral relationships and revenue but also talent and capacity.
That said, M&A isn’t for everybody. In an environment of full valuations and red-hot market conditions, many businesses aren’t prepared to take on more debt and risk to fund acquisitions.
Some may be able to buy small books but that doesn’t address the capacity issue. Tuck ins don’t usually come with ready-made advisers and support staff.
M&A is not the silver bullet and neither is technology, although both are critical levers.
Expanding capacity and scaling up requires a multi-faceted approach and greater investment in people, systems and innovation from all participants including licensees, product and platform providers, and regulators.
Recent research released by Colonial First State found half of advisers aspire to manage 152 clients.
But that target is influenced by the lens of current comprehensive, ongoing advice propositions. It could potentially be as high as 200, possibly more, with the development and acceptance of new models, such as scaled and episodic advice.
The Covid-19 pandemic gave us a glimpse of what could be achieved when the rules are relaxed, even slightly, and there is regulatory support to facilitate better consumer access to advice.
That strange, uncertain, and tragic time demonstrated the value and importance of professional advice and guidance.
While the loss of life, illness, and decimation of some businesses caused by Covid-19 was devastating, the pandemic also created a productivity bubble, driven by the immediate policy response, and the focus, creativity and long hours caused by lockdown.
Road to 200
Across Entireti, a key strategic priority is to support our member firms in boosting their capacity over the next two to three years to serve 200 clients per adviser. Internally, we’ve dubbed this ambitious goal, “Road to 200”.
Like any important mission or journey, advisers won’t get there alone.
They won’t hit 200, or even 152, trying to do everything themselves. Rather advice firms, like all businesses, should focus on what they do best and the areas where they can achieve a sustainable competitive advantage. All other non-core functions should be outsourced to external specialists.
On the road to 200, regulatory reform has a role to play in reducing the compliance burden, encouraging investment and attracting talent to the industry, but the legislative process is long and arduous.
Every day 800 Australians retire, according to research commissioned by the Financial Services Council. Over the next decade, retirees will gain access to around $1.5 trillion in superannuation savings.
The social impact of people retiring without sound guidance on retirement incomes, budgeting and cashflow management, and Centrelink, could be disastrous at both a personal, community and national level.
Australians can’t wait for regulatory change. Similarly, advisers can’t assume technology will magically solve their problems.
No matter how good a tech solution is, its impact will depend on its users.
Licensees, given their close relationship and intimate understanding of advice businesses, are ideally positioned to help advisers optimise the use of technology.
These are the type of services that advisers value. They may need licensing services like risk and compliance, professional indemnity insurance, and investment research, but they really want help expanding their capacity to manage more clients and grow their business.
Licensees, as we were previously tagged, must evolve into business services partners.
They should be trialing technology, negotiating agreements, and implementing change management programs to tangibly assist advisers to automate and speed up processes, address bottlenecks, and drive transformational change.
Most advice businesses don’t have the capability or capacity to do this inhouse. More to the point, they should be focusing on serving their clients.
Stepped change
A technology-assisted advice future that enables businesses to manage over 200 clients per adviser requires stepped change.
The critical component lies in integrating technology into a business’ processes and governance framework to give advisers the confidence that they are acting within appropriate guardrails.
Behind the scenes, licensees that are now business services providers are coordinating the component parts of the advice process, including working with technology providers, product manufacturers and platforms, to facilitate an efficient, streamlined and harmonised process that delivers improved client experiences and outcomes.
Advisers that see licensees as a commodity and cost to their business, rather than the business services partners they are, risk missing out on opportunities to expand their capacity, help more clients, and build businesses of significant capital value.
Neil Younger is the managing director of Entireti and will be speaking at the Professional Planner Licensee Summit on 23-24 June 2025 in the NSW Blue Mountains.
