Boutique financial firms are adding risk products to their portfolios as the downturn forces planners to sow new revenue streams.

According to Macquarie Practice Consulting, average funds under management have fallen 26% in the past two years and financial planners are looking to risk products like life insurance to supplement their income.

Nearly 40% of practices surveyed by Macquarie say their proportion of revenue from risk products increased last year, while 43% now generate more than 10% of their revenue from risk.

Macquarie Practice Consulting Head Liz McCarthy says declining revenues are forcing planners to rethink their product suites.

“Boutique financial planning practices have faced a number of challenges during the past 18 months, revenues had dropped significantly and attracting new clients has been a particular struggle during that period,” Ms McCarthy says.

“This means that they had to take action to address this if they were going to continue to survive and importantly to grow.

“For many investors, the recent market downturn prompted them to think more seriously about their wealth protection needs and as a result, the need for insurance has grown.”

The move to risk insurance products is also triggering opportunities for the life insurance industry. While 89% of boutique firms are writing insurance in-house, more than a third need support and training in this area.