A survey of My Dealer Services‘ national network of self-licenced financial advice practices in Australia found that despite the upheavals and disruptions of the past few years the principals of these businesses are optimistic about the future.
MDS Director Alex Euvrard says in a statement that with their own AFSL it has allowed advisers “… to be far more entrepreneurial and operate innovative client-centric business models”.
He says survey respondents affirmed there are challenges ahead for the industry with the most significant being:
- The current compliance regime that requires practices to devote up to 30 percent of time and resources to this undertaking
- The exit of experienced practitioners
Euvrard says that 58% of the advice practices surveyed confirmed they were more profitable than two years ago despite the impost of compliance related costs impacting the finances of their businesses.
“The rising cost of compliance is unsustainable in the long run and needs to be addressed as an industry priority,” he states.
The statement adds that staff costs and increases in PI insurance premiums (some as high as 50%) were additional expenditure outgoings negatively impacting business profitability.
It says that survey respondents also viewed the growth in consumers needing professional advice as another industry issue “…that will deteriorate further as more and more advisers exit the sector as the deadline for academic qualification nears.”
…42% of advisers confirm they were considering acquisition of books of business to facilitate growth…
Although a negative on one side, the exodus of advisers was also regarded as an opportunity with 42% of advisers confirming that they were considering acquisition of books of business to facilitate growth, the company states.
While 26% of respondents said they were unsure if they would pursue acquisition opportunities, Euvrard was confident many in this group would do so.
Even though many mature age advisers were leaving, the uplift in education standards and qualification requirements was viewed overwhelmingly as a positive for the industry.
The company says that when asked what mattered most to their clients – it was the interpersonal relationship with the adviser that topped the list. Strategy to reach goals and investments was next, followed by investment returns.
Euvrard adds that an overwhelming 98% of advisers affirmed that technology will play a bigger role in the future “…with benefits measured in reduced costs and improved operational efficiency. Most importantly, it will significantly enhance the client experience and provision of advice.”
However, he noted that when it comes to technology and its impact on client engagement, the “humble telephone” was still number one.
Additional complementary services offered
The company says that although the primary focus of planning practices is the provision of professional financial advice, additional complementary services are being offered to clients and these are (in descending order):
- SMSF administration and related services
- Accounting, finance and mortgage broking facilities
- Estate planning and aged care
- Budgeting and cash flow management services
Euvrard says that demand by mature age clients is expected to increase considerably reflecting the nation’s ageing population and the largest inter-generational transfer of private wealth in Australia’s history.
“Although a major marketing opportunity, it requires advisers to improve their skills and knowledge in this highly specialised undertaking.”
Euvrard says the company is pleased with the results of the survey, “…especially as it has reaffirmed the positive mindsets of self-licensed advice practices and their outlook for the future.”
He says that increased professionalism of the advice sector will lift the standing of the industry “…and act as a beacon attracting the next generation to consider a career as a financial advice practitioner,” noting that technology will assist in reducing costs, improving client engagement and facilitate and encourage growth through acquisition opportunities.
However, he concludes that of the challenges ahead, the most crucial is the impact of compliance “…and regulators need to heed the calls of advice professionals for a more workable and practical framework going forward”.