Driving profitability in advice practices
Daryl Stout, MLC Business Growth Manager, VIC/TAS/SA
With fees on the rise and technology evolving, advisers need to know exactly how their licensee can help them become more profitable.
The cost of servicing clients is increasing as the financial advice sector continues to transform. Advisers need to be reviewing their pricing structures to ensure they remain profitable in this environment.
Any good advice business should review its prices on a regular basis in conjunction with their licensee. How much to charge, and when to raise fees and by how much are important questions for all businesses.
Research conducted by Momentum Intelligence on behalf of MLC Licensee Network shows that the vast majority (63 per cent) of advisers are reviewing their pricing structures to maintain their profitability in today’s market.
A big opportunity for all advisers is to work with their licensee and other established practices to develop the value of their services and improve the way they communicate it to their clients. Price arguably only
becomes an issue when a client feels they are not getting value for the money they spend.
This opens up a whole world of potential possibilities for advisers to improve the value of their service offering and, importantly, the way they communicate it to their clients.
As advisers plan for the future, they were asked by Momentum Intelligence what strategies they are using to reduce costs and maintain profitability in today’s market. Reviewing pricing structures (63 per cent) was the most common strategy, while more than half (57.4 per cent) are investing in technology to boost efficiencies. A third (32.3 per cent) are reviewing fixed costs and 19.7 per cent are reducing staff.
ONE IN FIVE PRACTICES REVIEWING LICENSEES
Only one in five advice practices are reviewing their licensee in an effort to reduce costs and maintain profitability.
These results clearly show that pricing and technology are the preferred strategies advisers are considering to remain profitable in this new environment. Licensees have an important role to play in each of these areas.
Yet the introduction and adoption of digital advice has the highest level of risk for advisers. Almost a third (32 per cent) of advisers have indicated that they feel there will be an impact on their business as a result of digital advice and that they are not adequately resourced to manage this impact.
This is where the right licensee could really add value. Technology should not be looked at as a threat, but rather as a tool for advisers to make their practices more efficient and profitable. A well-established licensee is best placed to invest in the right technologies that will help advice practices deliver back-end efficiencies in order to offer a digital solution for clients on the front-end.
A successful advice group of the future will likely be that which can blend digital advice with their existing offering. With the support of their licensee, these advice practices will potentially maximise the value of their business and be confident about pricing their services at a competitive rate.