Are you ready to build the practice of the future


In a rapidly changing regulatory and technological landscape, financial advice practices have never been under greater pressure to adapt. Exclusive new research from Investment Trends shows that some practices have been successful in this increasingly challenging environment, laying the foundations for the emerging practice of the future.

Why business as usual is no longer enough

We all know that financial advice practices are dealing with an environment of almost unprecedented and unrelenting change. Regulatory scrutiny has never been more intense, with 56 inquiries and reviews already completed since 2008,1 not including the current Royal Commission and the further changes it is likely to bring. Most recently, the Australian Banking Association announced it would seek legislative change to abolish grandfathered payments, putting established business models under further threat.2

Research tells us that it isn’t only other advice practices who pose a competitive threat. Robo-advice, self-directed investments and insurance platforms continue to grow in sophistication and reach. 72% of Millennials interviewed in a recent survey now say they manage their own wealth, while two-thirds say they’d prefer to receive advice digitally, rather than face-to-face.3

So how are practices preparing their businesses to thrive and grow in this new and different world?

To help answer that question, Investment Trends analysed data from a comprehensive quantitative survey of 345 practices across the country.4 The conclusion the research found was that, despite the challenges, a number of top scoring businesses are already finding new growth opportunities – and laying the foundations for the emerging practice of the future. Top scoring practices are those scoring in the top 20% of those surveyed.

For exclusive insights into Investment Trend’s benchmarking data, subscribe to BT Academy.

What will your new business model look like?

Recep Peker, Research Director at Investment Trends, explains how the research was conducted. “We started by giving each practice a combined score, based on three key indicators – revenue per planner, client acquisition and profitability growth. Then we looked at the characteristics that differentiated the top-scoring practices from the rest.”

“The emerging picture shows many different elements coming together to drive success,” he says. “We see practices pursuing a variety of different business models, from multi-disciplinary to specialist, but what does seem clear is that many of the top-scoring practices have been willing to embrace change and begin re-engineering their processes in response to an altered industry environment.”

Phil Butterworth is an industry veteran with more than 25 years’ experience at the coalface of financial advice, including eight years as CEO of DKN Financial Group, later acquired by IOOF. Today, Phil is Head of BT Open, dedicated to equipping practices with the services and tools they need to thrive in this new advice landscape. He concluded that while the practice of the future is still a work in progress, the research indicates that business models are already evolving.

“Both the Investment Trends data and our conversations with practice principals show that advisers are taking a fresh look at the fundamentals of the way they do business. From technology to advice processes and charging models, the changes they’re making today touch every part of the practice,” he says.

Phil says the research suggests that top-scoring practices have succeeded in driving performance in three key areas:

  • Re-engineering processes and business models to maximise efficiency
  • Leveraging technology to increase productivity and monitor advice compliance obligations
  • Creating a compelling customer experience to drive acquisition, retention and sustainable growth

Focusing on the first of these areas, here are three ways top-scoring practices are evolving their business models to maximise efficiency.

1. Simplifying processes to enhance adviser productivity

The research shows that advisers in top-scoring practices are significantly more productive than others, managing 36% more clients (148 per planner, versus an average of 109) and generating 78% more revenue ($690,000 per planner, versus an average of $387,000).

How do they do it? Andrew Walsh, CEO of IRESS, says practices are re-examining every stage in the advice process to find opportunities for automation, support staff and outsourced services to relieve the administrative burden on advisers, freeing them to focus on client service.

“Increasingly, advisers are seeking data and CRM solutions that are end-to-end, secure and integrated. Practices are thinking about digital engagement with their end clients and to profitably service both high-touch clients and those with low-touch needs and heightened service expectations, client data will need to be available in a unified system,” he says.

“The future for advice practices, to service more and more advised opportunities, will require more automation in order to scale and apply human expertise to comprehensive advice needs.”

Patrick Anwandter, Managing Director of Strategy First Financial Planning,5 says he has been able to maximise his practice’s efficiency by outsourcing basic advice documents, freeing his internal paraplanners to concentrate on more complicated advice documents and his advisers to focus on client interaction.

“We've hired the right people with the right skills and attitudes so we can challenge everyone and get the most out of them to continue to provide the high level of services our clients are expecting,” he says.

2. Driving referrals through client engagement

Top-scoring practices in research excel at client acquisition, gaining more than twice the number of new clients as the average over the last 12 months (40 clients compared to 20). Phil Butterworth says that while referrals are the engine of growth for almost all advice businesses, the practices with the best results in this area tend to take a methodical approach to engaging clients through frequent, high-value interactions, then tracking and managing the referrals they generate.

“It all comes down to how practices engage with their clients and what they do to build an active community in their chosen marketplace. We see practices successfully engaging clients through multiple channels as part of their normal operations, leveraging technology to reach more people at lower cost. They also align themselves with outside referral sources and have a structured framework for those referral arrangements,” he says.

Suzanne Haddan, Managing Director and Representative at BFG, says that nearly all her practice’s referrals come from existing clients. “You need to make sure your clients understand that a referral is welcome,” she says. “We don’t ask explicitly for referrals, but we make sure our clients know how we can add value for their friends or family members. We have a lot of family groupings in our practice, and every client is connected in some way to another client.”

3. Embracing regulatory change

Top-scoring practices are more likely to view regulatory change as positive, says Kon Costas, Head of Services at BT Open.

“The 2018 Investment Trends Planner Business Model Report shows that one in five planners now have their own AFSL, which is double the proportion in 2012,” he says. “We also see practices with their own licence acknowledging and accepting their obligations around risk, governance and compliance, with far greater professionalism than ever before.”

“In general, the most successful advice businesses, self-licensed or not, have been accepting their responsibility for risk and embedding best practice risk management frameworks into their business processes so they can consistently position their clients’ best interests first.”

“For these practices, good risk management is just second nature, rather than an administrative burden,” he says.

1. Financial Planning Association of Australia, Reviews and Inquiries into Financial Advice in Australia 2016. 
2. Australian Banking Association, Ending fees for no service, grandfathered payments, 10 October 2018.
3. Telstra, Millennials, Mobiles and Money: The Forces Reinventing Financial Services, 2016.
4. The findings in the BT Financial Practice of the Future Report are based on 345 valid responses to the 2018 Investment Trends Planner Business Model Report. This quantitative survey was conducted in May 2018 and published in June 2018.

To identify the characteristics of successful practices, BT asked Investment Trends to assign each of these 345 respondents a score between 0 and 10 for the following criteria:

  • Revenue turnover per planner
  • Number of new clients acquired in the last 12 months
  • Profitability growth (adjusted for the age of the practice)

The three scores for each respondent were added together to obtain a total score, which was then ranked. This gave three segments: 73 high-scoring practices (top 20%), 201 middle-scoring practices (middle 60%) and 71 low-scoring practices (bottom 20%).
5. Strategy First Financial Planning Pty Ltd AFSL 290771 ABN 69114540528 is a member of BT Select and may receive some support services from BT Financial Group.

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