The lone rangers: Are solo advice practices becoming the norm?

AFSL Adviser Ratings financial advice financial advisers

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Single adviser-led firms continue to expand their footprint in the Australian advice ecosystem, Adviser Ratings research shows.

Adviser Ratings’ latest Musical Chairs Report for Q1 2024 has highlighted that the vast majority of advice practices (85 per cent) are privately owned.

The report broke this down further, examining where the 6,105 total practices sit among the differently sized licensees.

Practices that are privately owned by licensees with 100-plus advisers made up the largest slice at 31.4 per cent (or 1,917 practices).

This was followed by practices under licensees with one to 10 advisers at 31 per cent (1,890 practices) and practices under licensees with 11 to 100 advisers at 23 per cent (1,405 practices).

Across these three segments, the majority was made up by single-adviser practices, reflecting a broader shift in the advice market.

“The Australian practice ecosystem now mainly comprises privately owned businesses, with most occupied by a single adviser. Increasingly, the boutique practice has been an attractive proposition for advisers seeking autonomy and control,” the report explained.

“Between 2022 and now, the proportion of solo practices has grown, while the footprint of diversified and limited licensee practices has shrunk.”

While historically it has been difficult for boutique practices to achieve scale and profitability, Adviser Ratings recognised the role of technology in helping firms increase their margins.

Interestingly, less than half (48 per cent) of solo adviser practices were pursuing client growth strategies in 2023, while 30 per cent were reactively growing.

“Without the benefit of scale, almost one-in-20 solo practices is either reducing its client load or trying to find new ways to hold onto its current mix of clients,” the report said.

Earlier this year, two advisers spoke with Money Management after the first year of launching their own advice businesses. Both directors noted that rather than attempting to take on every client that comes their way, they are instead prioritising high service standards for existing clients and referring when possible.

Advisers yearn to stay

Adviser Ratings also discovered the number of advisers committed to remaining in the profession has risen.

Just 15 per cent of advisers said they may exit the industry over the next few years, which was down from 26 per cent in the 2020 report. Meanwhile, only 7 per cent of advisers were certain about their plans to leave, which equals approximately 1,000 advisers.

As a result, those who are dedicated to staying in the industry are investing in the growth and longevity of their firms, the research found.

“We’ve seen a leap in the volume of practices aggressively pursuing new business to achieve this. Post-QAR, advisers are now doggedly focused on attracting new clients,” it said.

Among larger firms, 86 per cent are purposely expanding their client base, especially as advisers look to target a specific type of client.

“For example, we’ve seen practices refine their value propositions and specialisation, with some focused on pursuing certain professions, age ranges and wealth brackets,” the report said.

“The sweet spot for achieving rapid growth is at five-plus advisers per practice, where scale and process efficiencies allow practices to manage a higher client load more easily. These practices have already put changes in place to enable them to grow their profitability and revenue. Often, it’s a mix of outsourcing, an excellent tech stack and, more recently, using AI.” 

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Submitted by One foot out t… on Mon, 2024-05-06 09:48

Just 15 per cent of advisers said they may exit the industry over the next few years,

Thats about 2,300 advisers! if that occurs unlikely to ever recover numbers as new entrants replacement won't do it

Submitted by Big Feller on Mon, 2024-05-06 14:39

This can't be a surprising development.
I'm sure every Financial Planner in Australia has had an experience of being screwed over when it comes to joining with another practice or being someone's succession plan.
I got done for $250,000 years ago and of course it hurt but after talking to numerous friends who had a similar experience it finally dawned on me that most Planners would eat their own children if it resulted in them getting a dollar.
Far better to go it alone on your own than trust someone else in this game!

Yet everything states profitability is much higher in a larger practice. As a smaller planning practice it is a hard slog but it is better than being ripped off again.

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