The survey aims to provide a current picture of the industry to identify the diverse range of business models in the sector. The initiative is intended to contribute to the ongoing development of the SMSF sector that manages about one third of all superannuation assets.

SPAA CEO Andrea Slattery said: “The survey is an exciting project and an excellent opportunity for SMSF professional members of SPAA to be involved in a leading survey on ways to improve efficiencies and drive growth. I strongly encourage SPAA members to participate.”

The findings of the survey will be shared through a comprehensive report to be launched at the SPAA State Technical Conferences in July.

Macquarie Banking and Financial Services Group Division Director, Sarah Penn, said that as the popularity of SMSFs continues to grow, understanding business models becomes a very important part of the landscape.

“SMSFs are becoming an increasingly large part of many financial advice businesses and we know from our work in the industry that firms are approaching this in quite different ways,” Ms Penn said.

“Some businesses are developing hybrid models, while others are taking a more organic approach. Whatever path they choose, this survey aims to provide practical insights for the sector.”

The survey takes approximately 15 minutes to complete, and individual insights and business information will be kept strictly anonymous and confidential. Industry participants can access the survey here  and can request to receive a copy of the report at the completion of the survey.

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Positive profit expectations for 2014 within the financial planning community: Macquarie

The Macquarie Practice Consulting 2013 Financial Planning Best Practice Benchmarking Survey has revealed further optimism within the financial planning community, with respondents anticipating an increase in profit in 2014.

Eight in ten (83 per cent) advisers anticipate increased profits in the next 12 months, up from 74 per cent in 2012. Practices that offer financial planning only or financial planning and accounting are the most positive, with a larger proportion expecting at least a 20 per cent increase in profit in the next financial year (32 per cent and 39 per cent respectively). Younger practices are also confident, with half of firms under three years old believing they will do the same.

“This year’s survey has shown steady growth in revenue and gross profit in advice practices, which is great news for the financial planning industry,” said Fiona Mackenzie, Head of Macquarie Practice Consulting.

The results showed that since the last survey, there was a 15 per cent increase in average revenue and an increase in average operating profit of 45 per cent over the same period. In addition to these top line measurements showing improvement, direct expenses have remained fairly steady and the average revenue per adviser has increased.

“Expenses appear to have been well managed, which can contribute to driving profit improvements,” she said. “Practices are still controlling costs but the survey suggests that some practices are feeling confident enough to invest back into their businesses.”

While revenue and profits are up, there has been a reduction in client numbers per adviser (153 clients per adviser, compared to 185 in 2012). Additionally, advisers have a higher proportion of active clients, up at 77 per cent in comparison to 69 per cent in 2012. Macquarie Banking and Financial Services Group 2

“Advisers have told us they want to spend more time with clients who genuinely value their advice. From the survey, we can see that many appear to be making real efforts to refine their client base and increase the focus on active clients, and this tends to improve the profitability per client.” said Ms Mackenzie

“Looking at the evidence of profit and revenue growth, this could be a good sign that many are having success with this strategy.”

The full report will be available in early 2014.

About the Macquarie Practice Consulting 2013 Financial Planning Best Practice Benchmarking Survey:

Data was collected from 226 financial planning practices in October 2013 with the majority of respondents (82 per cent) being practice principals. The survey covers a wide range of topical areas for Australian financial planning firms, including business structure, financial management, general practice and confidence. Measures capturing profit and revenue were calculated based on the 2012/2013 financial year results for the participating firms. The previous survey was released in May 2012 and based on the 2010/2011 financial year.

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Visor is a comprehensive suite of financial planning tools and software solutions for independent or boutique advisers, and is based on Rubik’s COIN financial planning software system that Rubik purchased from Macquarie in 2012.
 
COIN is a respected technology service provider in the Australian financial planning software market with an established client base and leading position in the institutional segment of this market. 
 
As part of the 2012 COIN acquisition agreement, Macquarie continued to service the majority of COIN’s boutique (independent financial advice) clients, under a licence from COIN, with the renamed software Visor.
 
Wayne Wilson, Managing Director Wealth with Rubik Financial said this agreement means Rubik will now service the boutique independent financial advice clients that were retained by Macquarie as part of the COIN Transaction. 
 
This is the third acquisition for Rubik in the wealth management space.
 
“The acquisition of COIN in 2012 expanded Rubik’s wealth offering to the financial institution market and created significant scale across the group,” Mr Wilson said.
 
“The acquisition of market leading scaled and online advice provider, Provisio, announced earlier this year, will place Rubik as a leader in the provision of scaled wealth advice software in the superannuation fund market. This will complement its existing leadership position in the institutional market for comprehensive wealth advice software.
 
