Boutique practices confront prospect of scaling advice

Small and mid-sized advice practices have indicated they feel unprepared to scale up their practices, according to Zenith Investment Partners, but recognise it would benefit their businesses.

In the research house’s report, Unlocking Advice Efficiencies in 2025, an overwhelming majority of practices (84 per cent) said they are expecting growth over the next two to five years.

Out of this, 17 per cent said they are forecasting 'high growth' where they are planning to significantly expand their client base through organic growth and practice acquisitions.

But scaling up is a “critical challenge” for advice firms and some are more prepared than others. 

Overall, 67 per cent of practices acknowledge scaling advice will have a positive impact on their business, yet only 42 per cent said they feel prepared to take the next step.

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This falls further to 37 per cent of practices when considering those in the boutique advice structure (those with less than 100 clients), although 72 per cent said it will have a positive impact on their business.

Zenith said: “There are significant variations in how practices of different sizes expect key industry trends to impact them over the next two to five years, as well as how prepared they feel to manage these changes. 

“Larger practices report a higher perceived impact and readiness across most trends, while boutique and moderate-sized practices demonstrate lower preparedness, particularly in scaling advice and adapting to regulatory changes.”

At the larger practices (those with more than 300 clients), they are more bullish on growth than their smaller counterparts, which Zenith suggested can be due to economies of scale, established client bases and stronger market positioning.

On the other hand, those working at boutiques are among the practices most likely to be planning for retirement or sale, but, pleasingly, Zenith said they represent only a small minority of respondents. 

Some 67 per cent said they expect managed accounts will be able to improve their ability to provide advice at scale, either moderately or significantly. This will be by automating portfolio management, offering pre-built investment models that can be implemented at scale or integrating with digital advice models. 

Managed accounts can encompass custom, private label and off-the-shelf offerings.

“The consistent 67 per cent rating for both the perceived impact of scaling advice and the potential impact of managed account providers suggests that practices see external solutions as critical enablers of scaleable growth, emphasising the importance of provider partnerships.”

Again, this varies between the size of practice, with larger firms seeing the greatest impact of managed accounts on scaling advice (72 per cent), while only 53 per cent of conservative firms feel the same way. 

Last month, research by Investment Trends and State Street found off-the-shelf models remain the dominant type of usage at over 70 per cent, just over a third of advisers said they were using models which were custom-built for the licensee or practice.

Managed accounts are used by 59 per cent of advisers, typically allocating close to three-quarters of total client assets into the accounts. Almost half (48 per cent) of new client inflows are being directed to the products, up from 41 per cent in 2024. As a result, total assets under management have risen to $232.7 billion.