Advisers servicing more one-off clients in 2024

Data from Adviser Ratings reveals advisers’ client distribution has shifted slightly towards one-off clients since 2020, now making up 25 per cent of all advice clients in 2024, up from 20 per cent.

The firm suggested that advisers need to recognise that clients receiving one-off advice services have the potential to become ongoing clients, if only they could remove some of the barriers hindering them, namely the cost.

“To facilitate this transition, we need to address the barriers that currently prevent one-off clients from engaging in ongoing financial advice. Leveraging technology to reduce costs and, consequently, fees, can lower the entry barriers for these clients,” Adviser Ratings said.

“By making financial advice more accessible and demonstrating its value, we can encourage them to see the benefits and eventually commit to recurring advisory relationships.”

The data revealed that the average fee for a once-off advice client is $1,700, and while advised clients are willing to pay slightly more than this ($1,791), unadvised clients are aiming drastically lower, only willing to pay $651 for the service.

According to Adviser Ratings’ 2024 Australian Advice Landscape Report, the median advice fees have risen by 58 per cent over the past five years, from $2,510 in 2018 to $3,960 in 2023, despite efforts to reduce costs through increased efficiency, with expectations that this will continue throughout 2024.

The report noted that this has largely been due to inflation, rising interest rates and regulatory changes that have pushed up the cost of providing advice, which have inevitably been passed on to clients.

Furthermore, the report found that only 6 per cent were willing to spend $2,500 or more to access advice, while 67 per cent of consumers were willing to spend no more than $500 on financial advice, posing a significant issue as only 6 per cent of advisers offer fees below $1,500 for new clients.

Despite many being unwilling or unable to afford financial advice, the total amount paid in fees to advisers in a year is estimated to be approximately $7.4 billion, which Adviser Ratings said reflects both the high demand for service and the “significant fees charged by advisers”.

Given that one in four unadvised consumers are considering seeking financial advice, approximately 2.3 million Australians, the firm said this “untapped market represents a potential for increasing the overall investment in financial advice”.

Adviser Ratings said: “Addressing this issue is crucial to attract these clients into the advisory world. Leveraging technology to reduce costs can make financial advice more accessible and appealing to a broader audience.”

Speaking in an MLC Life Insurance webinar earlier this month, partner education manager Marshall Ross explained that consistent client engagement and process efficiency play a significant role in transitioning one-off clients into ongoing advice relationships.

“There’s a long-term value to engaging these clients, where those needs might pop up, they’re now familiar with us because they’ve had that initial engagement, we’ve demonstrated competency, service, support to them over these initial few years. As a result, they’re now wanting to engage with them,” Ross said.

Ross explained that when advisers are looking to transition clients into an ongoing advice relationship, scale can play an important role in making it easier.

“So we may be bringing some clients in who are in that risk advice only position, but over time, we can transition them, through engagement, to being that ongoing advice client, and to do that we need to do it in a time-effective manner,” he said.

“This is where scale becomes really important, and it’s something that has become really quite visible in the data when we look at things like profitability. As scale increases, so revenue coming in the door increases, so generally does profit margins.”