Adviser Ratings' managing director, Angus Woods, notes the growing trend of advisers committing to their roles as a positive change. This increased certainty not only benefits the industry internally but also provides reassurance to the government and the Australian public that the advisory sector has strong foundational support. Over the past five years, the inclination for advisers to exit the industry has notably decreased.
One of the main drivers of adviser retention is the increase in profitability within financial advice businesses. Currently, profit margins have risen to 25 percent, up from 21 percent in the previous year, with average yearly practice revenue previously below $500,000. To maintain financial viability, advisers reportedly need to charge annual client fees of around $4,000.
The industry's persistence through the challenging period of the Hayne Royal Commission is now being rewarded. Those who have remained, undergone training, and restructured their practices are witnessing profitability margins around 25 percent. Despite increased wages impacting profits, a rise in fees has somewhat offset this effect. The larger profit margins are also attracting interest from mergers and acquisitions, fueling further growth and activity in the sector.
Research indicates a trend toward significant business improvements in the coming year, with 43 percent of practices planning to enhance process efficiency and 36 percent exploring new business opportunities. Additionally, 22 percent are considering adopting new IT solutions, including artificial intelligence, to further boost profits.
Meanwhile, superannuation funds face the dual challenge of complying with regulatory changes such as the Retirement Income Covenant while managing member advice needs. The covenant mandates funds to provide a retirement income strategy for their members, underscoring the importance of accessible financial advice.
Currently, only a limited number of advisers are serving super fund members, against the backdrop of 2.5 million impending retirements over the next decade. Approximately 15,600 advisers on the ASIC Financial Adviser Register currently serve 1.8 million clients, including those in super funds. The landscape for advice within super funds is varied, with some funds offering comprehensive advice and others limited to intrafund advice or a blend of both.
The upcoming wave of retirees will place additional pressure on super funds to offer more sophisticated advisory services. Notable funds like IFS and Aware Super lead in adviser numbers, while Australian Retirement Trust relies on external partnerships to augment their advice capabilities.
