Boutique dealership practices have diversified into wealth protection advice over the last 18 months in order to increase their profitability, according to a study released by Macquarie Practice Consulting (Macquarie).
The key findings in Macquarie’s 2010 Boutique Practice Benchmarking study summarise the postion of many small advice firms following the Global Financial Crisis:
- Boutique firms are looking to diversify their sources of revenue
- They are focussing on organic growth opportunities
- They are taking this path in order to address significantly falling revenues
Risk insurance has been a ‘beneficiary’ of the GFC
Risk insurance has been a ‘beneficiary’ of the GFC, with strong evidence, supported by Macquarie’s study findings, of many smaller practices diversifying into risk insurance advice in order to supplement their income and maintain their profitability.
The study reports the proportion of revenue received from insurance advice increased in 39% of boutique practices last year, and 43% said they generated more than 10% of their revenue from risk advice over that period. This compares with a 26% downturn in average funds under advice in boutique practices over the last two years.
The report also outlined that more than a third of the practices involved in the study said they wanted more support and training in the insurance area, indicating opportunities for life companies and industry service providers to reach a growing market of ‘first time’ entrants into the risk insuance sector of the industry.
Commenting on the study findings, Head of Macquarie Practice Consulting, Liz McCarthy, said boutique practices have faced a number of challenges over the past 18 months, where revenues have dropped significantly and small firms have struggled to attract new clients:
“As a result, many of these firms have been looking at ways to diversify their income and increase their focus on other services,” said Ms McCarthy.
