I read with interest a recent blog from adviser business experts, Business Health. In it they talked about the preliminary results from their latest report on the ‘health’ of Australian advisory practices - Future Ready VIII.
The biggest heads up the report gave in its initial analysis was the dramatic reduction in client numbers. The average number of clients per practice had dropped from 715 in 2016, to 530 clients this year. The report also made the point that ten years ago, the average client size was 1,100 clients. But it did ask, were those clients just policy holders?
There were a few reasons listed for this significant decrease in client numbers. The first being rising costs and increased compliance responsibilities - many advisers are looking to pull back on their exposure to risk.
Closely linked to that was the fact that the drive to fee for service means the physical amount of clients advisers can service has reduced significantly. Again, the report ponders the fact that perhaps advisers have prematurely ‘thrown the baby out with the bathwater’ in moving clients on, rather than offering them an alternative service that the clients can afford to pay and that the practices can deliver profitably.
Either way you cut it, advice practices are looking very different than they did 2 years ago. They are almost unrecognisable to the practices of 10 years ago. I remember when we first shot No More Practice where we followed practice sales, the biggest issue advisers had when deciding what to do with their business, was who to sell to, or what clients to keep. There were a variety of players all vying to buy into advice practices - whether the clients were ‘A” or “C” class clients.
Perhaps it is time to consider where new growth can come from in adviser practices. How can new services be developed for those who cannot afford a full service experience? There will definitely be a need for average Australians to receive advice around key events like estate planning and inheritance. Can advisers develop a one off product that is affordable and also effective in areas such as this?
Either way you look at it, advisers are to be commended for shifting their business so far, so quickly. Anyone who runs a business knows how difficult this is to do, when you still have the day to day running of a business to contend with.
Everybody believes this period of change and disruption is far from over. My hope is that advisers can lead the charge in developing new ways to grow their business in this environment - by harnessing technology, templates and coaching skills to serve Australians while growing profitable practices. Because the stress and pressure of running a small to medium business deserves financial reward.
Until next time,
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These disturbing stats say a lot about where leaders in our industry are....
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