Financial planning’s evolution to mirror accounting industry
The future shape and form of the financial planning industry will follow that of the accounting industry, with regulatory complexity and the need for scale giving rise to so-called "mid-tier" firms, according to Seaview Consulting — the company which helped AFS Group devise its new strategic plan.
The principals of the firm, Bob Neill and David Fotheringham, claim financial planning businesses face a decision about the type of businesses they are going to be — and suggest that the recent history of the accounting industry may point to the outcome.
"Not so long ago the majority of accounting services were delivered by ‘suburban partnerships' consisting of sole practitioners, or two or three partner practices run by ‘general practitioners'," they said. "There was an evolutionary change driven by the tax and legislative amendments of the early- and mid -‘80s that introduced a raft of complexities for business owners — at the same time that they were growing their expectations of the advice that was being offered to them by their accountants."
The pair said this had given rise to the emergence of the ‘second tier'' of accounting practices, which consisted of firms large enough to deliver a depth of capability in each of the areas that their clients required advice, including tax, audit, corporate advisory, insolvency, business services and related activity.
"The need for scale was evident in this drive to deliver the full range of services to clients with a high level of expertise in each advice channel," they said. "This emergence is now well and truly complete, and this sector dominates the accounting market to the detriment of the small general practitioner who faces a constant battle to remain relevant to their client base."
"It is our view that financial advisory businesses will go the same way, and in fact it has already commenced with the emergence of a number of ‘merged' accounting and financial planning practices delivering their clients a ‘one-stop shop' experience," Fotheringham said.
He and Neill said that it was inevitable that financial services would move into an environment in which much closer attention would be paid to the price that clients pay for the services that are delivered.
"If a financial services practice cannot ensure that it can economically deliver those services it will struggle to maintain a sustainable future. By building scale and taking advantage of the economies available through scale, practices will be able to meet the client expectations of value for money."
AUTHOR
Mike Taylor
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