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The latest Rubik Financial/Business Health Future Ready VI report* shows an overall improvement over the past two years in the “health” of Australian advisory practices, but there are still some major concerns that need to be addressed.

The Rubik Financial/Business Health Future Ready VI report provides insight into key areas that determine success for financial planners, including profitability, client management, staff levels and turnover, and use of technology.

According to the report, key areas that have improved noticeably since 2012 include:

  • Practice revenue (up 29%)
  • Funds under management (up 32%)
  • Practice profitability (up 15%)

However key issues that need to be addressed remain. They include:

  • Key person risk – almost two-thirds (62%) of practices have a single principal in charge, and 43% believe their business could not operate without them. Yet 48% don’t have any key person protection in place?
  • Client acquisition – individual client numbers have remained relatively static since the last Report in late 2012, with the average per practice now standing at 863. And while 81% of practices are employing a segmentation strategy, the Report concludes that just 24% are implementing it effectively
  • Client communication – regular communication with clients, even ‘A’ list clients, is still sporadic in most cases, while only 30% of practices have sought structured feedback from clients
  • Marketing and positioning – 20% of practices still don’t have a website, and only 54% have a social media presence.  Practices report an average marketing spend of less than 1.5% of total revenue.

Terry Bell, partner at Business Health, said that on the whole, financial planning practices have taken steps to improve the way they operate, and have seen the financial benefits of this.

“Nonetheless, some of this improvement can be attributed to the ‘rising tide’ of markets, and practices shouldn’t be tempted to rest on their laurels.

“Issues such as dependency on the principal, and client acquisition and communication, need to be resolved, and practices that don’t get these areas right will find it harder and harder to keep their heads above water.

“For instance, the report shows that practices that seek formal client feedback are, on average, over twice as profitable than those that don’t.

“Likewise, those practices that contact their ‘A’ clients more than 10 times a year are significantly more profitable than those that contact their clients less than five times a year.

“Regular client communication, including maintaining a two-way information flow, is undoubtedly part of the financial success of a practice,” Mr Bell said.

Technology and tailored software provide opportunity for profit

Iain Dunstan, chief executive officer at Rubik Financial, said that financial planning businesses using tailored client management systems and automated workflow management systems are also shown to be more successful and profitable than those that don’t.

“Surprisingly, there are still a small number of practices using paper-based files or spread sheets to maintain client information.  While they may feel that investing in software specifically designed for the industry is expensive, it is clearly a false saving – the report shows that practices that use an automated customer relationship management (CRM) system have experienced a 1179% increase in profit compared to those who are still relying on paper based or Excel spreadsheets.

“Making better use of technology is an area of opportunity for many practices, and can assist them in delivering targeted and scaled advice that meets their clients’ needs,” Mr Dunstan said.

He added that effective use of technology remains the best way to proactively and profitably communicate with client bases, especially larger ones.

“Just over half (51%) of practices reported using personalised mail merges or broadcast emails to communicate with their clients.

“Significantly, 69% of practices state they can set up and track workflows such as making appointments, plan preparation, document signing and business lodgement using an automated workflow management system. However, only 28% reported that their workflow management system is fully integrated, so that their modelling, ongoing management and review processes all ‘talk’ to each other.

“Other surveys undertaken by Business Health show that clients would appreciate more contact from their adviser (assuming its customised and relevant to the client’s specific situation), so there is scope for more practices to take advantage of technology to meet this client need,” Mr Dunstan said.

Other notable findings from Future Ready VI include:

  • Over half (55%) of practices are generating at least half their income from fees, compared to 43% two years ago
  • While 86% of practices have a regular and documented review process for clients, only 28% provide a differentiated process for the ‘A’ class clients
  • A total of 39% of practices have a clearly documented succession plan – while a significant improvement over 2012 results (29%), there is still a long way to go for most Australian principals who, with an average age of around 58 years, can’t really afford the ‘luxury’ of delaying any longer
  • On average, each practice has 5.9 permanent people working in the business, up from 4.6 people two years ago.  Interestingly, 41% intend to increase the number of support staff they employ over the next 12 monthsAlmost half (42%) of practices have a documented, three-to-five year strategic plan for their business – the highest level recorded since inception of the survey, but still less than ideal.

“This represents a significant opportunity for practices – those that have invested time and effort into building an effective strategic plan are generating, on average, 194% more profit per owner than those with no plan,” Mr Bell said.

“Importantly, those practices that are able to effectively utilise the benefits available through the latest client management programs generate a far higher level of profit per principal, on average, than those who are still managing their business on dated technology platforms.

“The overall conclusion that can be drawn from the report is that the more principals invest in their business – be it time or other resources – the more they will ultimately benefit financially.”

The Future Ready report provides a comprehensive insight into the health of Australian financial planning practices and their preparedness for the future, based on data provided through the Business HealthCheck diagnostic tool.  The latest in the series, Future Ready VI, is based on information from 328 firms that have taken the HealthCheck between December 2012 and December 2014.


For more information please contact:

Iain Dunstan
Phone: 02 8026 4144

Terry Bell
Phone: 02 9518 6966

About Rubik Financial Limited

Rubik Financial provides software for the Financial Services sector, including financial planning software, mortgage software, and a broad range of banking software. Rubik is ISO9001, ISO27001 and NoC02 certified.

About Business Health

Business Health is an independent organisation specializing in advice and solutions to the financial services industry. Since its establishment in 2000, Business Health has evolved as one of Australia’s leading practice management groups. In addition to its Australian clientele, Business Health has clients in the United States, South Africa, Hong Kong, UK and New Zealand.