Smaller practices feeling unprepared for upcoming industry changes: Report

A new report from Zenith Investment Partners has revealed that eight in 10 (83 per cent) advisers expect the growing pool of retirees and pre-retirees needing decumulation advice in Australia will have a positive impact on their advice practice, with 70 per cent feeling prepared to handle the incoming demand.

This was followed by the intergenerational wealth transfer and the need to offer advice at scale, which 72 per cent and 67 per cent, respectively, believe will have a positive impact.

Despite this, only around half of advisers feel prepared for the impact the intergenerational wealth transfer (56 per cent) and scaling advice (42 per cent) will have on their practice.

On a less positive note, 49 per cent of practices believe compliance and regulatory changes will have a negative impact on their practice in the next two to five years, while less than a third (30 per cent) hold out hope for a positive result.

Taking a closer look, the report found that larger firms – those with more than 300 clients – feel more prepared across the board when it comes to managing the impact of key industry trends in the coming year.

This disparity is most apparent when it comes to offering scaled advice, with half (52 per cent) of the large firms reporting feeling prepared, compared with little more than a third of boutique (37 per cent) and moderate-sized (36 per cent) firms.

However, with the majority of practices set on growing over the next two to five years (84 per cent), the report suggested that external partnerships are likely to act as key enablers for growth in the near future.

As such, 58 per cent of financial advice practices are now using managed accounts, the overwhelming majority of which (92 per cent) have said they have been able to save time on portfolio administration, rebalancing and reporting by utilising these solutions.

Furthermore, the report found that around two-thirds of advisers believe managed account providers will have a significant impact on their ability to scale advice (67 per cent), keep up with compliance and regulatory changes (65 per cent) and manage the incoming wave of retirees (63 per cent).

“The consistent 67 per cent rating for both the perceived impact of scaling advice and the potential impact of managed account providers suggests that practices see external solutions as critical enablers of scalable growth, emphasising the importance of provider partnerships,” the report said.

Meanwhile, boutique (65 per cent) and conservative growth (53 per cent) practices reported slightly lower impact expectations for managed account providers in scaling advice compared with larger firms (72 per cent), which Zenith said may suggest the presence of “more significant barriers to adoption” or a potential lack of the necessary resources to fully leverage these solutions.