The planning practices will need to focus on revenue growth in order to sustain financial planning roles in face of a growing shortage of planners and potential significant revenue streams losses, according to Spark Financial Group.
According to the firm’s founder and chief executive, Arthur Kallos, the industry, which is currently in the transitionary year, would see the financial planning firms re-evaluating their models and pricing, looking for the new ways to renumerate the planners.
“The practices will be forced to re-evaluate their value propositions, re-evaluate their pricing models and re-evaluate the clients they wish to serve or are able to serve, because we are now in the environment where there is a severe absence of additional revenue streams,” he said.
“On top of this, you have now practices having to pay top dollar to recruit financial planners. So, with a shortage in terms of planners leaving the industry for better work or not interested in financial planning anymore. Planners that were formally employed or willing to be employed for financial planning, are now looking at alternative careers.
“What we are seeing today is we are seeing a lot of financial planners leaving the industry and a lack of new entrants.”
This created a supply shortage and what it meant for a financial planner to be employed would mean that practices would need to focus on revenue growth to remain sustainable.
“Right now, we are in this transitional year and we can still earn this kind of revenue but if practices don’t continue to onboard and renew these service agreements with their clients then they cannot sustain the financial planners roles,” Kallos said.
“So, I think we are going to see some innovative changes to the way planners are renumerated.”
Kallos noted the demand and supply issue forced some practices to pay 30% above what they normally were paying for a financial planner.
As of 9 December, 2021, there were 18,572 active advisers on the Australian Securities and Commission Investment (ASIC) Financial Adviser Register, according to Wealth Data, and that number was expected to continue to drop further.