Escalating business costs emerge as top adviser concern
The rising costs of operating a financial advice practice has been ranked as the number one challenge for advisers today, outpacing administrative and compliance burdens.
According to CoreData, over one-quarter (26 per cent) of advisers have identified growing business costs as their top concern at the moment.
This figure is over double what it was one year ago, when it stood at just over 10 per cent of advisers. The finding echoes previous BT research which uncovered that cost base increases and pressure on profitability is impacting 91 per cent of advisers.
Worries related to administration and compliance burden, which used to be the top concern at approximately 20 per cent of advisers one year ago, has fallen to 18 per cent in 2024.
“The latest insights reveal a dramatic shift in priorities among financial advisers, with rising business costs now overtaking traditional concerns around administration and compliance,” CoreData said.
“This surge in concern over business costs underscores the growing pressures on financial advisers to manage operational expenses while maintaining profitability.”
Andrew Inwood, founder and principal of CoreData, said this is the first time in the past three years that escalating business costs have overtaken administration and compliance.
He commented: “Understanding these costs and the changes is complex and passing them on elegantly to their customers is also a challenge, which means that for many advisers profitability is being squeezed.”
Last month, Investment Trends discovered that advice practices with high profit margins of 40 per cent or more were charging upwards of $7,700 per annum in client fees.
“Advisers that were at that really high level of profitability did charge more, but what they also did particularly well was keeping a lid on operational costs. They are doing everything they can, including leveraging technology, to actually streamline the production process and reduce their operational cost,” said Irene Guiamatsia, head of research at Investment Trends, at the time.
Outside of rising business costs and compliance burden, CoreData found that other challenges impacting advisers today have all remained relatively steady over the past 12 months. Some 6 per cent of advisers highlighted market volatility as a key concern, while 9 per cent pinpointed mental health and staffing issues respectively.
This latter finding – that under one in 10 advisers are concerned about staffing issues – contrasts previous research. Earlier this year, BT revealed that 76 per cent of advisers identified finding and recruiting staff as a challenge for their firm due to the short supply of new entrants.
Last week, Striver founder and CEO Alisdair Barr also unpacked the significant cost impact that comes from losing valuable team members within an advice practice. Some estimates said that losing a valued team member could end up costing 150 per cent of an annual salary, he quoted.
AUTHOR
Jasmine Siljic
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