Why now is the time to invest in your practice
According to the Future Ready IX report, profitability of the average advice business in 2021 decreased to 24% from a reported 28.2% in 2019 and 27% in 2017.
With profits down it’s tempting to tighten the purse strings, but while cutting costs might lift profits in the short term, it may not be the best thing for the future success of your advice business.
The same report has shown that while profits have decreased, the average revenue per practice principal has remained steady and the average gross business revenue has increased.
It’s clear that declining profitability is the result of increasing operational costs.
For an advice business to thrive, they need to invest in efficiency-creating systems and processes.
According to Rod Bertino, Principal of Business Health and co-author of Future Ready IX, finding scale through technology would be the “true enabler” of profit.
Technology is an investment, and like any investment, it must deliver a decent return.
It takes time and effort to implement a new piece of technology into a practice, which is often a sticking point for already busy practice principals, according to Bertino. But he notes the efficiencies gained – and potential technology cost savings – make it a worthwhile investment in the long run.
The longer practices wait to update their processes and systems, the more they will spend serving customers using a less than ideal cost structure, and losing potential profits in the process.
While the pace of digital adoption has increased in recent years, particularly since the start of the COVID-19 pandemic, outdated approaches haven’t yet been fully replaced by integrated digital end-to-end processes.
Digital advice technology drives efficiency and offers new ways to engage clients, but it’s not a replacement for the adviser-client relationship which remains an important component of a successful advice business. Bertino points to the survey results of 52,000+ advised Australian clients that indicate the strength of the relationship with their adviser is more important than the adviser’s technical knowledge or the quality of the advice they receive.
However, practices that do not adopt digital advice technology and client engagement tools will be left behind as consumers increasingly demand easier access to services and the changing demographic of people seeking advice is creating a growing number of digitally savvy clients.
Midwinter’s Head of Product Andrew Zietara notes the benefits of systemising practice processes using advice technology extend beyond efficiency. “Advice technology enables repeatable tasks to be systemised through workflows which creates efficiencies through automation, but also ensures consistent business processes are established and followed, helps improve staff satisfaction and reduces key person risk.”
Efficiencies gained by implementing the right technology free up time for advisers and practice principals to spend on high-value activities which help boost client satisfaction, deepen the client relationship, and acquire and serve new clients effectively – in turn boosting practice profitability.
The Future Ready IX report was produced by Business Health in partnership with Midwinter Financial Services. You can download the full report on Midwinter’s website. To find out about Midwinter’s leading financial advice software AdviceOS, click here or book a demo with the sales team.