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.
Comments
It's quite simple really, and it's in line with what Advisers have been predicting for years. Due to the regulatory changes, abolition or reduction of commissions and "Professionalisation" of Financial Planning (higher standards were overdue), the Financial Planning profession now needs to operate the same way as Lawyers, Accountants, Engineers and other professionals do. Either charge by the hour or by fixed price piece work in a commercially viable manner PAID FOR BY THE CONSUMER. Gone are the days where consumers get their advisers "for free" because back then, advisers were predominantly paid (i.e. subsidised) by the product providers. Those days are gone and so now the consumer pays.....AND THE CONSUMERS DON'T SEEM TO LIKE IT.......AND MANY CAN'T AFFORD WHAT IT COSTS TO DELIVER THE SERVICE. Bad luck because that's what the Royal Commission Lawyers and Consumer Action Groups pushed for and that's exactly what they now have. I have lost count of the number of elderly people who have walked into my office seeking advice, service and help......for free......because their adviser retired or left the profession and so the people don't know where to go. They baulk at the mention of Fee for Service and so I simply suggest they ring Centrelink or their Super Funds (i.e. these people are "Orphaned"). Now we head towards an undersupply of advisers and so prices will rise. Advisers and Advisory Practices will charge more and will choose to only serve those with capacity and / or willingness to pay what it costs to deliver the service. You don't see Lawyers working for peanuts or for free do you ? This is the new normal...END OF STORY....THE END.
Rest easy old boy. If you are going to be here post Jan 2026, keep your head down, take on the best 100 clients you can find and run a review only practice. If I client moves on or dies, you will have no problem finding another to take their place. Sure costs will rise but you will still pull a nice income and cover all costs. Always remember that it is not your responsibility to look after smaller clients who cannot afford your advice. No other "profession" does or would do so. Merry Christmas.
Of course there's another option, which is mentioned by Roger Ramjet. Stop worrying about growth and take care of your top clients/advocates. The income is more than enough and as long as you've met all the requirements, post 2026 looks pretty good. Remember that the losers in this new reality are the fund managers, FPA, AFA, TPB, ASIC and all the BDMs and PDMs that relied on growth bonuses. I haven't worked to a KPI in 3 decades and won't start now. Thanks ASIC and FASEA, we're looking forward to a lucrative semi retirement.
Add new comment