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.

Scope

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

Key Players

Commonwealth Bank
NAB
Westpac
MLC
BT Financial
Yellow Brick Road
Macquarie Bank
Stockspot
Acorns
On Your Own Two Feet Advisory
National Financial Advisors

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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