How to become a high-performing advice firm
Macquarie Business Banking has revealed the top characteristics of high-performing financial advice practices, including how succession planning and client engagement drive profitability.
The Macquarie Business Banking’s 2023 Financial Advice Benchmarking report collaborated with Business Health to survey 312 Australian financial advice firms.
The study highlighted the key features of advice practices in the top quartile with a profit per owner of $809,163, starkly contrasting $252,969 for other firms.
The gross practice revenue of high-performing firms is $2.2 million, whilst for other firms it is $856,127.
These firms more than doubled their profit per adviser at $425,931, compared to $199,995 for other firms.
“High-performing firms have frequently reviewed long-term strategic plans particularly around the succession of their business,” said Olivia Ellis, head of accounting and financial services at Macquarie Business Banking.
“Firms that have documentation to support succession planning can be twice as profitable as others as it creates alignment between owners and key staff around business continuity and long-term growth ambitions.”
Practices with fully documented annual plans saw a profit per partner of $664,446. This contrasted those without any operational plan at $294,154.
In particular, succession planning also has a tangible effect on a practice’s profitability. Those with an effective succession plan in place saw $684,148 in profit per owner, whilst $355,446 in firms that didn’t have one.
Another marker of high performance is client engagement, with advisers in top quartile firms seeing over twice as many clients per week as advisers at other firms.
Top advice businesses had 10.9 weekly appointments per adviser, but that figure dropped to 5.2 for other practices.
The report highlighted that streamlined advice processes and well-documented service models enable high-performing advisers to focus more time and energy towards client engagement, thus delivering higher value interactions.
“High-performing financial advice firms are more profitable because of the depth of their client base, on average servicing 30 per cent more clients than other firms. We are subsequently seeing greater service efficiency from a lower spend,” Ellis explained.
Top firms have 280 clients per full-time adviser, compared to 184 for other practices. They also extract $555,273 in funds under management per client, whilst this dropped to $498,443 for other firms.
Support staff and adequate resourcing also strengthen a business’s value proposition, allowing frontline staff to be more dedicated towards client outcomes.
“The research shows that high-performing firms are supported on average by 1.8 full-time equivalent support staff per adviser,” the Macquarie head commented.
In addition, firms that actively collect feedback from both clients and staff to refine their client value proposition saw $137,298 higher profit per owner.
Macquarie Business Banking gave five key steps to achieve high performance as an advice practice:
- Define and document your firm’s value proposition.
- Put strategies in place to attract and retain valuable staff.
- Ensure your client-facing people are doing the most important work.
- Charge appropriately.
- Have a clear strategic decision.
AUTHOR
Jasmine Siljic
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