New research from Investment Trends has revealed that 41% of adviser participants' practices are less profitable compared to last year.
Setting a new record, this percentage is up from 38% in 2019 and 18% in 2018. Despite these challenges, though, just 4% reported an intention to stop providing advice in the next year.
Investment Trends research director Recep Peker said this indicated that advisers "remain resilient against a shifting regulatory landscape, disruptions from major players entering and leaving the wealth management space, and the recent pandemic-induced market volatility."
Commenting on the primary issues advice businesses are facing in 2020, Peker said a significant proportion (67%) were dealing with compliance obligations, and 46% were having difficulties providing affordable advice. "Still," he added, "some advice practices have performed better than their peers. The industry’s most successful - by net profit margin, client and profitability growth - appear more adept at handling compliance-related obligations through their technological efficiency."
Peker also noted that when advisers in the UK faced similar challenges in the past decade, their overall headcount was reduced by 20%. That this hasn't happened in Australia, he said, "[highlights] the strength of Australian advice industry."
Several years ago, we spoke to Citrus Financial managing director and principal financial adviser David Braithwaite about his experiences during the Financial Conduct Authority-mandated professional standards reforms for advisers in the UK.
He described his decision to stay in the industry as "hard work,” especially since going back to school seemed like looking in the rear-view mirror. On top of this, unlike in Australia, the commissions ban and the professional standards reforms kicked in at the same time. “I’m sure Australian advisers can relate to this,” he says. “There’s a sense of, ‘Now it’s another thing. When’s it going to end? When are you going to leave us alone and get on with it?’”
Ultimately, though, Braithwaite said there were positives: the overall market share for remaining advisers increased and it allowed him to provide more bespoke services.
"“Because we were now exclusively paid to sit down with a client," he said, "I didn’t even have to sell them anything. Just because you’re an adviser doesn’t mean you need to advise on products.”
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