The financial advice profession has long grappled with a fundamental challenge: most Australians see value in professional financial advice, but few are willing to pay current market rates. While 68% of Australians recognise the benefits of financial advice, only 6% are willing to pay more than $2,500 annually - the minimum most advisers need to charge to break even (let alone make a profit) under traditional models.
Figure 1 - Adviser Ratings Landscape Report 2024. Do you see the benefits of professional financial advice?
This disconnect between perceived value and price sensitivity isn't new. What is new, however, is that some innovative practices are finally cracking the code on profitable scaled advice delivery.
The Evolution of Scaled Advice
The industry's journey with scaled advice has been complex. Following the FOFA reforms, numerous attempts were made to create workable scaled advice models. Many of these early attempts failed due to regulatory complexity, compliance costs, and difficulty achieving profitability at lower price points.
The UK's experience following its Retail Distribution Review (RDR) in 2012 offered early warnings about the challenges ahead. Their market saw a 10% exodus of advisers and increasing costs, leading to their Financial Advice Market Review (FAMR) in 2016, which promoted "focused" or "simple" advice models.
Today's Success Stories
What's different now is that some practices have found ways to make scaled advice work profitably. As highlighted in the upcoming ARData Life Insurance Benchmark Report 2024, Skye Wealth provides a compelling example, offering only life insurance advice for just $330 upfront while maintaining profitability. Their success stems from a combination of process innovation and clear scope boundaries underpinned by strategic technology integration. They've created a sustainable model by maintaining streamlined systems that don't compromise quality while dramatically reducing delivery costs. This is complemented by well-defined service parameters that prevent scope creep and strategic use of digital tools to automate routine tasks. The result is a volume-based strategy that successfully serves higher client numbers at lower margins.
The Market Opportunity
The potential market for scaled advice is substantial and largely untapped. Research reveals a $27 billion opportunity in potential insurance premiums from under-55s who value advice but find current fees prohibitive. Beyond insurance, there are 2.6 million Australians actively looking for a financial planner. While unrealistic under holistic models, 67% of potential clients are willing to pay up to $500 annually for advice, and another 19% would pay up to $1,000 annually. This represents a significant opportunity for practices that can deliver services efficiently at these price points. For clients, scaled advice models offer access to professional financial advice at a more affordable price, improving their financial outcomes.
Figure 2 - Adviser Ratings Landscape Report 2024. What consumers are willing to pay for financial advice.
Key Elements of Successful Models
Modern scaled, thriving advice practices share several critical elements that set them apart. Technology integration forms the backbone of their operations, with digital tools driving client engagement, marketing automation, and streamlined advice production. As we covered in last week’s article, the data shows this approach works - tech-savvy practices operate with 55% fewer staff per adviser while maintaining high service standards. This emphasis on technology not only streamlines operations but also keeps these practices at the forefront of industry trends.
As highlighted in Figure 3 below, few practices are considering narrowing their service offering. However, practices that successfully make the transition excel at establishing and maintaining clear service boundaries and benefit from the 19% of practices looking to increase partnerships with specialist advice businesses. They develop specific, well-defined advice propositions with transparent pricing that aligns with service delivery costs. Clear communication with clients about service limitations helps manage expectations and maintain profitability. Their processing systems are built for efficiency, with standardised workflows for common advice scenarios, automated data collection and analysis, and streamlined compliance processes. Advisers focus on the parts of the advice process that require a professional to engage with the client, not low-value steps.
Figure 3 - Adviser Ratings Landscape Report 2024. How is your business changing?
The economics of these practices are fundamentally volume-based, but this doesn't mean quality is compromised. Instead, these firms have developed efficient client acquisition strategies and scalable service delivery models that allow them to maintain high standards while serving more clients at lower individual margins.
Overcoming Traditional Barriers
The profession has historically struggled with several barriers to scaled advice delivery. Regulatory complexity makes many advisers hesitant to offer limited-scope advice, while traditional advice models carry high fixed costs that seem incompatible with lower fees. For many practices, even 'simple' advice requires substantial adviser time, and there is significant uncertainty around building profitable business models at lower price points. These challenges are real, but they are not insurmountable. Successful scaled advice practices have found ways to overcome these challenges, and their experiences can provide valuable insights for those considering this model.
Successful scaled advice practices have found ways to overcome these challenges. They've developed clear processes that satisfy compliance requirements efficiently while leveraging technology to reduce manual work without compromising quality. Many have succeeded through service specialisation, focusing on specific advice areas where processes can be standardised effectively. Perhaps most importantly, they've built business models that thrive on serving more clients at lower margins, creating sustainable practices that benefit both advisers and clients. This success is a testament to the potential for profitability in scaled advice practices, motivating others to explore this model.
The Future of Scaled Advice
The future of scaled advice looks increasingly promising as several factors align to support its growth. The Quality of Advice Review recommendations create a more supportive regulatory environment for simpler advice delivery while continuing technology evolution, is making efficient advice delivery more feasible than ever. The growing consumer interest in limited-scope advice, combined with increasing industry acceptance of varied service models, suggests that scaled advice will play an increasingly important role in the profession's future.
Building a Sustainable Model
For practices considering entering the scaled advice market, success requires careful consideration of several key elements. Market selection is crucial - practices need to identify specific client segments where scaled solutions add value, understand price sensitivity and service expectations, and define clear target market parameters. Service design must focus on developing standardised packages with clear scope boundaries and efficient delivery processes. To this point, clients who don't fit the model or need more holistic advice must be referred to another adviser.
Technology integration plays a vital role, but it must be strategic. Successful practices select digital tools that complement their service model, automate routine tasks effectively, and maintain consistent quality control. The team structure is equally important, with staff trained in efficient delivery methods and clear roles and responsibilities that support scalable operations.
The success of firms like Skye Wealth demonstrates that profitable scaled advice is not just theoretically possible but practically achievable. As the profession continues to evolve, these models offer a promising path to both practice profitability and broader access to professional financial advice for Australians. The key lies not in compromising on quality but in rethinking how that quality advice can be delivered efficiently at scale.
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