New research points to ‘optimistic’ future for advice industry

The survey looked at 75 local advice firms that was part of a larger surgery of 740 firms globally that ranked businesses across s five key metrics – revenue growth, client retention, employee retention, profit margin and revenue per advisor.

The study found that firms has been focused on improving processes and workflows to boost services and create a platform for growth.

While Dimensional found that managing compliance and regulatory changes remains a major operational challenge for local advice firms – more so than for their global counterparts – the focus of higher performing firms is principally on implementing workflow processes and selecting and maintaining technology.

Dimensional Australia Client Group Co-Head Nathan Krieger said that years of advisers working on their business as opposed to just in it, is starting to bear fruit for advice businesses.

Dimensional’s survey found high-performing advice firms in Australia and New Zealand last year enjoyed, on average, 19 per cent year-on-year growth in revenue, as opposed to 14 per cent among other local firms.

High performers were also generating more revenue per household at about $8,400 versus $7,400.

The research also found that higher performing firms were providing a greater number of services to a larger percentage of clients in areas such as tax, retirement and insurance planning.

“Part of the success is coming from improving efficiencies and implementing technology, but also from growing their client service support personnel significantly faster,” said Mr Krieger.

“That’s allowing high performing firms to service more clients per advisor without losing quality.”

The survey also found that on average, a senior adviser at a high performing firm now services 174 households, as opposed to 122 households at other local firms.

Average revenue per senior advisor was also significantly higher at the top firms at $1.1 million versus $750,000 at other firms in Australia and NZ.

Dimensional noted that the industry locally has been undergoing significant change in recent years under the pressure of regulatory and compliance requirements.

“A new regulatory regime for financial advice came into force in New Zealand in 2021, while Australia has had several waves of regulatory change dating back to the Future of Financial Advice reforms a decade ago,” it said.

“After those changes and subsequent reforms in the wake of the Hayne Royal Commission that required advisers to undergo further training and certification, there has been a major exodus from the industry. Banks exited financial advice and many existing advisers quit the industry altogether.”

However, the asset manager noted that during that time firms have made substantial investments in productivity-enhancing technology, made a priority of workflow process improvements and sought to enhance the overall client experience.

“With the prospect of a simplified regulatory and compliance regime after the Levy inquiry, that holds out the prospect of a new wave of growth in the years ahead.”