As we move on from the outcome of the 2025 federal election and associations jockeying for position over DBFO legislative drafts, early analysis from the upcoming 2025 Australian Financial Advice Landscape Report reveals a promising trend. Financial advice practices in Australia are not just surviving, but thriving, experiencing a surge in profitability. The data shows that 84% of practices increased their revenue in 2024. More impressively, 41% achieved revenue growth exceeding 15%, up from 35% the previous year. This success story should inspire us all. So, with most practices improving their profitability, what are the factors that are driving this change?
The Profitability Picture: A Clear Correlation with Scale
The data paints a compelling picture: 51% of practices now achieve 20% or more profit margins, up from 47% in 2024. However, a closer look reveals that practice size remains the dominant factor in determining profitability. Solo practices average $606,660 in revenue, while practices with five or more advisers average a substantial $5,142,857.
The correlation between revenue and profitability is particularly stark. Among practices generating less than $250,000 annually, 58% report no profit whatsoever. In contrast, practices with revenue between $1.5 million and $2.5 million show remarkable financial health, with 46% achieving profit margins of 30% or more.
These figures aren't just statistics; they demonstrate that financial advice practices are becoming experts in helping clients meet their goals and objectives, and they demonstrate an ability to run a successful small business. It is no wonder that private equity is flooding into the profession.
The Building Blocks of High-Margin Practices
What exactly are these high-performing practices doing differently? Several key factors are emerging when analysing the 2025 Landscape Report data:
1. Strategic Growth Focus
The most successful practices have shifted away from reactive growth models and now focus on targeted client acquisition. While 85% of practices actively pursue growth, there's a clear preference for strategic approaches. 57% of these practices target specific client types, rather than accepting any client who walks through the door. This strategic approach is even more pronounced in larger practices, with 80% of firms with five or more advisers pursuing targeted client acquisition compared to 54% of solo practitioners. By focusing on clients with similar needs and value profiles, these practices are enhancing service quality and operational efficiency.
This strategic approach is even more pronounced in larger practices, with 80% of firms with five or more advisers pursuing targeted client acquisition compared to 54% of solo practitioners. These practices enhance service quality and operational efficiency by focusing on clients with similar needs and value profiles.
2. Technology Integration and AI Adoption
Maybe unsurprisingly, there has been a dramatic shift in technology utilisation, with AI emerging as a transformative force. An impressive 74% of practices are now either using (59%) or planning to use (15%) AI in their operations - a significant increase from 2024.
The applications of AI are reshaping core practice functions, with practices leveraging it for file notes and meeting documentation, improving client engagement, and producing statements of advice or records of advice. This technological enhancement enables practices to manage larger client loads without proportionally increasing staff numbers.
This efficiency gain is evident in staffing ratios, with the average practice now employing fewer administrative support staff, down a further 0.11 customer service staff per adviser since 2024, and a 20% reduction in internal paraplanning resources. This adaptability and resilience of the industry should reassure us all about its future.
3. Sophisticated Investment Approaches
Top-performing practices increasingly leverage external expertise while focusing internal resources on client relationships. The report shows 16% more practices have increased their formal investment philosophy, with a 22% increase in the active use of third-party expert researchers and investment consultants.
This strategic outsourcing extends to product selection, with ETFs remaining the investment vehicle of choice. 45% of practices plan to increase their ETF usage in 2025, while 31% intend to boost their allocation to off-the-shelf managed account solutions.
4. Formalised Business Planning
As noted earlier, practice owners are demonstrating increased professionalism in their approach to business management. In 2025, over 3/4s of practices reported having a business plan in place, with a 1/3rd increase in business plans being up to date—a significant improvement from 2024. This commitment to structured planning is not just a formality, but a strategic move that provides a framework for sustainable growth and profitability.
Building the Profit Engine: Practical Strategies
For practices looking to join the ranks of these profit powerhouses, the 2025 Landscape Report will highlight several key strategies:
Achieve Scale Through Multiple Paths
While the data demonstrates that scale matters, achieving it has multiple paths. For some practices, growing adviser numbers organically offers the most direct route. For others, particularly solo practitioners, strategic partnerships present a viable alternative, with solo practitioner practices showing higher profitability, demonstrating an expansion of their service range primarily through partnerships. As highlighted above, investment management outsourcing is one example of this.
Embrace Digital Transformation
The technological revolution in financial advice creates new efficiency and client engagement opportunities. Beyond AI adoption, practices are reimagining their technology infrastructure, but with a recognition that they are financial advice practices, not IT experts, leading to an increased recognition of the importance of outsourcing IT management to specialist providers.
Platform selection has become increasingly strategic, with providers offering enhanced adviser support and client experience, gaining market share. Similarly, in the advice software space, solutions that excel in adviser support and value for money, such as ProductRex, PlatformPlus, and PlutoSoft, are gaining traction, highlighting the growing importance of cost-effective technology in practice management.
Specialising in Client Services
The most successful practices are becoming more specialised in their approach to client segments. They can develop deeper expertise, streamline operations, and deliver more targeted value by focusing on specific client demographics or needs.
This specialisation is reflected in practice focus areas, with retirement and superannuation, life insurance, and investment management emerging as the top three areas of expertise practitioners actively communicate to clients they specialise in. This targeted approach allows practices to build a reputation and referral networks in specific niches while maintaining operational efficiency.
Optimise Service Models
Client engagement strategies have stabilised around models that balance service quality with operational efficiency. Most advisers (55%) maintain annual formal client meetings supplemented by ad-hoc contact as needed; however, biannual, quarterly and monthly thematic service models are also emerging for different client bases.
This service model optimisation extends to client acquisition, with existing clients remaining the most valuable source of new business (increasing by 15% since 2023). By focusing on delivering exceptional value to current clients, practices can leverage these relationships to drive organic growth through referrals.
The Economics of Excellence
The financial results speak for themselves. Practices achieving 40% or higher profit margins have fundamentally transformed how they approach their business. They've moved beyond viewing themselves as advisers who happen to run a business to seeing themselves as business operators who deliver financial advice.
This shift in mindset is reflected in their revenue growth, with 41% of practices achieving increases exceeding 15% in the past year. Even more impressively, only 3% of practices experienced revenue decreases, indicating strong business performance across the sector.
The correlation between practice size and profitability is unmistakable, with solo practices averaging $606,660 in revenue while practices with five or more advisers average $5,142,857. However, the data also reveals that profitable practices exist across all revenue bands, suggesting that effective business management can overcome some of the challenges smaller firms face.
The Future of Practice Profitability
As the financial advice profession evolves, the gap between high and low-performing practices will likely widen. Those that embrace strategic growth, technology integration, and sophisticated business management will increasingly pull ahead of those that fail to adapt.
However, the strong client demand for advice, evidenced by the robust revenue growth across most practice segments, provides a solid foundation for future industry growth. With 85% of current advisers intending to remain in the profession, there's a renewed sense of stability and optimism about the future.
The path to profitability is clear: strategic focus, technological innovation, and professional business management are the hallmarks of today's most successful practices. By adopting these approaches, more firms can join the ranks of Australia's financial advice profit powerhouses.
Article by:
Comments0