Adviser recruitment falls down the priority list
Two industry executives have highlighted why financial advice practices are less focused on adviser recruitment, as firms grow their capacity to service more clients with less staff.
Adviser Ratings’ Musical Chairs Report for Q1 2024 recently revealed that client growth is a key focus for many advice practices, with the help of outsourcing and artificial intelligence (AI). Among larger firms, 86 per cent are purposely expanding their client base.
While client growth is on the agenda for most businesses, growing adviser numbers within the practice is not, the report found, as adviser recruitment has fallen from the third-highest business priority in 2021 to the fifth in 2023.
On average, there were 2.5 financial advisers per practice in 2023, which was the same figure as the previous year. Meanwhile, customer service and administrative staff dropped from 2.1 per business in 2022 to 1.7 in 2023.
Adviser Ratings attributed this to a key trend: “In 2021, practices were rather quickly inheriting clients from their departed industry colleagues. With little time to invest in changes to their businesses, their swiftest option to manage the higher load was to recruit more advisers. Now, practices have already implemented efficiencies to allow them to handle more clients without needing to recruit additional advisers.”
Speaking to Money Management on these findings, Radar Results founder John Birt observed how practices have enhanced advisers’ capacity to assist more clients with less staff.
“These days with technology, it’s a lot easier to service clients with fewer advisers. Back in the old days, you had one adviser who could service between 50 to 80 clients. Now with technology, you can have one adviser service around 200 clients quite easily – especially with the back-office being more IT-orientated. Overall, you tend to need less staff,” he explained.
Steve Prendeville, founder and director at Forte Asset Solutions, also reflected on how the significant upgrades in technology enabled increased efficiencies for both front and back-office staff.
“Businesses are continuing to invest in their practices and aspire to have spare client capacity for onboarding and service delivery. However, this is challenging in the current and foreseeable labour market in an environment of higher wages and general costs,” Prendeville told Money Management.
Firms that do not have the balance sheets to invest are instead taking on a decreased number of new clients, the founder said, while reviewing their overall delivery costs.
In his M&A experience, he noted that the adviser exodus had meant practice principals are often retained following an acquisition rather than the acquiring firm bringing on new staff and around 60 per cent are retained for longer than 12 months.
“The reason for sale is not full retirement – sellers seek to derisk but also reduce their time in HR, IT, compliance and other non-advice roles. Given the lack of talent, buyers are welcoming principal retention as this also mitigates any staff and/or client migration.”
AUTHOR
Jasmine Siljic
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
Let's face it, recruitment numbers are down because the government, and their bureaucrats, have made this a dying industry.