How advisers can reap additional $2.1bn in revenue

Financial advisers are poised to generate $2.1 billion in new revenue over the next five years and add nearly 500,000 clients to their books if they are proactive in managing seven key factors, Deloitte Access Economics says.

Despite the enormous regulatory and qualification upheavals advisers experienced since the Hayne Royal Commission, the study found that opportunities abound and there is cause for optimism as the industry reaches a tipping point.

To be successful in the future, the Advice 2030: The Big Shift report, co-written with Iress, urges advisers to act now on seven megatrends that will impact their businesses.

Two major trends advisers must be cognisant of is the increased demand for retirement advice and assistance with the significant intergenerational wealth transfer.

John O'Mahoney, a partner at Deloitte Access Economics, told Financial Standard that advice firms' profitability is back to pre-Royal Commission levels.

"The number of financial advisers is now stable and expected to grow albeit slowly over the next five years, while the number of customers is expected to grow quite significantly. Not just for millions of people who could do with financial advice, but especially those people who could pay for it as well," he said.

With the skyrocketing retirement advice demand, Deloitte found that advisers can command as much as a 50% premium for this service well above the standard price for advice.

"Of our seven key trends, it's complex and requires a higher-fee option because it involves more work. We also found that it's one where there's a greater capacity for people to pay and there's more of a revenue opportunity for advisers," it said.

Among the other trends, advisers need to be mindful of the "new Australian dream of housing unaffordability" as the reality is house prices are steadily on the rise and out of reach for many families.

"The reliance on asset growth as a primary investment strategy will be under pressure from future policy and markets - forcing people to look elsewhere as the demand for wealth generation moves beyond housing," O'Mahoney said.

Three important trends involve advising on the proliferation of digital assets such as cryptocurrency; navigating lifestyle and asset risk management strategies related to natural disasters like bushfires and floods; and incorporating ESG or value-alignment investing.

Finally, advisers should embrace technology within their operations as pricing pressures may supress margins as clients become more cost-conscious and seek low-fee alternatives for simplified investment strategies and basic financial planning.

By 2030, the 250 financial advisers surveyed anticipate servicing an additional 486,000 clients, with 76% saying their client base will increase 10% or more by that time.

Deloitte calculates this would see Australians spend on financial advice grow from roughly $6.1 billion to $8.2 billion.