Financial planner numbers hold steady despite macro headwinds: 2020 Planner Business Model Report


Recep Peker

Leading research firm Investment Trends has released its 2020 Planner Business Model Report, an in-depth study of Australian financial planners and their business support needs.

Key highlights:

  • Financial planner numbers hold steady despite macro headwinds
  • Planners have minimised client attrition, but profitability growth remains a challenge
  • The cohort of self-licensed planners continues to expand rapidly

Financial planner numbers hold steady despite macro headwinds

Australia’s population of financial planners has held steady despite challenges on multiple fronts. While the number of ASIC registered advisers has changed substantially in recent times, the underlying number of true financial planners who serve Australians nationwide remained steady at 17,500 in 2020 – a figure that has held steady throughout the past decade.

“Financial planners remain resilient against a shifting regulatory landscape, disruptions from major players entering and leaving the wealth management space, and the recent pandemic-induced market volatility,” said Recep Peker, Research Director at Investment Trends.

“Similar regulatory challenges have impacted the UK advice market in the past decade, reducing their planner headcount by 20%, further highlighting the strength of Australian advice industry.”

Looking forward, industry attrition will not be seismic, with only 4% of financial planners intending to stop providing advice in the year ahead, and a further 3% in the year after.

Planners have minimised client attrition, but profitability growth remains a challenge

Planners have successfully minimised client attrition despite recent headwinds. The average planner acquired 16 new clients in the last 12 months but lost 17 over the same period – similar to levels observed in 2019.

Despite strong efforts to maintain client numbers, practice profitability growth remains a challenge. In 2020, a record high 41% of planners said their practice was less profitable compared to last year (up from 38% in 2019, and 18% in 2018).

“While COVID-19 has added to the host of challenges that planners were already grappling with in their business, their top challenges remain compliance obligations (67% cite this) and providing affordable advice (46%),” said Peker.

“Still, some advice practices have performed better than their peers. The industry’s most successful (by net profit margin, client and profitability growth) appear more adept at handling compliance-related obligations through their technological efficiency.”

“These high performing practices were also far more likely to be prepared for COVID-19 related disruptions from a technology and operations perspective, highlighting the importance for all planners to optimise their technology stack for operational and client-facing benefits.”

The cohort of self-licensed planners continues to expand rapidly

The move to self-licensing continues at pace, with 30% of planners now holding their own AFSL or operating in a boutique AFSL – a two-fold increase since 2016. A further one in ten is considering becoming self-licensed.

“More planners are heading down the self-licensing route, whether by choice or structural changes in the industry. As the dynamics of the advice market evolve, so do planners’ support and service needs,” said Peker.

Currently, almost all self-licensed planners (92%) outsource or use third-party expertise, most often for compliance/audits, research, professional development and paraplanning.

Still, a growing proportion have unmet support needs, particularly around developing effective advice/review processes (27%, up from 12%), best practice examples (20%, up from 9%) and technical support (14%, up from 8%).

“All planners – whether self-licensed or part of a licensee network – seek greater support from providers across the financial planning value chain,” said Peker.

“Through the pandemic, planners most often acknowledged the support received from their colleagues (58% cited ‘good’ support) and licensee (43%), but more work can be done by investment product providers (33%), platforms (26%) and professional associations (18%).”

About the report

The results are drawn from the Investment Trends 2020 Planner Business Model Report, based on an in-depth study of 693 financial planners concluded in May 2020.

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