The characteristics of high-performing advice firms
High-performing advice firms in Australia and New Zealand are enjoying 19% year-on-year growth in revenue while managing to provide a greater number of services to a larger percentage of their clients, according to a new study.
Dimensional Fund Advisors’ 2022 Global Advisor Study of 75 local advice firms found high performers were generating more revenue per household at about $8,400 versus $7,400 among other local firms.
This 19% revenue growth compared to 14% for other local firms.
“Part of the success is coming from improving efficiencies and implementing technology, but also from growing their client service support personnel significantly faster,” said Nathan Krieger, Dimensional Australia client group co-head.
“That’s allowing high-performing firms to service more clients per adviser without losing quality.”
Improved processes, new technology, and increased support personnel were bolstering the growth of the financial advice industry.
A senior adviser at a high-performing firm would now earn $1.1 million and service some 173 households on average, the survey found. In comparison, the average revenue per senior adviser at other firms in Australia and NZ stood at $750k and 122 households.
The average normalised profit margin for high-performing firms was 42%.
As evidenced by these figures, Krieger noted there was now a greater sense of optimism than a few years ago.
“The picture we get from firms we survey with is that years of advisers working on the business, as opposed to in the business, is finally starting to bear fruit,” he elaborated.
Interestingly, the survey found the local industry was less reliant on mergers and acquisitions as a source of growth. It was also less likely to pay staff compensation through performance bonuses, with the cash compensation structure more tilted towards base salary.
Compared to global peers, local advice firms were more focused on processes and workflows while others were more focused on hiring/developing employees.
Their key challenges were sourcing prospective clients, developing rainmakers, and for high-performing firms, expanding existing services to clients such as tax, retirement and insurance planning.
AUTHOR
Rhea Nath
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