Most financial planning principals have felt the need to reduce costs within their businesses, with many targeting support services or cutting back on factors such as platform costs, according to a survey conducted by Money Management.
The survey, conducted during the last week of August and first week of September, revealed two primary drivers for the cost-cutting - market volatility leading to client nervousness, and uncertainty flowing from the Future of Financial Advice (FOFA) changes.
The survey revealed that 88 per cent of respondents had felt the need to reduce costs in their businesses, with nearly 60 per cent of those who had not already done so indicating cost-cutting was probably inevitable.
The Government's FOFA changes were the most frequently cited reason for planners cutting their costs (44 per cent), while 33 per cent nominated the impact of market volatility on their operations.
Asked to outline the underlying reasons behind their cost-cutting, respondents provided some of the following answers:
"Difficulty convincing new clients [of] the value of advice, especially ongoing services as opposed to transactional strategic advice."
"Reduced commissions because of market instability."
"Uncertainty with the implementation of FOFA and future value of the business makes me wary of additional investment in staff and technology."
"Reduced revenue following GFC [global financial crisis] has put a strain on cashflow."
"Uncertainty, clients wanting more for less, pressure on fees, need to streamline processes."
"Cost of providing a full service option for the majority of my clients and having reliable support staff to assist with this service is creating a higher cost. Many of my clients will need to either pay more for my full service or downgrade their level of service."
"In process of changing to fee-for-service model to meet FOFA compliance for this administration work. When further details from ASIC are available, additional costs will be incurred to comply with the proposed regulations, and setting up new computer systems and staff workflows will incur more costs.
"The figure of $11 p.a. per client quoted by the Industry Super Funds to comply with the FOFA legislation is nowhere near the true cost that will be added to my practice running costs."