Boutique financial planners are, on average, more profitable than smaller non-aligned dealer groups, the fifth annual Macquarie benchmarking survey has found.
Macquarie Practice Consulting associate director Fiona Mackenzie said the survey of 304 practices nationally showed that boutiques with their own Australian financial services licence (AFSL) tended to be “more profitable because they tended to be larger and therefore could defray operating costs across a larger base”.
Profits had come through more client referrals and more cost management, “not through acquisition and not through employing more advisers”, Mackenzie said.
The survey showed “a small increase in operating profits from 17 per cent to 20 per cent “, while costs had decreased from 50 per cent of revenue to 41 per cent.
Overheads had been decreasing for the past five years, and particularly in the past year, through non-replacement of departing staff and re-negotiation of rental costs, the survey said.
The shape of investment was changing with managed funds losing their allure, down to 45 per cent of funds under advice (FUA), compared with 62 per cent five years ago, it found.
Direct shares rose to 29 per cent of FUA (25 per cent in 2008). Fixed-interest and cash was up to 17 per cent (8 per cent in 2008), while “other” asset buckets were up to 9 per cent (5 per cent in 2008).
One-third of the FUA were in self-managed superannuation funds (SMSFs), and one-fifth of planners’ clients were in SMSFs.
Mackenzie referred to another Macquarie survey, “Mood, Life and Money”, which showed that 9 per cent of Australians had an SMSF and 18 per cent were looking at forming one.
Revenue diversification was not happening, Mackenzie said, despite predictions that planners would branch out into other services.
“It is not a reality. We are not seeing this happening, and there is no major shift.” she said.
Most of the planners surveyed had a similar composition of their businesses: financial planning 62 per cent, insurance 28 per cent, 2 per cent mortgages, 3 per cent share trading, and 5 per cent other.
The report found social media was beginning to impinge on planners’ understanding of their clients’ buying behaviour.
“First, people talk with family and friends, then they ‘socialise’ their ideas, do their online research, and finally then go to a financial planner,” Mackenzie said.
“Planners are seeing that social media is their shopfront. I am getting the sense this is going to increase.”
The average total number of clients – active and inactive – per adviser was 185, but the number of active clients was 128.
“Advisers are managing their clients through segmentation into A and B; delegation of the C and D clients to younger advisers; and workflows, so that most of their time is spent thinking about clients,” Mackenzie said.
