Death of trail commissions creates revenue black hole
Trailing commissions account for 35 per cent of revenue in the financial planning industry, according to research conducted by IBISWorld Australia.
Furthermore, much of these trail commissions continue to be generated from the accounts of clients who aren't being regularly serviced.
The IBISWorld report, Financial Planning and Investment Advice in Australia, found that financial advisers have on average about 380 clients each but only regularly service about 40 per cent of them.
The report found the average trailing commission paid to advisers to be about 0.5 per cent of funds under advice. According to the report, funds under advice for each financial adviser can range from $20-$25 million for those working for the largest dealer groups, while those working in smaller groups average about $5 million in funds under advice per adviser.
IBISWorld also shed some historical light on the average funds under advice of advisers working under the AMP and AXA banners.
In the six months to December 2007, AMP's financial advisers each looked after an average of $33.6 million of funds under advice. By December 2008 this had fallen to FUA per AMP adviser of $19.2 million.
Meanwhile, AXA Asia Pacific's "rolling gross sales per adviser" was $2.6 million in June 2008, compared to $3.15 million in December 2007.
The report also found that adviser salaries across the industry had fallen during the crisis, from an average of above $100,000 per year before the financial downturn, to about $90,000 in the last quarter of 2009.
Recommended for you
ASIC has permanently banned a former Perth adviser after he made “materially misleading” statements to induce investors.
The Financial Services and Credit Panel has made a written order to a relevant provider after it gave advice regarding non-concessional contributions.
With wealth management M&A appetite only growing stronger, Business Health has outlined the major considerations for buyers and sellers to prevent unintended misalignment between the parties.
Industry body SIAA has said the falling number of financial advisers in Australia is a key issue impacting the attractiveness and investor participation of both public and private markets.
