Adviser sentiment rebounds

Most Australian financial advisers believe the worst of the global financial crisis is over, with sentiment having improved rapidly over recent months, according to the latest Wealth Insights Adviser Sentiment Survey.

The survey has also revealed that, notwithstanding improving sentiment, the bottom lines of financial planning practices have been hit hard, with more than 70 per cent acknowledging that revenue and profits have been impacted.

The survey, conducted in July, revealed that only 25 per cent of advisers now regard times as being ‘very bad’ or ‘bad’, compared to 36 per cent in May and nearly half in February.

According to Wealth Insights managing director Vanessa McMahon, advisers are now significantly more optimistic in their outlook, with the mood shift reflecting the steady rise in equities markets over the past

12 months.

“The recovery in equity markets has calmed many distressed clients and worried planners,” she said.

According to the Wealth Insights data, 53 per cent of the advisers surveyed now believe conditions to be ‘average’, while 20 per cent regard them as being ‘good’ or ‘very good’.

McMahon said while there was the occasional planner who believed the first six months of 2009 had been nothing more than a bear market rally, most were now generally positive about the future for

both their clients and themselves.

She said this optimism was being reflected in views about the planning industry generally, with more than half describing conditions as being ‘mostly good’ or ‘continuously good’ and 40 per cent believing this was ‘both good and bad’.

Looking at broader sentiment, McMahon said advisers had far more confidence in the markets rebounding than they did six months ago, which she believed was the main factor behind their sense of relief and optimism.

The Wealth Insights survey showed that while 44 per cent of respondents were expecting average returns over the next 12 months, 33 per cent were expecting good returns and 3 per cent were expecting excellent returns. This represented a strong reversal on the position revealed in the December 2008 survey, when more than 50 per cent were expecting ‘below average’ or ‘poor returns’.

Where revenue and profits are concerned, the survey revealed that 29 per cent of planners had acknowledged revenue being a lot lower, while 44 per cent said it was a little lower compared with the same period a year earlier. Where profit was concerned, 33 per cent said profit was a lot lower, while 41 per cent said it was a little lower.

McMahon said almost all advisers had suffered a drop in revenue and profit and were reporting losses of between 20 and 30 per cent.

“The past 12 to 18 months have been very challenging for many advisers,” she said. “Some admitted that their personal take home income had reduced dramatically in the preceding 12 months, while others had to reassess their business models.

McMahon said it was advisers who had begun a new business in the past few years or bought an existing business who were feeling the most pain, because they were very reliant on new business as their primary source of revenue.