Advisers up for changing licensees
Nearly half of all financial planning practices are reporting increased profitability despite the cost of advice rising and despite one in four advisers signalling they are likely to exit the industry inside the next five years.
What is more, as many as 70% have signalled their willingness to change licensee arrangements in the next 12 months.
According to new research conducted by Investment Trends, cost of providing financial advice is continuing to rise and has reached $3,820 for a typical client.
The Investment Trends 2022 Adviser Business Model Report, has painted a picture of a financial planning profession which is evolving and reshaping the commercial realities of financial planning practices.
The Investment Trends analysis said that financial advisers’ resilience had been put to the test over the past twelve months.
Noting that “the ever-changing regulatory landscape has seen the population of advisers drop from 20,000 in 2021 to 16,500 in 2022,” Investment Trends said the latest report revealed that the move to self-licensing had eased over the past year as advisers begin to weigh up the benefits with the additional costs and compliance challenges associated with this model.
“Despite this, the movement of advisers around the industry will continue, as 70% looking to leave their licensee in the next 12 months intend to move to a self-licensed model,” it said.
Commenting on the research, Investment Trends Research Director, Dougal Guild said that decreasing NPS was, in part, driving the increasing number of advisers across both the ‘Aligned’ and ‘Majority independent’ segments intention to leave their current licensee to be part of a self-licensed practice.
He also said that, consistent with Investment Trends’ recently released 2022 Adviser Technology Needs Report, compliance burden (65%), providing affordable advice (41%), and regulatory change (40%) remained key challenges for advisers.
The research revealed that the complexity of these impacts and the ongoing structural changes in the sector has considerably driven up the cost of providing advice. The total cost of providing full advice to the typical client (the breakeven point) has increased from A$2,850 in 2020 to A$3,280 in 2022.
“The more successful advisers appear to have better adapted to regulatory change and new technologies to address this cost/profitability issue. They primarily service wealthier clients and are prepared to pay for tech solutions to enhance their advice offering and bolster profitability,” Guild said.
“Despite the regulatory burdens and increased industry attrition, we are seeing practice profitability increasing with 46% of financial advisers stating that they were more profitable this year, compared to 34% in 2021,” he said.
“This is encouraging as it indicates advisers are adapting to the ‘new world’. Contributing to improved practice profit margins is a continued move by advisers focusing their efforts on acquiring and retaining higher value clients.”
“Overall, practices’ net profit margins are moving in the right direction,” said Guild. “Advisers are refocusing efforts on new business post the COVID and FASEA disruption. This, combined with an increasing focus on higher value clients has delivered record high levels of new inflows.”
Four weeks from dealer group to self-licenced…
What were the costs of getting your AFSL?
Total of $7,500.
An initial $3,750 to start the paperwork and application to ASIC and then $3,750 once ASIC had approved the licence.
Annual Costs:
PI costs of $13,000 PA
Research costs of $1,700 p.a.
Dealer to Dealer Support $24,000pa
Annual accounting and Audit $7,000 p.a.
Total Annual $45,700
What is Dealer to Dealer support? Is annual accounting and audit an ASIC requirement or is it just for the usual company costs?
Dealer to Dealer service allows me to get all our policies and procedures templates, SOA’s and ROA’s templates , Adviser Compliance / Audit, Kaplan, PD days, RM Training, etc.
The Audit has to be completed in a particular manner, Accounting in a particular manner…ASIC want it done this way.
Cheers
As a small (one adviser), simple, AFSL my PI and audit costs are about half those. I don’t use a dealer group package, they are neither compulsory nor necessary, and in most cases will have a dealer group product slant. I just purchase compliance consulting, software, research, training, etc direct from the source suppliers on a right sized and as needed basis. Costs about $10K pa. Another cost not mentioned is the infamous ASIC Industry Funding Levy which is about $4K pa for me. So total annual self licensee costs are about $25K. First year was about another $5K extra for consultant assistance with compliance manual and ASIC application documents. Approved in about 6 weeks.
Thanks, that’s really interesting. Did you have any issues obtaining PI? Where’s the best place to start for assistance in setting up, do you have a name for the consultant? Thanks
I had no issues at all obtaining PI.
Brett Walker at Smart Compliance helped me get set up.
https://www.fsi.net.au/