Advisers need to position themselves as running either a boutique business or one that takes advantage of significant scale, according to a succession planning expert.
“Accounting practices and financial planning firms fit somewhere in the spectrum between boutique or scale,” Succession Plus chief executive Craig West told attendees at last Friday’s selfmanagedsuper NowInfinity SMSF Strategies Day in Sydney.
“The important thing is to work out whether you’re boutique or scale. There’s no value in the middle and there’s no value in trying to do both.
“The value is at the extremities. If you’re boutique, get more boutique. If you’re scale, get more scale and more volume.”
West cited McDonalds as an example of a business specialising in scale and Rockpool restaurant in Sydney as an example of a boutique style of business, but said there were just as many examples in financial services.
“There are plenty of accounting businesses like McDonalds. H&R Block is probably the best known. It churns out tax returns, it’s quite efficient, but it’s based on volume,” he said.
“The way they make money is they do a lot of tax returns really quickly and efficiently.”
He said it was likely most SMSF advisers were running boutique practices.
“Boutique businesses are specialised. They have something special about them. They’re premium businesses and no one goes to these businesses for price.”
When assessing their business, advisers needed to keep in mind that neither model was better than the other, rather just different, and either could be very profitable, he said.
“You have to be really clear on the model and everything about your business has to be consistent with that model,” he said.
“Anyone can work out where they are, they just need to think about boutique or scale. Are you McDonalds or are you Rockpool and if you’re somewhere in the middle, you need to head towards the extremities because that’s where significant value lies.”