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Australian Advisors and their Clients

  • January 2016
  • -
  • Verdict Financial
  • -
  • 46 pages

Summary
In recent years, the financial advisor market in Australia has been mainly focused on adapting to new regulations, with customer retention and acquisition suffering as a result. With key elements of the FOFA regulations largely bedded in among advisors, they can now focus again on growing the customer base. However sustainable growth in the client base will only be achieved by effective targeting of the client base based on customers' financial goals and circumstances.

Key Findings
- Independent financial advisors (IFAs) still rank as the leading outlet for Australians receiving advice with a 34% share of the market.

- The growing popularity of self-managed superannuation funds has supported the renewed growth in the number of Australians with ongoing financial advice.

- Growing affluence and an aging population have supported the growth of advisors' client base.

- Older affluent men remain the largest demographic among advisors' client bases, with all other demographics having lower penetration despite a greater willingness to seek financial advice.

Synopsis
Verdict Financial's “Australian Advisors and their Clients” examines the current advisor client, identifying key demographics and behaviors that can be used to more effectively target and service these Australians, improving customer satisfaction and client retention. Prospective clients are also analyzed sizing the potential market and the strategies necessary to grow the customer base. Analyzes the financial goals and life events that lead Australians to consult with financial advisors

- Identifies key customer demographics within the financial advisor client base

- Examines the prospecting strategies of the financial advisor client base

- Explores the impact self-directing has had on the advisor base and how advisors can reach out to these investors

- Analyzes the potential for greater use of digital channels in the advisory process

Reasons To Buy
- Understand the key demographics in the Australian client base

- Understand the looming threats to the IFA channel

- Learn how successful IFAs are targeting clients based on life stages rather than product pushing

- Gain an insight into the impact of digital channels on the advisor client base

Table Of Contents

Australian Advisors and their Clients
Table of Contents
EXECUTIVE SUMMARY
The Australian advised client base is growing once again after sharp declines
Key findings
Critical success factors
THE INVESTMENT ADVICE MARKET IN CONTEXT
The financial advisor client base has grown to 2.5 million Australians
Growth in client numbers has returned following a post-FOFA dip
A range of distribution channels have helped draw in new investors
Shifting demographics, growing affluence, and greater use of SMSFs will drive client growth
The growing number and value of SMSFs has kept the need for advice up
The affluent population is growing, meaning more clients and more assets under management per client
The aging of Australia means more consumers are in the retirement and pre-retirement phases
Barriers to growth threaten to fundamentally change the advice market
Self-directed investment platforms have never been more accessible or ubiquitous
Robo-advisors are growing as a competing channel for investment advice
Cost to serve has gone up as costly regulations have come into force
THE ADVISOR CLIENT BASE IN FOCUS
Identifying the IFA client in Australia
Older clients are the core of the IFA market
The advised client base is skewed towards men, but women have a greater affinity for advice
Mass affluent investors are a key target demographic
Complex finances typically incline consumers to opt for advice, with the self-employed the leading market
Understanding the drivers for seeking financial advice
Big financial decisions prompt Australians to seek professional financial advice
Investment managers have to compete with property as an investment choice
Long-term investments are heavily weighted towards retirement goals
Clients are looking to advisors to improve their strategy and offer a better range of investments
Life event targeting is critical for customer outreach
HOW TO GROW THE ADVISOR CLIENT BASE
Self-directed investors are a fertile pool for advisors to convert
There is considerable scope to add new clients - provided advisors can reach out effectively
Understanding why some retail investors choose to self-direct
Technology has made investors content to self-direct, along with the perceived cost of financial advice
Advisors need to step into the digital space and offer a compelling proposition
Cheap and cheerful options such as scaled advice need to be available for marginal clients
Prospecting needs to embrace the digital
The same clients are still being acquired in the same they always have been
Most advisors do not offer digital channels to their clients
Client referrals are the primary new client pipeline, and advisors of all sizes can use social media to leverage this further
Most clients are the result of referrals, making word of mouth marketing crucial
APPENDIX
Abbreviations and acronyms
Definitions
Emerging affluent
IFA/financial advisor
Mass affluent
Methodology
Estimates of the number of Australians receiving financial advice
Verdict Financial's 2015 IFA Survey
Verdict Financial's 2015 Global Consumer Survey
Bibliography
Further reading
About Verdict Financial
Disclaimer

List of Tables
Table 1: Number of Australian investors by type of advice (millions), 2008-15
Table 2: SMSF population and assets, June 2010-15
Table 3: Age distribution of the Australian financial advice market, 2014

List of Figures
Figure 1: FOFA reforms hit the non-investor segment, leaving investors as the core of the finance advice market
Figure 2: Australians are seeking advice from IFAs first and foremost
Figure 3: Australians with wealth to invest are forecast to grow by close to 10% per year
Figure 4: Aging Australia will push more of the population into the IFA market
Figure 5: MyWealth makes self-directing simpler and less confusing for retail investors
Figure 6: The Australian robo-advise market is heating up, with new brands emerging in 2014 and 2015
Figure 7: BT's register helps connect clients to advisors and restore trust in the industry
Figure 8: The oldest Australians form the core of the advisory market
Figure 9: Men are the bulk of the IFA market, but only because they are more likely to hold wealth
Figure 10: The IFA market is effectively a mass affluent-focused industry
Figure 11: The self-employed are most likely to take advice
Figure 12: For the widowed a lifetime of financial decisions need evaluating all at once, something many need help with
Figure 13: Retirement is the main prompt for seeking advice
Figure 14: Property is the dominant investment choice in Australian portfolios
Figure 15: Retirement solutions are the main goals of all long-term investors
Figure 16: Forming an investment strategy is the main reason to opt for a professional
Figure 17: CBA and Yellow Brick Road want to help with retirement, life insurance, and debt consolidation
Figure 18: Financial planning is about dealing with not just assets but liabilities too
Figure 19: The likely potential new client market for advisors is estimated to be in the region of 200,000 to 500,000 Australian investors
Figure 20: A "go it alone" attitude and cost are the main factors preventing investors from using advisors
Figure 21: Unadvised investors are attracted to digital channels
Figure 22: More of the onboarding process needs to be moved online, similar to DIY options
Figure 23: Most unadvised investors are looking for low-cost expertise when it comes to financial services partners
Figure 24: IFAs need help effectively communicating the value they offer clients
Figure 25: Customer acquisition strategies are dominated by non-digital channels
Figure 26: Digital channels remain an untapped source of engagement for many advisors
Figure 27: Social media is a viable channel for prospecting among both the advised and unadvised
Figure 28: Advisors have had success leveraging the current client base

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