The frictionless movement of assets is becoming a common feature of markets around the developed world, yet Australia remains a step behind. The ASX is in no mood to rush the move to T+1, however, after its calamitous attempt to implement distributed ledger technology.
It’s a dire situation for consumers but a massive tailwind for financial advisers. More people and more capital in the superannuation coffers than ever, with a stubbornly small number of advisers to service them.Â
‘Remember to breathe’: Advice profitability up 4.4pc as industry settles
“Resilience, adaptability and flexibility” are on display in an advice industry that is showing signs of renewal after a period of regulatory upheaval and higher-than-usual M&A activity, according to advice data specialists Business Health.
In a recent note the research group highlighted some data that indicates what it believes is an emerging trend – the advice industry is settling down after adjusting to the regulatory changes and the havoc it wrought, which included the break up of institutional advice and a raft of mergers and acquisitions.
“It’s been encouraging to see more and more practices across the country stepping up to recent challenges and emerging victorious,” Business Health stated. “An encouraging picture for sure. Resilience, adaptability and flexibility are clearly on display in many practices and after the last few years – blue skies are very welcome!”
The financial benefit of coming out of the recent period is also hitting home as advice groups take advantage of increased demand, caused in part by the diminished number of practicing advisers in the industry. Practice profitability (notionally calculated) increased from 24 per cent in 2022 to 28.4 per cent now, the researcher reported, while 68 per cent of firms are looking to hire new staff in the next 12 months.
Client retention has “not wavered”, Business Health said, with 92 per cent of practices reporting a key-client attrition rate under 3 per cent for the last two years. Additionally, 87 per cent of clients are “more than happy” to refer their adviser to others and client satisfaction with their adviser sits an average of 4.23 out of 5 across the researcher’s database.
The next move for advisers, they believe, will depend on where they are in the evolution of their business. The last few years has seen many advice businesses “refocus and retool”, with a lot of those in the final throes of mergers or major technology integrations.
“If you recently purchased, consolidation and integration will be among your main priorities, Business Health advised. “If you are thinking about retirement (or perhaps simply winding down a tad), preparing your practice early, so that it’s ’sale ready’, identifying potential successors and getting a clear handle of current market valuations will all help for a smooth transition.
“If growth is your focus for 2024+, ensure your website and socials stack up to where you need them to be and encourage your centres of influence/strategic partners to proactively refer you. Consider if now’s the time to cultivate a particular market niche or expand your range of services,” they continued. “If you’re attracted to a new licensee (even creating your own AFSL), settle on your ‘must have’ attributes before you begin and take the time to objectively assess the pros and cons for each option.”
Ultimately, the team says, advisers should use this opportunity to take stock of their business, their client book and their next significant move. “And remember to breathe…”
