Tough Love

Australian financial advisers remain generally loyal to their licensee groups despite a plummet in profit growth levels over the past 12 months.

Despite the tough times, more advisers are of the belief that their licensee is helping them develop their business, is focused on their needs and that more than seven in 10 feel valued as part of the network they’re in, CoreData research shows.

With markets down 55% from the November 2007 peak earlier this year, before clawing back some of the losses over the past eight weeks, it’s not surprising that only a third of advisers have been able to increase levels of profitability over the past 12 months.

Only 35.3% of financial planners experienced an increase in profit growth over the past 12 months.

Yet more advisers feel valued within their networks with a rise of 6.5% loyalty over the past two years up from 65.1% in 2007 and 71.3% in 2008 to 71.6% this year.

One of the more interesting notions from the research is that of the range of remuneration methods available, advisers who receive commission payments from investment/risk product manufacturers were more likely to have seen an increase in profits over the past 12 months.

39.6% versus 35.3% for the industry average.

Meanwhile at the other end of the spectrum, in instances where clients pay an upfront fee to their individual planner, this collective are less likely to have experienced an increase in profitability as new business levels have dropped across the country (only 28.9%).

Having shares/options in the underlying business will also decrease the likelihood of an adviser having experienced a growth in profits, which isn’t surprising given many listed advisory firms have seen a plummet in their market valuations.

Advisers With Profit Growth Split By Remuneration

The following illustrates the state breakdown, with advisers in Queensland generally more positive yet advisers in Western Australia are more inclined to have seen an increase in profit levels between April 2008 and April 2009.

The CoreData Licensee Study is an annual study aimed at delivering financial planning dealer firms key insight into the evolving needs and demands of financial advisers and outlining the specific triggers influencing them to join/leave a given dealer group.

A key indicator of the success of a financial advisory dealership today is the ability of firms to acquire and retain quality financial planning practices.

The research allows for the benchmarking of dealer groups and advisers against the broader market against a number of key metrics.

The above interim findings from the study are derived from a sample of 1,695 practitioner responses from across the industry and licensee firms.

Data was collected throughout March 2009.