Planners thrive on the ‘new normal’

Financial planners are finding times more profitable in 2013 despite the reality of continuing market volatility and the impact of legislative and regulatory change, according to new research released by Wealth Insights.

The research, which reveals levels of planner profitability over the past two years, said 52 per cent reported that profitability had increased from their 2011 position, with more than 20 per cent indicating an improvement of more than 20 per cent.

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Commenting on the results, Wealth Insights managing director Vanessa McMahon said she believed it reflected the manner in which planners had successfully changed their business models to deal with the new reality.

"They have clearly re-engineered their businesses, disengaged from some types of clients and generally cut costs," she said.

McMahon suggested the research was also indicative of the manner in which planners had exited commission-based remuneration and now succeeded in bedding down a fee-for-service model.

She stressed, however, that as good as profitability seemed to be at the current time, it was well below the halcyon days before the onset of the Global Financial Crisis.

McMahon said the levels of profitability being indicated by planners also reflected improving market conditions and more frequent meetings with clients who were looking to move out of cash.

"Between picking up new clients and helping move existing clients back into the markets, planners seem to have had plenty of work to do and it is being reflected in their bottom line," she said.

McMahon said focus group sessions had also suggested that planners were now accepting of the "new reality" with respect to market conditions and the fact that the heady days that had preceded the GFC would not be returning.

"They really get that this is the new normal," she said.

McMahon said the relatively high number of planners who had answered ‘don't know' (13 per cent) was attributable to younger or more junior respondents who had less need to be familiar with the profitability or otherwise of planning practices.