Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
The legislative threads surrounding financial services “look less like an elegant tapestry and more like a painting by Jackson Pollock”, the ASIC chair said, before announcing a new thinktank to reassess ways the regulator can help make the system more efficient and less complex.
‘Inefficiencies’ the number one block to increasing advice practice profitability
With the Hayne royal commission fading from recent memory, demand for financial advice at an all-time premium and the country’s burgeoning superannuation system ensuring it will stay that way for a long time, there is plenty of evidence to show that the future of the advice industry looks sound.
The tailwinds behind financial advice are plentiful. Add to them the prospect of regulatory reform via the Delivering Better Financial Outcomes Bill, and you get an industry that’s likely entering an era of growth after a dour half-decade that saw adviser numbers drop to their lowest ebb.
A recent study from Colonial First State highlighted the growing confidence advice practice principals now have in their ability to grow the business, as well as the factors they believe they need to overcome to achieve that growth.
The study, which CFS conducted in partnership with independent research firm Empower Business Advisory, found that advisers manage an average of 110 clients each, but believe they can handle (on average) 152 clients each.
That ambition, however, is conditional upon several obstacles being overcome, with two thirds of the 300 advisers surveyed identifying the hurdles they need to pass before they can reach their profitability potential.
“Inefficiencies in providing advice is the most commonly cited hurdle, followed by ongoing servicing requirements and capacity constraints,” the report stated. “They are not constrained by the demand for advice, but rather their ability to supply it profitably while keeping advice affordable.”
CFS notes that if the quantum of advisers left in the industry as it stands – around 15,500 – managed to overcome business hurdles and achieve the elevated client books they aspired to, the additional 42 clients each would translate to an additional 650,000 more Australians receiving ongoing financial advice, increasing the total country-wide to 2,400,000.
According to Recep Peker (pictured), founder of Empower Business Advisory and author of the report, the industry is on the cusp of significant positive change.
“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. As part of this advisers, advisers are aiming to simplify their operations and reduce the cost of servicing clients, while seeking to increase their revenue per client as an outcome of delivering greater value,” Peker said.
“Taken together, this shows clear intent to boost advice quality and business profitability while simultaneously getting advice to more Australians.”
