Australian financial advice practices have increased average total revenues substantially since 2021, according to Iress’ 2023 Financial Advice Efficiency Report.
The financial services technology company says the average total revenues of all practices surveyed had increased from $1.1m in 2021 to $1.6m in 2023.
Iress says this increase is “…despite practices shrinking their employee base and servicing fewer clients. In 2021, the average FTE per practice was 6.8, compared with 5.6 in 2023. The average clients per adviser also dropped marginally from 133 to 129.”
The firm notes that top performing practices bucked this trend by scaling up to handle a larger number of clients “…managing more than 500 clients compared with an industry average of 457. High performing practices also generated profit margins of more than 60% compared with an industry average of just 27%.”
It adds that practice principals highlighted their concerns over growing cyber risks, with cyber and data security named as the number one technology challenge facing their business over the next 12 months, followed by the time taken to produce advice documents and the integration of applications into a single desktop.
…advice practices across the board were found to have made significant efficiency gains…
Iress says advice practices across the board were found to have made significant efficiency gains over the two-year period, reducing the time it takes to produce all types of advice documentation.
“Automation was behind the time savings, with practices running a fully automated review process on average three hours faster at preparing client review documents than peers relying on manual processes.”
The research also found that the most profitable Australian financial advice practices built their advice processes around a single platform “…and were shown to be far more efficient than those practices that used multiple software platforms for their business management processes.”
…practices that communicated with their top clients more than 10 times per year were also able to achieve a 114% uplift in profitability…
It says that advice practices that communicated with their top clients more than 10 times per year “…were also able to achieve a 114% uplift in profitability. This supports research that shows direct correlations between client communication, satisfaction, referral business and overall practice profitability.”
Advice industry on the improve
Iress’ CEO of Wealth Management, Harry Mitchell, says the survey results show “…that the advice industry has been improving across a number of measures, despite prevailing pressures for advisers to do more with less and find ways to make good financial advice more accessible for more people.”
He adds that high performing advice practices are getting more out of their software “…by simplifying their tech stack and using a limited number of software applications to streamline their internal processes and reduce complexity.”
Mitchell says they are also getting more referrals and stronger advocacy from their best clients “…simply by staying in touch more often for less effort by using technology-underpinned communications solutions.”
He adds the research shows that cyber and data security is the number one challenge facing financial advice businesses in the coming 12 months.
“The good news is that there’s plenty of third-party specialists that advice practices can engage with if they haven’t already, to run vulnerability testing and set clear business continuity plans that can future-proof their practices.”
Iress’ 2023 Financial Advice Efficiency Report was produced in partnership with Business Health, an independent organisation specialising in customised advice and solutions to the financial services industry. The findings in the report are based on responses provided by 122 financial advice practices representative of the Australian advisory sector.
Click here to read the full report.
