Financial services technology company Iress’ research has found that Australian financial advice practices have seen revenue grow by an average of $500,000 from 2021.
According to the 2023 Financial Advice Efficiency Report, which Iress produced in partnership with Business Health, Australian financial advice practices have increased average total revenues from $1.1 million in 2021 to $1.6 million in 2023.
This revenue growth comes despite practices reducing their employee base and servicing fewer clients. In 2021, the average full-time equivalent employees per practice was 6.8, compared with 5.6 in 2023. The average clients per adviser also dropped slightly from 133 to 129.
However, top-performing practices were on the other side of this trend, scaling up their businesses to handle a larger number of clients – managing more than 500 clients compared with an industry average of 457. Iress added that high-performing practices also generated profit margins of more than 60 per cent, compared with an industry average of 27 per cent.
Harry Mitchell, chief executive of wealth management at Iress, said: “The survey results clearly show that the advice industry has been improving across a number of measures, despite prevailing pressures for advisers to do more with less and find ways to make good financial advice more accessible for more people.”
Cyber risks were a significant point of concern for practice principals, with cyber and data security named the top technology challenge facing their business over the next 12 months. This was followed by the time taken to produce advice documents and the integration of applications into a single desktop.
“Unsurprisingly, the research shows that cyber and data security is the number one challenge facing financial advice businesses in the coming 12 months,” Mr Mitchell said.
“Even with a proliferation of cyber security products, services and guidance, the threat of a cyber attack or data breach continues, with businesses of every size subject to cyber crime in recent years.
“The good news is that there’s plenty of third-party specialists that advice practices can engage with if they haven’t already, to run vulnerability testing and set clear business continuity plans that can future-proof their practices.”
According to the report, advice practices have made “significant efficiency gains” since 2021, with reductions in time taken to produce all types of advice documentation.
The report found that automation was the main cause of these time savings, adding that practices running a fully automated review process (2.1 hours) were, on average, three hours faster at preparing client review documents than those relying on manual processes (5.5 hours).
The research also found that the most profitable Australian financial advice practices built their advice processes around a single platform, with these practices also far more efficient than those that used multiple software platforms for their business management processes.
Advice practices that communicated with their top clients more than 10 times per year were also able to achieve a 114 per cent uplift in profitability, Iress said.
“High-performing advice practices are getting more out of their software by simplifying their tech stack and using a limited number of software applications to streamline their internal processes and reduce complexity,” Mr Mitchell said.
“They’re also getting more referrals and stronger advocacy from their best clients, simply by staying in touch more often for less effort by using technology-underpinned communications solutions.”
