Why your client portfolio needs professionals
Financial advice in 2024 is constantly evolving, presenting advisers with new challenges and fresh avenues for growth.
The underlying supply/demand dynamics of the advice sector (fewer advisers serving an increased demand for quality financial advice) present sustainable opportunities for advisers to ‘move up’ the sophistication curve to focus on higher earning and more complex client needs, along with commensurate greater rewards to the advice practice.
Add to this the notion that almost 80 per cent of existing financial advisers do not write risk insurances, choosing to refer this business to a risk specialist, adds obvious further incentive for the advice profession to re-focus on the benefits of not only serving the risk needs of more Australians, but in effect ‘cherry pick’ the relatively prime professional market in Australia.
High-earning professionals are typically time poor and would seek out like-minded professionals to efficiently resolve the challenges and complexities of managing and protecting their wealth and future wellbeing.
A younger generation of professionals face an additional layer of complexity and opportunity including a looming $3.5 trillion wealth transfer that they may need help managing and protecting.
For advisers, the opportunity to partner with clients who value counsel from a trusted source, and who understands their needs, preferences, and goals, is quite clear. Risk is the foundation of a great financial plan, and professional clients have unique human and intellectual capital to protect.
The support we provide around Australia to successful risk advice practitioners and their firms underscores the following additional key benefits of targeting the professional client market:
1. Greater earning potential and enhanced revenue streams
Professional clients typically enjoy higher earning potential. The younger cohort, while earning a lower income in the short-term, will in time significantly increase their earning potential.
Further, high-earning professionals generally value support on a range of financial services as a complement to their risk insurance plans. This presents significant opportunities to partner with investment-oriented advisers or accountancy professionals to help resolve the additional investment management, estate planning, tax planning and business succession planning needs.
This may also present an opportunity for risk advisers to organically tap into new revenue streams by facilitating holistic financial services that cater to the specific needs of high earning professionals.
2. Professional networks and referral opportunities
The professional market offers a diverse array of connections: professional associations, industry groups, and networking events. By engaging with these networks, advisers can open doors to new and sustainable referral opportunities.
High-earning professionals also tend to associate with those in similar income brackets. Satisfied professional clients are more likely to refer their peers, friends and family who may also be high earners seeking similar guidance from a trusted expert. This can result in a strong referral network and steady stream of qualified leads.
3. Long-term relationships
High-earning professionals are looking for a long-term partnership with a trusted financial adviser who can provide guidance throughout their careers and beyond into the next generation. These clients would pay a premium for specialised services that cater to their unique needs.
Advisers who discern and cater to the unique needs of professionals – whether established or emerging in their career journey – lay the groundwork for enduring relationships, leading to client retention, and recurring revenue streams.
4. Greater potential monetary impact of trauma and thus need for advice
Australians are among the longest-living populations globally, yet one of the most underinsured.
KPMG, Statista and the FSC (Financial Services Council) estimate that there are about 14.3 million underinsured for trauma insurance and 3.4 million underinsured for income protection insurance.
This is especially sobering when considering that high-earning professionals suffer a greater financial impact for any given health trauma relative to the overall population, according to our recent 2023 Reducing the Trauma report.
There are three drivers of this, according to the report. First, high earning professionals will almost always be treated as private patients. The out-of-pocket costs for private patients can be anything from two to ten times higher than those having the same condition treated publicly.
Second, high earning professionals experience a ‘postcode multiplier’, i.e., paying more for procedures performed in more affluent areas. Third, income lost through time off work is higher for professionals, meaning some absences can leave sufferers forgoing tens or even hundreds of thousands of dollars.
Cancer, a pervasive threat, looms large in the professional sphere. Our research shows that over 1 million Australians have battled cancer, with 40% of working age. The mean duration of initial time off work due to cancer is 30 weeks, resulting in potential income loss for professionals of $150,000 and over, in addition to any ongoing loss due to reduced capacity.
What does this mean for the professional market? Our 2023 State of Health and Wellbeing in Accounting Report, shows that cancer is the number-one concern among Australian accountants. The report reveals that 1 in 3 accountants anticipate the possibility of cancer in the next 10 years. This stark reality underscores the crucial need for comprehensive support and robust financial planning for professionals in Australia.
For the growing cohort of Australian professionals grappling with unique challenges, underinsurance, and mounting healthcare costs, financial planning and risk advice will be critical to bolster and protect their future.
Advisers today have a unique opportunity to position themselves as indispensable allies and trusted
counsel to these professionals, providing the safety net they need.
Brian Pillemer is director of distribution at PPS Mutual
Recommended for you
Referral arrangements with other professional advisers, known as Centres of Influence, can help financial advisers to build client relationships, engagement and trust over time.
One of the apparently happy outcomes of QAR Tranche 1 was the introduction of relief from having to provide a Financial Services Guide but it turns out this was not all it is cracked up to be, writes Samantha Hills.
With more women aged 35-50 engaged in their finances and investments than ever, the cohort is a growing demographic for financial advice firms to work with, writes Nina Kazmierczak.
Systematic fixed income approaches are finally hitting the mainstream. For those starting to incorporate them, it is important to seek managers with a long and proven pedigree.