Financial planners can use 'banking logic' to retain clients: Instreet
By diversifying into services other than financial planning, advisers can dramatically increase the likelihood they will retain clients, says Instreet managing director George Lucas.
The benefits of offering clients other services - such as accounting, mortgage broking, legal (estate planning) and insurance services - is similar to the old "banking logic", said Lucas.
"If you've got a client on one product there's an 80 per cent chance that they'll leave you; if you've got them on two products that chance goes down to 50 per cent; and on three products it goes down to 20 per cent," he said.
The idea - still employed by banks today - is that if you can "tie [clients] up in different channels then there's less likelihood they will leave you", Lucas said.
If clients are disappointed with one service, they may well be happy with another part, he added.
"That's why you always get banks ringing up and saying: 'Oh you've got a term deposit. Why don't you do a mortgage? It's the same logic," he said.
He also pointed to the arbitrage available to planners who are looking to diversify into accounting services.
"You can buy accounting practices on one times [recurring] revenue, and financial planning practices tend to trade at two-and-half to three times [recurring] revenue," Lucas said.
"If you buy an accounting practice which doesn't have much financial planning in it and you can turn those clients into financial planning clients, you can arbitrage it - and now the revenue's three times rather than one," he said.
In addition, if the practice has self-managed superannuation clients "you get all the accounting business from that, which is just regular fees and not linked to funds under management", Lucas added.
Recommended for you
While the number of advisers switching tends to tick up at the end of the year, Padua Wealth Data reveals which business model sees the most adviser loyalty.
Private credit, auditor misconduct and super trustees have been listed among ASIC’s priorities as the regulator unveils its top focus points for the coming year.
Melbourne-based investment manager Woodbridge Capital has appointed an origination director for south-east Queensland, strengthening its foothold in the region as part of its national expansion strategy.
Barings has appointed a new head of Asia Pacific to succeed Duncan Robertson, who will retire after almost two decades with the firm.
