Advisers optimistic on increased profit

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The financial advice industry is growing more profitable, and eight out of 10 advisers are optimistic revenue will only increase in the New Year.

A financial planning best practice benchmarking survey by Macquarie Practice Consulting shows 83% of advisers anticipate increased profits in the next 12 months, up from 74% in 2012.

Practices that offer financial planning only or financial planning and accounting are the most positive, with a larger proportion expecting at least a 20% increase in profit in the next financial year.

Younger practices are also optimistic, with half the firms under three years old believing they will do the same.

“This year’s survey has shown steady growth in revenue and gross profit in advice practices, which is great news for the financial planning industry,” said Macquarie Practice Consulting head Fiona Mackenzie.

Since the last survey, there has been a 15% increase in average revenue and an increase in average operating profit of 45%.
 
As well, the results show direct expenses have remained fairly steady and the average revenue per adviser has increased.
 
“Expenses appear to have been well managed, which can contribute to driving profit improvements,” said MacKenzie.
 
“Practices are still controlling costs but the survey suggests that some practices are feeling confident enough to invest back into their businesses.”
 
While revenue and profits are up, there has been a reduction in client numbers per adviser. On average advisers now have 153 clients, compared to 185 in 2012).
 
However, advisers have a higher proportion of active clients, up at 77% instead of 69% in 2012.
 
Advisers want to spend more time with clients who genuinely value their advice, said Mackenzie.
 
“From the survey, we can see that many appear to be making real efforts to refine their client base and increase the focus on active clients, and this tends to improve the profitability per client.
 
“Looking at the evidence of profit and revenue growth, this could be a good sign that many are having success with this strategy.”
 
Data was collected in October from 226 financial planning practices, with the majority of respondents being practice principals.

The survey covered business structure, financial management, general practice and confidence.

The full report will be available early next year.

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