The five drivers of advice prosperity

By Jayson Forrest - Managing Editor  - IMAP Perspectives

Andrew Mathie, Samantha Hawkins and Matt van Dijk discussed the latest findings from Praemium research, which was undertaken by Business Health, on the key drivers for success for advice practices.

While it is proven that managed accounts deliver efficiencies that translate into improved performance metrics for advice practices, Business Health’s study sought to more clearly identify the key differentiators between firms using managed accounts and those advice firms that don’t, and whether using a managed accounts solution was driving the success of those businesses.

Speaking at the IMAP Advice in Action Conference, Andrew Mathie, Samantha Hawkins and Matt van Dijk revealed some of the key insights from Praemium’s 2022 - Profit facts & Key success drivers research.

The research clearly shows that the two areas in which managed account firms were doing things differently to non-managed account businesses were:

* It enabled them to work on their business, not just in it; and

* It enabled them to prioritise the client experience.

“The research revealed that 36 per cent of firms using managed accounts for three years and over had a documented 3-5 year strategic business plan, compared to just 22 per cent of firms not using managed accounts. And 64 per cent of firms using managed accounts have a documented client value proposition, compared to 41 per cent of firms that do not use managed accounts,” said the speakers.

The findings also show that businesses using managed accounts have been able to better prioritise the client experience. This includes 67 per cent reporting improved client engagement, 89 per cent reporting they are spending more time with clients, and 56 per cent revealing they are more likely to seek formal client feedback, compared to only 23 per cent of firms without a managed accounts offering.

According to the speakers: “We’re also seeing the efficiency and scale of managed accounts transforming profits of advice businesses. This includes practice profitability, profit per business owner, and profit per client. On average, practice revenue is $2.1 million for firms using managed accounts, almost double that of firms that don’t use them. And revenue per client is 65 per cent higher at $5,321 for managed account firms than those businesses not using managed accounts.”

The findings in the research also confirms that the digital service experience for clients is changing, with smart technology being one of the biggest drivers of changing consumer behaviour over the last decade. This includes:

* 40 per cent of clients today prefer self-service over human contact;

* 50 per cent of clients believe their adviser should offer a digital solution; and

* 60 per cent of emerging HNWs would welcome the ability to access and manage their whole investment portfolio through a single digital experience.

The research showed the digital evolution has driven an expectation by investors for an increasingly personalised holistic service. This is supported by the fact that 55 per cent of clients feel the advice they receive is too generic, with 34 per cent indicating they would increase their investments if they receive a “hyper-personalised” experience.

“Managed accounts are ideally suited to meet this demand for digital services. Managed accounts provide a compelling and innovative offering that is scaleable and cost-effective. Clients are seeking platforms that offer them 24-hour access and a positive user experience.

“And with increased awareness of new investment opportunities amongst retail investors - like ESG, crypto, non-fungible tokens (NFTs), and ETFs - managed accounts are the ideal solution to access these investments.”

With a predicted $3 trillion in wealth set to transfer from one generation of Australians to the next over the coming decade, intergenerational wealth and emerging HNW investors are a definite advice opportunity for advisers.

Praemium believes the key to meeting the needs and advice expectations of the next generation of clients will be managed accounts.

“We are already seeing a rapid growth in new millionaires over the last year, with much of this wealth achieved through inheritance,” said the speakers. “However, whilst these HNW investors cite a number of unmet advice needs, they still have a preference for using an adviser.

“Praemium’s research indicated that this segment is particularly focused on a number of key investor needs, including: a holistic personalised wealth service; a focus on ESG investing; and a digital service offering.”

Moving forward, the research showed the five key success drivers for advice businesses will be:

1. To focus on the client experience, including more time spent with clients and greater detail on reviews;

2. To regularly seek client feedback;

3. To have a documented five-year strategic plan that is frequently reviewed;

4. To have a documented client value proposition; and

5. To regularly seek external business advice.

“We believe these will be the key elements that will drive success for advice businesses over the coming years. And at the centre of this success will be managed accounts driving business efficiency, profitability, and an enhanced client experience,” said the speakers.

Samantha Hawkins, Andrew Mathie, and Matt van Dijk are Regional Managers at Praemium. Each spoke on a session titled - ‘Profit facts and prosperity drivers’ - at the 2022 IMAP Advice in Action Conference in Melbourne, Sydney and Brisbane.