How Efficient Paraplanning Services Drive Growth In Financial Advice Practices
The recently released report by Iress and Deloitte, “Advice 2030: The Big Shift,” sheds light on a substantial profit margin gap in the financial advice sector. It highlights that “high-performing” advice practices boast a 40% profit margin, compared to just 25% for the average practice. This translates to a staggering $550,000 difference in annual profit.
Outsourcing your paraplanning can play a big role in elevating your advisory to become a “high-performing” one.
The report also indicates that Australia’s financial advice industry is poised for significant growth, with an expected $2 billion increase in revenue by 2030. This growth will be driven by 486,000 new customers seeking advice as they approach retirement. However, achieving this growth requires advice practices to enhance their operational efficiencies and expand their client base substantially.
As Kelli Willmer, Iress’ Executive General Manager for Wealth, said in an interview with Professional Planner, it is of critical importance that advisories leverage technology and business efficiencies to enable more Australians to access financial advice. “It’s really important that licensees and advisers harness every avenue they can to enable more Australians to be able to get advice,” says Willmer.
The Role of Paraplanning Services
One critical area where advice practices can significantly improve efficiency is through the use of outsourced paraplanning services. For instance, a financial planning firm that engaged Mutual Plans’ paraplanning services saw a remarkable reduction in their Statement of Advice (SOA), product research, and strategy formulation turnaround time—from eight weeks to less.
In other words, Mutual Plans has become a key source of operational efficiencies, which directly translates to better margins.
Impact on Business Growth
Advisories often engage with paraplanning services as a way of helping them to meet their regulatory requirements. By streamlining processes and reducing the administrative burden on advisers, these services free up valuable time that can be better spent on client engagement and business development. This leads to improved client satisfaction, increased referrals, and ultimately, higher profitability.
It’s not an insignificant benefit. The client of Mutual Plans mentioned above was able to surpass yearly objectives within the first six months of the year. This rapid achievement highlights the potential for significant growth when advice practices adopt efficient, technology-driven solutions.
Addressing the Adviser Shortage
Helping advisers find more time to service customers is important for another reason: the Deloitte and Iress report also highlights a looming challenge: the potential departure of a significant number of advisers from the industry. With 21 per cent of surveyed advisers likely to switch careers or retire in the next 12 months, and 74 per cent of those under age 40, the industry faces a potential talent shortage, and this means that the remaining advisers will need to service more customers. It’s potentially good for their business, but only if they’re able to sustainably increase their scope.
This is why, in the interview with Professional Planner, Willmer suggests that technology suppliers, licensees, and the broader ecosystem need to offer more support to younger advisers. Reducing the compliance burden and the cost of serving advice can help retain talent and make the profession more attractive to new entrants.
Paraplanning fits in here too. It’s a repetitive task that many advisors would rather not do, so by outsourcing it you do support better morale and retention among advisers within your practice.
Adapting to Megatrends
Finally, the report also warns that advice practices must proactively respond to seven megatrends to stay competitive. These include the rising demand for retirement advice, the need for protection against environmental volatility, challenges in home ownership, the digital delivery of services, intergenerational wealth transition, increased interest in ESG, and the rise of digital assets like cryptocurrencies.
By leveraging advanced paraplanning services, advice practices can better position themselves to address these trends. Efficient back-office operations enable advisers to focus on developing innovative solutions and strategies to meet evolving client needs. It also frees up more time for advisers to undertake the kind of ongoing training and professional development that they’ll need to stay on top of these trends, and any further ones that should arise in the future.
There are significant opportunities in the market, but only for advisories that take the time to be strategic about their business and invest in being able support their customers efficiently. Outsourced paraplanning services should play a crucial role in this transformation, enabling practices to streamline operations, reduce turnaround times, and ultimately, drive profitability.