A more optimistic picture of the financial advice industry has emerged in a new study which finds firms in New Zealand and Australia have been focusing on improving processes and workflows to boost services and create a platform for growth.
Asset manager Dimensional Fund Advisors’ survey, covered 75 advice firms across the two countries and was part of a larger survey by Dimensional of 740 firms globally that ranked businesses across five metrics – revenue growth, client retention, employee retention, profit margin and revenue per adviser.
A statement from the firm says that amongst the findings were:
- On average a senior adviser at a high performing firm in New Zealand and Australia now services 173 households, as opposed to 122 households at other local firms
- Average revenue per senior adviser was also significantly higher at the top firms at $1.1 million versus $750K at other firms in Australia and New Zealand
Nathan Krieger …there’s definitely a greater sense of optimism now than there was a few years ago.
Dimensional says that while it 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 says the picture it gets from firms surveyed “…is that years of advisers working on the business, as opposed to in the business, is finally starting to bear fruit.
“There’s definitely a greater sense of optimism now than there was a few years ago.”
…high-performing advice firms last year enjoyed, on average, 19% year-on-year growth in revenue…
Dimensional’s survey also found high-performing advice firms in New Zealand and Australia last year enjoyed, on average, 19% year-on-year growth in revenue, as opposed to 14% among other local firms.
High performers were also generating more revenue per household at about $8,400 versus $7,400.
Dimensional says all the while higher performing firms were managing to provide a greater number of services to a larger percentage of their 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,” Krieger says.
“That’s allowing high performing firms to service more clients per adviser without losing quality.”
In terms of distinctions between global firms and those in New Zealand and Australia the survey found the local industry was less reliant on merger-and-acquisitions as a source of growth and also less likely to pay staff compensation through performance bonuses.
In noting the significant regulatory change in Australia and the exodus of advisers from the industry, Dimension says however, that remaining firms “…have made substantial investments in productivity-enhancing technology, made a priority of workflow process improvements and sought to enhance the overall client experience.”
It adds that 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.”