Advisory group Fortnum Private Wealth has released a white paper that has identified what it sees as the critical component required in building a successful financial advice business.
“The inevitable advice journey: Where professional advisory groups are set to land” was launched at the dealer group’s annual conference and cites scale as the crucial element to financial planning practice success.
More specifically, the white paper stated not only a lack of scale, but the absence of a strategy to achieve this vital ingredient is holding advice businesses back from achieving their full potential, as well as leaving them vulnerable to attack, despite having a compelling advice proposition.
While acknowledging advisers’ efforts to improve practice governance, processes, culture and advice propositions, Fortnum Private Wealth group chief executive Neil Younger said they now need to focus on growth if they want to turn their firms into a material asset.
“Many advisers want to run their own business and many have done an incredible job to date, but the industry is going through a transformational phase and advice businesses, which have traditionally struggled to grow beyond a certain point, let’s say, $2 million to $3 million in revenue, will need to get much bigger,” Younger said.
“They need to bulk up to reach their full potential and build something great.”
In an effort to demonstrate how crucial an element scale is, he referred to the experience of advisers looking to build an integrated one-stop-shop model – a popular aim in the early 2000s.
“The one-stop-shop experiment generally failed because most businesses were simply too small. They didn’t have the resources to invest in the systems, processes and skills required to expand their value proposition and efficiently execute,” he noted.
According to Younger, the ability to build scale will lead to better purchasing power, a stronger employee value proposition to secure and retain talent, and the ability to offer a broader value proposition and “grow share of wallet”.
He suggested advisers will more than likely need to leverage off the experience of knowledgeable business partners to improve their practice scale.
The Financial Services Council also launched a white paper last week recommending changes the federal government should make to improve the provision of advice.
