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
With regional and rural suburbs exhibiting high spare capacity to invest, Money Management speaks to three regional advisers on the opportunities beyond the major cities and the importance of a strong network.
Platform consolidation is expected to accelerate among financial advisers this year, as software company Finura pinpoints which two platforms are set to be the winners, thanks to this trend.
The software provider has made several appointments in its APAC wealth propositions team, with a focus on driving growth across digital advice, Xplan and strategic partnerships.
The platform has announced it plans to close its Xplore managed discretionary account service in 2026 which holds $2 billion in funds under administration.
