As we wave goodbye to the 2022-23 financial year, many practices will be doing a stocktake on the past 12 months and setting business goals for the year ahead. As part of the process, we expect they’ll also be checking in on the industry outlook for challenges and opportunities on the horizon.
Earlier in 2023, we used our data insights to produce a list of what we expected would be the major themes for advisers. Given we’re at the end of June, we thought it would be worth checking in on how they’ve manifested – and what we may see in the next few months.
1. Clients will highly value advisers’ investment expertise.
There are plenty of things happening in markets that have clients spooked, from sticky inflation to ongoing recession fears. As a result, we tipped clients would increasingly cede to advisers on the investment front.
We’ve seen this trend play out, particularly among pre-retirees and retirees. Data from our 2023 Adviser Ratings Landscape Report showed a year-on-year jump in the proportion of people outsourcing their investments, instead of using online brokers or ETFs. More than 45 per cent of clients aged 65 or over now turn to advisers or stockbrokers, compared with 29 per cent a year earlier.
2. Practices will change how they use technology.
In 2023, we’ve seen a wealth of new tools on the market that we expect will change the way advisers run their businesses. ChatGPT is one example of an innovation that could help practices become more efficient day to day.
While we know some advisers have embraced these innovations, we expect much more activity in the latter part of the year on this front.
3. Fees will shoot up.
As practices awaited change on the regulatory front, we didn’t see the sharp jump in fees in 2023 we’ve witnessed previously. In the past year, the median fee has risen 4 per cent. However, that doesn’t mean we won’t see further increases. At the start of the year, 93 per cent of advisers said a fee rise was on the cards and with practices’ costs skyrocketing, it’s likely to push the median fee closer to $4000.
4. The affordability gap will persist.
As practices face higher costs and lift their fees, this unfortunately pushes advice out of reach of many Australians who want or need it. We tipped this trend would continue and accelerate without regulatory intervention.
Our Landscape data shows, however, that the proportion of consumers with the capacity to pay only a few hundred dollars for advice has remained stable, year-on-year. And pleasingly, almost one-in-five consumers now say they would and could pay what the typical adviser charges – somewhere between $2500 and $5000.
5. Regulation will change.
When the Quality of Advice Review recommendations were released, we said they had the potential to affect many aspects of how practices function, from daily operations to fees. We’re now likely to see that play out. Earlier this month, Assistant Treasurer Stephen Jones adopted most of the review’s suggestions and said he would implement them in stages. We look forward to analysing how these changes affect advisers at the coalface.
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