Small practices facing big problems
Small financial planning practices are struggling with the complex requirements and costs of running their businesses.
A financial planner, speaking on condition of anonymity, told Money Management that he has had to give up his financial services licence because the cost of running his business was too high.
“One of the biggest problems is the cost of business and there being no scale,” he said.
“It costs me $50,000 to run my business and with only one adviser, some of those costs can’t be shared.”
Research, software and professional indemnity insurance were some of the costs with which he had to deal.
Another challenge financial planners face is being caught out by complex compliance requirements and the rising costs of outsourcing those requirements to external companies.
Lisa Faddy, co-head of Majella Wealth Advisers, said the time it took to deal with compliance requirements took financial planners away from their clients and eventually forced many to outsource their external compliance requirements.
The cost of outsourcing compliance requirements can rise to $20,000 per year, and even if you bought your own do-it-yourself toolkits from an external compliance company, it could add up to a lot if you bought all of the compliance toolkits available, Faddy said.
“We were looking at getting an external compliance service in, but that is an expensive cost. Research is another expensive cost,” she said.
Majella is currently completing its compliance requirements in-house.
Faddy said when she first launched her financial planning practice it was hard to find the information to deal with compliance issues and questions about clients.
As a member of the Boutique Financial Planning Principals’ Group (BFPPG), Majella was able to rely on regular e-mails between members and a discussion forum as a resource. However, if you weren’t part of such a network, it would be harder to run a business yourself, Faddy said.
In addition, Faddy said many of the members of the BFPPG were worried about the latest changes that were recently announced, particularly in superannuation, and how that would affect their business.
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