“The acquisition of Visor broadens Rubik’s presence into the IFA market, complements the recently announced acquisition of Provisio and means that Rubik is the sole provider of COIN based solutions in the market,” Mr. Wilson said.
 
The transition from Macquarie to Rubik is expected to be seamless with Rubik already providing a hosted service to its institutional customer base and offering roles to Macquarie customer facing staff.
Craig Coleman, Chairman of Rubik, said, “Rubik is a dedicated financial software company, and COIN and Provisio are industry leaders in their respective markets. The acquisition brings to Rubik a strong annuity revenue base and recurrent earnings and provides Rubik with greater scale.
 
“Our initial focus will be on delivering already committed product development programs and preparing our products for changes that flow from the Future of Financial Advice (FoFA) reforms. Beyond this, we will review technology opportunities based on customer feedback and market opportunity, whilst ensuring ongoing support to clients,” Mr. Coleman said.

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While the report, called The SMSF Generations Report, reveals SMSFs are popular with every generation of Australians, it has highlighted that there is no such thing as a typical SMSF investor. There are significant differences in the attitudes, investment priorities and lifestyle aspirations of each age group.

With SMSFs already the largest and fastest growing sector of the Australian superannuation industry, the report emphasises that advisers need to take into account these generational differences when delivering advice to help better meet the needs of investors.

Macquarie Banking and Financial Services Group Analytics Research Manager, Gary Lembit, said that investors across the generations recognise the value of advice when managing their SMSFs, but that advisers should tailor their approach according to life stage to have the greatest impact.

“It is clear that one of the main reasons investors opt for an SMSF is to have greater control and choice over their investments. However, this does not mean they want to be entirely self-directed,” Mr Lembit said.

“As the insights in this report show, SMSF investors across the generations recognise the role financial advisers have to play in providing valuable guidance on their investments. However, through better understanding their clients’ state of mind, advisers can adapt their advice models and learn to communicate in a way that better meets their needs, while articulating the value they can add.”

Despite investors sharing the common reasons for choosing an SMSF, more control and choice over their investments, there is a significant difference between how receptive each generation is to receiving financial advice.

Generation Y, not surprisingly, is generally highly confident about many aspects of their lives, but when it comes to long-term investment decisions, they are less confident than other generations. They are very receptive to advice, but do not seek it, meaning it is important for advisers to develop ways to proactively communicate with this group and help them understand the value of advice.

Generation X is a lot more sceptical about financial advice, but being extremely time poor, they are willing to pay for advice in certain situations, particularly if it helps save time.

The Baby Boomers are increasingly seeking advice, perhaps because of the higher amount in their funds and being closest to retirement, while the Silent Generation (those in retirement) is by far the most likely generation to seek advice.

Andrea Slattery, CEO of SPAA, said that as the number of investors using SMSFs grows, the industry needs to respond by focusing more on what they can do to best service this distinct group.

“We have found time and time again that investors who use SMSFs are the most engaged people in superannuation. They want to make sure their funds perform well and are interested in understanding what is involved to help make this happen,” Ms Slattery said.

“This includes accessing financial advice, which these investors show a continuing appetite for, but as this report has shown, the advice industry can make their role even more effective by tailoring their approach to the stage of life the investor is in. We think that through reporting insights like these we can continue to support the advice industry in its aim of demonstrating its value to investors and helping investors make the most out of their retirement savings through their SMSF.”

In addition to highlighting the differing attitudes towards advice, the report provides a snapshot of the SMSF asset allocation preferences among the generations. As a general trend, cash/near cash holdings and direct shares in SMSFs have increased in recent years, while managed fund holdings have decreased.

“We have always known that the cash holdings in SMSFs as at 30 June each year is not a true indication of the cash that is held throughout the year. This report highlights what trustees really do when they have control and flexibility and how they choose their assets to hold, including cash/near cash assets.”

Generation Y has lower cash balances and a higher proportion of their portfolios in equities than others, and a greater focus on achieving capital growth. They have been the most active during the past 12 months in changing the asset allocation of their funds.

Reflecting the ‘Great Australian Dream’, Generation X has 30 per cent of their SMSF capital in direct property, but with relatively illiquid portfolios, is less likely to have substantially changed their SMSF’s asset allocation in the past year.

The Baby Boomers have recently taken a more defensive stance towards their SMSF asset allocation. While still largely focused on capital growth, half have sought out franked dividends as a source of regular income. They still have among the highest allocations to direct equities, second only to the Silent Generation. Surprisingly, despite ongoing market volatility and the flight to safety among some investors, the Silent Generation have actually increased their SMSF allocation to direct equities in the past six years.

Summarising the key learning from the report, Mr Lembit said: “The overall message is clear: by tailoring advice to the different investment styles and decision-making processes of each generation, advisers can build stronger and more fruitful client relationships.”

25 July 2012

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