In a webinar regarding Adviser Ratings’ upcoming Advice Landscape 2024 report, Adviser Ratings managing director Angus Woods ran through some of the findings from the report prior to its release, which is expected on 27 June.
Looking at the findings, the average adviser is now 52 years old, up from 49 in 2023. According to Woods, this is likely a result of older advisers using the experience pathway to come back into the profession, while “some of the younger advisers have found it a bit more challenging, creating their own books and getting value and have gone into other industries”.
“While yes, there has been an exodus, probably around 2018, 2019 of the older adviser demographic on the back of the FASEA requirements, the age of an adviser has stabilised. Not that that’s a good thing that the average age is 52. We do want to lower that average age and we want to get more people into the industry,” Woods said.
The average salary for an adviser has increased to $140,000, to which Woods said, “they are making more money than they ever have been”. Woods claimed that improved profit margins played a hand in boosting advisers’ salaries.
According to the findings, each adviser is managing an average of 129 clients, made up of 97 recurring clients and 32 once-off clients, and has an average $89 million in funds under management (FUM).
Further, advisers have shown a greater preference for model portfolios and listed investments, and have been particularly drawn to separately managed accounts (SMAs) likely due to them being less time-consuming.
The average advice practice has, according to the report, a profit margin of 21 per cent, between one and 10 advisers, is privately owned, and has a yearly revenue of greater than $500,000, and $225 million in FUM.
Looking at practices by the number of advisers it has, the largest portion of those with up to five advisers primarily fell in the 10 to 20 per cent profit margin range.
“We are seeing practices now with 40 per cent profit margins. Those good practices need to be writing six figures. They need to be writing $1 million or more in revenue.”
Looking at what the report describes as an optimal advice practice in 2024, they have a yearly revenue above $1 million and their staff is made up of five advisers, one paraplanner and four customer service staff, and has a greater ratio of female-to-male staff as, according to Woods, female advisers tend to be more profitable.
“A female adviser is more profitable and actually runs a better business than male advisers in terms of the stats that are playing out. So, that’s really interesting as well,” Woods said.
“Probably not surprising if you look at it in terms of risk appetite, a willingness to look at things like processes and those sorts of things. Probably a little bit more patience if I’m being honest in terms of actually spending the time to look at that.
“But that’s important to note if you’re a partner looking at a firm, is that female-run practices tend to be better run which also means they’re going to be making more money and their investment decisions are likely to last longer.”
Clients
According to the findings, 1.89 million Australians currently have an adviser, a slight increase on last year to 10.4 per cent of Australians in 2024, up from 10 per cent in 2023. While these figures only include retail clients, Woods claimed there are “another 1 million or so being serviced by the wholesale or institutional market”.
Looking at the average advice client, the report revealed they are 58 years old and pay a median annual fee of $3,960, an 8 per cent increase on the previous year from $3,710.
“Clients are paying more, and more clients are also willing to pay more,” Woods said.
Unsurprisingly, given the average age, the most common reason clients are seeking advice is for help with building their super and retirement planning, on par with last year’s findings.
Woods noted that the average age of an advice client is likely higher as younger clients, who are generally less profitable for advisers, have been edged out of practices.
Younger Australians are also highly interested in using technology for investing, such as apps and online platforms, with 52 per cent of under 25-year-olds showing interest, a massive increase from 34 per cent last year.
Looking to the future, Woods highlighted the importance of learning to engage younger, technology-focused clients as they come into inheritance over the coming years.
“It’s important for you because as the generational wealth transfer happens, these are the guys that are making decisions as to where they’re going to invest their monies,” he said.
“If they’re sort of attached to these current trading platforms or investing platforms, it’s something that you need to be cognisant of in terms of crafting portfolios, delivering new services or solutions.”
