To wrap up the year, Angus Woods and Ben Marshan chatted about their reflections on the year and the potential opportunities in 2025. They delved into the significant shifts and trends that have defined 2024 and offer a glimpse of the bright future for you, your business, the profession and the broader industry in 2025.
A Year of Seismic Shifts: The Big Players Move
2024 has been a year of significant activity, marked by large-scale deals that signal a reshaping of the financial advice landscape. Here's what we saw:
- The AZ NGA, AMP and Entireti deal in 2024 was a significant milestone that signalled a shift towards consolidation. It also highlighted the increasing value private equity firms see in the financial advice profession. This trend is expected to continue into 2025, with more private equity firms seeking investment in financial advice practices and practices themselves exploring M&A activity. There's a growing recognition of the importance of investing in the sophistication of advice practice management and professional service delivery.
- The recent announcement of Insignia's potential acquisition by private equity firm Bain Capital is a strong vote of confidence in the industry. This deal not only promises increased value for shareholders but also showcases the appeal of a compelling platform that challenges incumbent players. The combination of Bain Capital's investment and the further investment and consolidation of the Expand platform could reshape the platform landscape, leading to a migration of advisers to the Expand platform.
The Forces at Play: Technology, Regulation, and Client Needs
Despite the promise of and waiting for significant regulatory change off the back of the Quality of Advice Review/Delivering Better Financial Outcomes legislative package, this year has been far from static, with several underlying factors driving change:
The Rise of Technology and AI: Integrating technology and AI is no longer a futuristic concept but a tangible force reshaping how practices operate. The focus is now on harnessing tech to increase efficiency and profitability, and few practices are waiting to determine which AI will win. From automating client communication to streamlining administrative tasks and even generating AI-powered summaries of key recommendations, practices are exploring various AI solutions to improve their ability to serve their clients better.
A Move Beyond Paper: The Quality of Advice Review (QAR) announcements are finally giving advisers the freedom to look beyond 120-page SOAs and adopt more effective communication strategies with clients. Options being explored range from fully digital advice documents to presentation tools forming the basis of the advice document to video advice (why share another document if you've already told your client what the recommendation is?). Practices have the opportunity as we wait for the new laws to be finalised to think about advice delivery as if they are in 2025 and design their processes and systems from the ground up - rather than trying to retrofit them with 25-year-old "word processor" technology.
Cost of Living Pressures: 2024 has seen both cost-of-living pressures pushing Australians to seek financial advice while simultaneously decreasing their willingness to pay current rates. As a result, advisers are also re-evaluating their fee structures, creating opportunities for innovative, scaled models. The introduction of new advice service types in 2025 and beyond will provide opportunities for advice practices and financial products to solve the cost versus willingness to pay dilemma for consumers.
Evolving Client Expectations There has been increased demand and interest in the complexities of retirement planning and the transfer of wealth, including estate planning and education around family governance. Advisers are also increasingly asked about socially responsible and sustainable investment options.
A Look Towards 2025: Predictions and Opportunities
While it is helpful to reflect on the year that has been (and where advice practices can make improvements), it's more important to consider what opportunities are coming. Given the deep insights generated from the annual Landscape report and frequent discussions with industry leaders, here's what we anticipate seeing in the coming year:
DBFO2 and Regulatory Changes: We will likely see the second tranche of Delivering Better Financial Outcomes (DBFO) reforms pushed through Parliament quickly in early 2025, potentially before the next federal election. While this will take time for practices to digest and implement, the regulatory changes will likely foster more flexibility and profitability in advice delivery.
Continued M&A Activity: The trend of consolidation in the industry will continue. With the recent activity with private equity and larger players, further M&A activity is anticipated, both in the financial advice practice space and in the platform and technology space.
The Ascent of the Modern Adviser: There's a clear trend towards independence (with privately owned licenses) as advisers seek more control and flexibility over their operations. The most successful practices will be those leveraging data and technology to drive growth and enhance the client experience.
The Rise of the "New Class of Advisers": With a "new class of advisers" on the horizon, it's likely that practices, life insurers and super funds will also explore how these roles can support a more tiered and more accessible advice process. Consumers with simple questions are frustrated with having to figure it out themselves or being pushed through expensive financial advice processes when they want simple answers (advice) to their questions.
Increased Demand for Scaled Advice: As more consumers realise the complexities of their financial lives but are resistant to high fees, scalable and efficient models such as those provided by the new class of advisers will become more critical. The good news is that this will lead to long-term, more holistic client relationships.
A Deeper Understanding of Value: The focus will shift beyond basic advice, with practices focusing on understanding and catering to evolving client needs and preferences and delivering value beyond just the implementation of strategy.
Embracing Change: A Call to Action
There is an opportunity for the profession to leverage these shifts and be aware of the opportunities presented. By virtue of the sort of alpha-type personality that resides within the broader industry - like advisers - we need to work together to move the profession forward.
As we move forward, let's focus on:
- Leveraging Data: Use data-driven insights to drive strategic decisions, client engagement, and operational efficiencies.
- Prioritising Technology: Invest in technology solutions that enhance client relationships and streamline advice processes.
- Focusing on Culture: Build a learning, empowerment and accountability culture to drive team performance and client outcomes.
- Embracing Change: Be prepared to adapt to a rapidly changing landscape and implement new strategies to effectively serve a broader range of clients.
- Reimagining the advice experience: Think beyond traditional advice to create client experiences that truly empower clients to take control of their financial lives.
The financial advice profession and financial services industry are on the cusp of a new era. While challenges remain, 2025 presents a unique opportunity for practices to redefine success, grow sustainably, and make a more significant impact on the lives of their clients.
Thanks for tuning in, and we look forward to keeping you informed next year,
Best regards,
The Adviser Ratings Team.
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