‘Maturing and adaptive’: Risk advice models all about execution

It’s still an incredibly low number, but the 589 financial advisers that wrote half of the new business during 2024 is up from previous levels.

In its latest Financial Advice Landscape Report, Adviser Ratings split advisers that wrote risk over 2024 into four categories – A, B, C, and D – each representing 25 per cent of new business.

The top end of the spectrum, which Adviser Ratings terms pure risk writers, saw 185 advisers write a quarter, while 404 category B high risk writers were responsible for another quarter.

In February last year, Adviser Ratings released a Musical Chairs Report that found just 480 advisers were responsible for writing half of the new business during 2023.

Comparatively, the increase of the top end to 589 is a positive sign, though the overall number of advisers writing some level of risk decreased slightly from 6,399 to 6,358.

The pure risk writers cohort is characterised as “high-volume specialists, focused almost entirely on life insurance”.

“Their business model is commission-driven, relying on scale, efficiency, and automation to manage high policy volumes,” Adviser Ratings said.

“Averaging $2,786 in revenue per client, Category A practices generate the highest annual revenue across all categories ($3.27 million on average), despite lower individual client fees.”

Given the much higher client volumes, the report said these firms have “honed systems that maximise transaction throughput”, which has allowed them to retain profit margins of 22 per cent, which is similar to more diversified practices.

The second leading group still maintain a “strong focus on risk advice”, the firm said, but mix in some holistic advice aswell.

“With an average client revenue of $3,430, they operate at a middle ground, balancing volume with slightly more personalised service,” Adviser Ratings said.

“Category B advisers also frequently act as referral hubs, receiving and giving business through formal arrangements with both Category A risk specialists and broader Category D planners. Their annual average practice revenue sits at $1.96 million, with profitability on par with other models (23 per cent).”

The 885 moderate risk writers that make up the next quarter are, the report said, “further along the diversification spectrum” and combine the risk advice component with other areas of advice.

With a significantly higher average of $4,579 per client in revenue compared with the pure risk-focused models, thanks to a combination of fee-based models alongside insurance commissions, annual practice revenue is lower at $1.5 million.

However, this group maintains strong profit margins at 23 per cent by “tailoring offerings and building deeper client relationships”.

The final and largest cohort is the low risk writers, with 4,884 advisers essentially embedding their insurance advice offering within holistic planning.

“These advisers write the lowest volume of new risk business but charge premium fees averaging $4,901 per client – the highest across all categories,” the report said.

“Category D advisers often receive referral income from Categories A and B and occasionally place simple policies themselves. This group is primarily investment-focused or holistic advisers, achieving the highest average profit margins (24 per cent), despite smaller practices ($1.47 million annual revenue on average). This is a strong portion of the adviser market.”

According to Adviser Ratings, this wide variation in revenue models maintaining a tight grouping of profitability signals that “multiple models can thrive with the right operational efficiencies”.

“The industry has shifted and is evolving to meet regulatory demands and consumer expectations. Advisers are finding new ways to deliver value – either through volume efficiency (as in Cat A) or depth of service (as in Cat D),” it said.

“The emerging cross-referral ecosystem between risk-focused advisers and comprehensive planners supports specialisation while ensuring client needs are met. Co-servicing, white-labelling, and transitions to general advice are opening new paths for growth and retention.”

The different business models is also a sign of a “maturing and adaptive industry”, Adviser Ratings added, noting that the ability of risk-only advisers to match holistic profitability “underscores that success is less about the model itself and more about its execution”.

“This evolution not only promotes healthy competition but also enhances client outcomes by allowing advisers to focus on their strengths while leveraging partnerships to fill gaps – signalling a resilient and forward-thinking risk advice ecosystem.”