Uncover the future of your business through your data

Financial Advice data insights business insights

by Peter Truong, Business Consultant

The Financial planning landscape is going through significant changes. From new education standards such as FASEA, to changing revenue models to increased compliance costs, principals and advisers are struggling to keep up with such rapid change. They simply do not have the time to focus on their business and even when they do, practices aren’t sure where to start because the task seems so daunting.

One solution is to bring in external consultants, if you can afford it, highly recommend it. If you cannot afford it due to increased operating costs, increased compliance requirements, ASIC levies, staff salaries and increased professional indemnity, where do you find the extra $30,000+ to cover the cost?

Before you panic, there are a few ideas that can help you start the process of identifying, evaluating and redesigning your business to adapt to a new world of advice.

So how do you access and use your data to gain insight about your business?

Building your internal system to help you analyse your data can be time consuming and costly. Getting an Excel expert to help decipher the numbers can help, but they may not know what they’re looking for and what data is important. The simplest and easiest way is to ask your licensee. Your licensee already has your data and should be helping you to derive some insights from it. Ask them for support

Looking at your data can uncover a lot about your business. Here are how some data points that can help you develop a sustainable strategy.

Summary of revenue

This will help you identify revenue that is stable or at risk. At risk revenue can be grandfathered commissions, trail commissions and any potential conflicted remunerations. You will need to have a clear strategy on how to address clients who have these fees, so you’re prepared when they end. Your business revenue can be impacted significantly, if you have not adapted to the fee for service model, you need to act quickly.

Source of revenue

Your data should identify which product providers you are using and the level of revenue you are receiving from these providers. This will assist you to evaluate your products/service offering. If your product is concentrated with a few providers, you’ll have to evaluate whether you are meeting your best interest duty requirements. Ask yourself: are these products still relevant to your clients’ needs and will they allow them to continue to achieve their goals and objectives? Are there other products and service which best meets their objectives and goals where necessary?

Comparisons of clients’ historical costs and fees

Your data should provide insight into what services you are offering clients. Historical information should help you understand whether your fees were fair and reasonable to ensure you are adhering to FASEA Code of Ethics. You need to understand your cost of operating and cost to serve for each client as a minimum. Once you have this information you should review your service package to align it to your operating cost. It is important that you clearly differentiate your services and ensure they are consistent, fair and reasonable.

Number of clients who receive ongoing services

Your data will tell you the number of clients you currently have, from total clients to ongoing service clients. This information is useful because it allows you to identify whether you need so many clients - and more importantly, if you have the resources to provide all promised services to them. Often this is a trigger for the practice to assess their cost to serve. Once you have identified this, the process can be much easier. In fact, you are probably going to find that you will save clients’ money by only charging for services they need. This will then allow you to work out how much to charge and what services to offer. Knowing this information will enable you to consolidate your client base and provide better services to clients.

Demographics of your clients

Knowing your target market is critical to your success. The data should provide insight on client segmentation and how much your clients have contributed to your business over the years. Who are your top clients and are the services you provide consistent with the cost and charges? The data will help you to identify areas for improvement and/or opportunities to add relevant services that are important to your client demographic.

This should help you start your analysis to get a better understanding of your business. Seeking guidance and help from your licensee is the first port of call. With increases in fees as a result of the end of the grandfathered commissions and rebates, licensees should do more to assist practices to adapt to the new world of financial advice.