The Profit Gap Between Average and High-Performing Advice Practices
What Is the Profit Gap Between an Average and High-Performing Advice Practice?
Around $550,000 a year. That's the difference in annual business profit between a high-performing Australian financial advice practice and an average one, according to Deloitte Access Economics. Same industry, same regulatory environment, same client demand. The gap sits almost entirely in how the work gets done.
If you run an advice practice in Australia, that number is worth sitting with for a minute.
What does the deloitte research actually say?
Deloitte Access Economics published Advice 2030: The Big Shift, a report that looked at where the Australian financial advice industry is heading over the next five years. View the report.
Buried in a report mostly about megatrends and growth forecasts is a finding about practice economics that deserves more attention than it got. After years of upheaval, a 43% decline in adviser numbers, institutions selling off their advisory arms, and wave after wave of regulatory change, the practices that stayed have proven remarkably resilient.Profitability has rebounded to around 22% profit margins across the industry.
But high-performing practices are achieving materially higher margins than that. In dollar terms, Deloitte puts the difference at roughly $550,000 more in business profit annually.
Not revenue. Profit. That distinction matters, and we'll come back to it.
Why is it profit, not revenue, and why does that matter?
Because it rules out the two explanations most principals reach for first.
If the gap were a revenue gap, you could explain it away. High performers have more clients. They charge higher fees. They're in a wealthier postcode. Those are structural advantages, and if you don't have them, there's not much to be done.
A profit gap is a different story. It means two practices can bring in comparable revenue and end the year in very different financial positions. The money came in the door. It just didn't make it to the bottom line in the same way.
Once you've ruled out pricing and client volume, what's left is the cost of delivering the advice. And in most small to mid-sized practices, that cost is measured in hours, your hours, your advisers' hours, your support team's hours
Where Does the Margin Actually Leak?
We can't tell you what Deloitte found on this point, because the report deals in industry-level economics rather than practice-level diagnostics. So what follows isn't research. It's what we see working alongside Australian advice practices day to day.
Is this a problem you can hire your way out of?
For a lot of Australian practices, not easily.
Deloitte's own numbers make the point. Adviser numbers have fallen 43%, and the industry is looking at serving an estimated 486,000 new customers by 2030 as it grows from $6.1 billion to $8.2 billion in revenue. Deloitte is explicit that this growth is contingent on advisers scaling up. There are more clients coming than there are people to serve them.
So the traditional answer, hire a paraplanner, hire another client services officer — runs into a thin market, a long ramp-up, and a fixed cost you're carrying whether the work is there or not. That's a reasonable move for a practice with predictable volume. It's a difficult one for a practice with lumpy volume, which is most of them.
The alternative isn't working harder. It's changing who does what.
How does outsourced support change the margin equation?
By converting a fixed cost into a flexible one, and by getting the right work in front of the right people.
At Advice Lab, we provide outsourced paraplanning, advice support and administration to Australian financial advice practices. In practice, that means SOAs and ROAs drafted to your templates and your compliance standards, implementation and administration handled and routine work lifted off your team so the client-facing hours returned to client-facing people.
What changes isn't the quality of your advice. It's the number of hours it takes to get that advice out the door, and who's spending them.
It's also worth being straight about what this isn't. It's not a transformation project. It's not a new platform to learn. And it won't fix a practice with a pricing problem or a positioning problem. If your fees don't reflect your value, better operations will only get you so far.
But if you've got a sense that your practice is working harder than the numbers suggest it should be, operations is usually where the answer is hiding.
The question worth asking
Deloitte's $550,000 figure isn't a target. It's a benchmark, a way of asking whether your practice is capturing the value it's already creating.
The practices closing that gap generally aren't doing anything exotic. They've just been deliberate about what happens between the client meeting and the advice landing, and honest about which of those steps genuinely need their own people.