In the early days of COVID-19, advisers saw their ‘one-off’ client list jump, as Australians sought help with the complexity of several financial support packages. But two years later, as we traverse a new COVID-normal period, the one-off advice trend has not abated.
Before 2020, advisers typically had 15 one-off clients a year, for 85 recurring clients – 15 per cent. By 2021, almost one-in-four clients had a more temporary relationship with their adviser. At the time, we attributed this partly to Record of Advice requirements for early access to super, along with adviser support needed for other government packages.
Figure 1 – Pandemic impact: one-off and recurring advice in 2020 and 2021
Source: Adviser Ratings
However, as we begin a new year and continue in the post-lockdown phase of the pandemic, episodic advice as a proportion of the typical client book has fallen just 1 per cent. There are a couple of explanations.
What’s happened: Rebalancing
While the COVID-19 support packages partly explain the initial spike in one-off advice, there are supply-side reasons for the continuation of the trend. The rationalisation of client books has allowed advisers to continue to take on clients in a more limited capacity. In some cases, practices are discarding lower-value clients and, in turn, finding new capacity for one-off clients, whom they hope to turn into ongoing business. The shedding of unprofitable clients has been a multi-year trend, which is likely to continue as long as advisers and practices face their current cost and regulatory burden.
At the same time, advisers are taking on a higher client load generally, with thousands of their industry counterparts exiting. In 2022, the average number of clients per adviser surged, following years of decline. Again, this is propelling practices to cycle through – or orphan – clients who don’t match their goals. In some cases, these clients can use their super fund’s advice; in other cases, they end up joining the growing army of Australians with unmet financial advice needs.
While advisers acknowledge there’s a significant need for dedicated scoped advice offerings, few offer the model exclusively. The same compliance obligations and the opportunity cost of serving more recurring clients mean one-off clients often doesn’t fit with practices’ broader growth objectives.
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Comments2
"I see a lot of long-term clients now who have become 'ad hoc' clients, along with new clients for one-off advice. An ongoing annual fee doesn't fit everybody and often they'll be return clients, but are happy to pay for an SOA only when required. It works for us, but again, isn't our core business."
Amanda Cassar 09:52 on 19 Jan 23
"Probably also linked to the fact that an ongoing client paying less than $3k to $5k per annum is a loss leader and therefore you are better off seeing them as a one off client. It shouldn't cost this much for a simple client but that is what ASIC wants so it is what they get."
Scott 17:24 on 18 Jan 23