It has become significantly more challenging to sustain and grow a profitable financial advice business. It boils down to a battle of administration versus efficiency. Scalability is now the holy grail for financial advisers.
Every adviser is familiar with this challenge. While many have made efficiency gains through technology adoption, most advisers still need more ways to streamline and scale their business.
The numbers are stark. According to the 2021 KPMG Report, The Cost Profile of Australia's Financial Advice Industry:
- The average cost of providing advice and implementation is now $5,335
- The fee charged for upfront service ranges from $3,000 to $5,000 depending on the complexity
- The fee charged for ongoing service ranges from $3,000 to $7,500 depending on the complexity
There's clearly a gap between cost and fees charged. It's a gap that impacts adviser profits, client service obligations, or both.
The SOA challenge
The most significant impact on advisers' time is the compliance heavy and laborious process of developing a Statement of Advice (SOA).
It's a big challenge. Let's use an example of an advice business with 150 clients paying ongoing fees for advice. The regulatory requirement is, therefore, to provide at least 150 SOAs per year. It means the adviser has to prepare just over three SOAs per week.
If the average time to prepare an SOA is eight hours, that leaves only two days per week to conduct client meetings, develop new business and manage other forms of business administration.
The bottom line is that the SOA workload is a handbrake on business growth. Furthermore, it potentially impacts the quality of service provided within an increasingly regulated environment with compliance and disclosure requirements making life even more difficult.
Outsourced paraplanning is an intelligent solution.
Using or switching to outsourcing SOAs to a paraplanning service is easy to implement. Plus, it creates value far exceeding the cost.
The average fee for quality outsourced paraplanning services is $400 per SOA or $50 per hour. It's a fraction of the cost imposed on an adviser to do it themselves. It provides a sensible margin uplift on the cost versus the fee charged. It also means the advice firm doesn't need to internally resource, with all the additional burdens and complications that brings with it.
Most importantly, using outsourced paraplanning services frees up the adviser's time and creates capacity to grow and scale the business. It also simplifies and improves compliance with paraplanners regularly dealing with such issues as part of their service.
How to get started
Like most things in business, productivity gains are born out of process efficiency. Beyond technology and automation, it's the institutionalised practice of doing repeatable tasks in the fastest and lowest-cost way to achieve the desired quality. If we can call the process a form of habit, changing habits is the main barrier for many.
The good news is that paraplanning services deal with this daily. The foundation is a standard briefing template that captures all the relevant information that you capture from the client as a matter of course. The result is a brief that communicates the client's circumstances and goals, your investment strategy and additional requirements.
In an agreed timeframe, you'll receive that completed SOA for review. You can then complete client authorisation, implementation and bill the work without delay.
Better business
Scalability and accelerating the business cycle are critical to running a growing and compliant advice business. Increasing the pace and responsiveness of your service is something clients appreciate and value. Plus, it is a far more efficient and profitable way to operate.
Dynamic Asset can help
Dynamic Asset can help you by introducing one or more paraplanning services aligned with your business's needs. Contact us today to learn more.
