Advice / Advisers / Practice / Research

The verdict: Drivers of advice business growth in the year ahead

Most financial planning practices expecting to grow in the year ahead believe growth in new clients and more business from the clients they already have will drive business expansion, as the industry looks set to recover from the trials of the past year.

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* Percentages for three and five years may not total 100 because not all firms in the survey have existed long enough to report three- and five-year growth.

CoreData’s latest fast and focused research, conducted between September 14 and 18, reveals that around six in 10 (60.7 per cent) firms expect to grow in the coming 12 months.

This proportion is lower than the proportions of practices that reported business growth in the past five years (67.0 per cent) and in the past three years (63.4 per cent) but is a significant improvement in the fewer than half (45.5 per cent) of firms that reported growth in the past 12 months.

Most (85.3 per cent) firms anticipating growth in the year ahead say onboarding new clients will be the main driver, with just less than half (47.1 per cent) expecting to generate higher revenue from existing clients.

About a quarter (23.5 per cent) expect to generate growth by repricing their advice services, and one in five (20.6 per cent) expect a merger or an acquisition to drive growth. 

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The importance of new and existing clients to driving business growth is explored from a different perspective in this week’s fast and focused research examining client satisfaction surveys – how frequently advice firms conduct them, and what they use the results for.

You can take part in this week’s research by finding the New Model Adviser newsletter in your email inbox and following the survey link.

Businesses that expect to remain static or to shrink in the next 12 months say the main reasons will be regulatory and compliance costs – both statutory costs, such as the ASIC levy (63.6 per cent of practices) and non-statutory compliance costs (72.2 per cent).

Around six in 10 (61.4 per cent) expect to onboard fewer new clients in the year ahead than in previous years; and more than half (52.3 per cent) cite an increase in fees paid to their licensees. 

In some cases licensee fee increases may cover an increase in professional indemnity (PI) insurance costs, although 45.5 per cent of businesses cited increased PI costs specifically as a factor in their expected business performance.

While one in five practices expecting business growth plan to reprice their services to clients in the year ahead, firms expecting to remain unchanged or shrink in the year ahead nominate lower fee income as a significant reason.

Just over one in five (22.7 per cent) expect fee income from existing clients, where it’s calculated as a percentage of funds under management, to decline; and just less than one on five (18.2 per cent) expect fee income to decline where the fee is calculated on the basis of the service provided.

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