After a colossal few years for advisers, marked by a shrivelling workforce, compliance pressures and professional evolution, 2023 looks set to deliver even more change.
From technological transformation to cost-of-advice tension, advisers have given an inside look at some of the themes they think will dominate this year. Here’s what they’ve said.
1. Advisers’ investment expertise will be prized.
With inflation at around 7 per cent, year on year, 2022 was challenging on the investment front, with several asset classes delivering sub-optimal performance.
With that in mind, early results collected for our next Landscape Report show advisers’ preference for direct shares dropped 23 per cent. Annuities and bonds were also in retreat, while managed accounts use grew 20 per cent.
Looking further ahead, analysts at J.P. Morgan say the next 12 months are likely to bring a few more bumps before asset prices recover.
“Consumers with a cushion of savings from lockdown have mostly exhausted their post-COVID excess cash and for the first time are getting hit by a broadening negative wealth effect from all assets simultaneously – whether that’s housing, bonds, equities, alternative/private investments or crypto,” J.P. Morgan’s global head of equity macro research, Dubravko Lakos-Bujas, said.
“This proverbial snowball should continue to gain momentum next year as consumers and corporates more meaningfully cut discretionary spending and capital investments.”
Given all of that, advisers’ expertise is expected to be even more sought after.
2. Profitable practices will get clever with their technology use.
As practices continue to be crunched by costs, more are looking at how they can incorporate technology into their offering.
Increasingly, we’re seeing more profitable practices make better use of technology to manage clients, which includes workflows, automation and outsourcing.
We expect to see ChatGPT – the emergent software that mimics human speech – to play a bigger role; however, we also note some advisers are still dubious about how to best integrate AI while maintaining their more traditional service values.
3. Fees will continue to surge.
Most practices plan to lift their fees in 2023, an Adviser Ratings survey found. In fact, a whopping 93 per cent of practices told us a fee rise is on the cards.
Few would be surprised to hear this; in addition to general inflation, practices have faced rising costs for compliance, education and PI insurance, as well as continued high demand.
In the three years to the end of 2021, the median fee jumped 40 per cent to more than $3500.
Our next Landscape Report will reveal how high fees climbed in 2022.
4. Advice will continue to be unaffordable for many Australians.
While fee rises are a necessity for many businesses, advice affordability continues to be a tension point.
The matter has been raised consistently by Treasury, the Quality of Advice (QoA) Review, industry groups, super funds and practices themselves.
While we expect some measures will be taken this year to bring down the cost of advice, as a result of the QoA Review, the effects will likely take time and prices aren’t expected to drop swiftly.
5. Regulation will be reviewed.
At the end of last year, QoA Review lead Michelle Levy handed the review’s report to the federal government. It’s now up to Treasury to decide which of the recommendations it will implement.
While question marks still hang over what will be tweaked, removed or stay the same, several recommendations have the potential to influence fees and costs, as well as advisers’ day-to-day operations.
Closing soon: Adviser Ratings is collecting survey responses for the next edition of our Landscape Report until next Tuesday, January 31st. We use these insights to bring you valuable information about how the adviser market is evolving, how practices are adapting and what the future holds for practices like yours. To participate and go into the draw for one of our four major prizes (collectively worth $35,000), click here.
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