According to Adviser Ratings’ latest Musical Chairs Report for Q1 2024, the number of advisers considering leaving the industry in the next year has fallen from 22 per cent in 2022 to 15 per cent in 2023, a stark improvement from 2020 when more than a quarter, 26 per cent, were considering leaving.
“In reality, however, the response to commissioner Michelle Levy’s final report and the federal government’s Delivering Better Financial Outcomes plan has been largely positive,” the report said.
”Advisers we’ve spoken to have since indicated there’s little expectation this [new class of advisers] will reduce the demand for fully qualified and experienced advisers.”
The report revealed that, not only are fewer considering leaving, there has also been an increase in practice growth strategies, with many focusing on attracting a specific demographic of customer, moving away from a more general client base and into specialisation.
For example, in 2023, 86 per cent of firms with more than five advisers were purposely growing their client base, targeting a specific client type, up from 69 per cent in 2021.
Smaller firms were also actively targeting specific client demographics, with 65 per cent of firms with two to four advisers doing so in 2023, up from 48 per cent in 2021, and 48 per cent of single advisers firms, up from 46 per cent in 2021.
“Historically, it’s been difficult for boutique practices to achieve scale and, in turn, build profitability; however, technology is enabling businesses to increase their margins, especially if they embrace outsourcing,” the report said.
However, adviser recruitment became much less of a priority for advice firms, with only 16 per cent of firms looking to increase the number of advisers in 2023, down from 21 per cent in 2022.
For firms to increase their client capacity without also increasing the number of staff, it has become essential for them to embrace new technologies and outsourcing where necessary.
With solo practices growing in popularity over the last year, Adviser Ratings said that advances in technology have made it easier to build profitability under this business model, making it a more tangible option for advisers.
“Increasingly, the boutique practice has been an attractive proposition for advisers seeking autonomy and control,” the report added.
Further highlighting the increased focus on growth, the report showed that in 2023, 39 per cent of firms were intending to seek new business opportunities, up from 35 per cent in 2022 and 33 per cent in 2021.
Mergers and acquisitions have also continued an upward trend in popularity in 2023, with one in four firms intending to pursue growth through these means, steadily increasing 1 percentage point each year since 2021.
Additionally, only one in 10 firms were considering major staff changes last year, down from 12 per cent in 2022.
