Futureproofing an advice practice as a business owner
With a growing number of advisers now running their own business, they need to rethink their role as being a business owner rather than just as a financial adviser.
In an M&A report from Forte Asset Solutions, it discussed the growth in self-licensed firms with privately owned Australian Financial Services licensees (AFSLs) with less than 10 staff accounting for 81.5 per cent of all licensees, according to Adviser Ratings.
This is leading to many advisers having to think about more than just how to give advice, but also how to run a business. While benefits include greater independence and autonomy for the adviser away from a large licensee, it can also bring in extra costs and management responsibilities.
With this in mind, it is crucial for these individuals to think about their firm from a business perspective and not just as an adviser if they want to futureproof it to be successful in the long term.
Forte Asset Solutions founder and director, Stephen Prendeville, said: “The difference to five, 10 and 20 years ago is that now success is not determined by being the best adviser, it is now about being the best manager of the business. We have focused on being the best technical practitioners, but for the benefit of all stakeholders (clients, staff, family), we now need to re-educate ourselves as to how to be the best business owner.
“When asked what we do, we say ‘I am a financial planner’ – the mindset should be, ‘I own and manage my own business’, which just happens to be financial planning.”
Those businesses which succeed in the advice marketplace, he said, will be those that can navigate the difficult and ever-changing legislative environment, can scale up their businesses, have the ability to change and adapt their business and that can achieve profitability.
Data from Adviser Ratings shows the average profit margin across all practices is 21 per cent, and 11 per cent of practices exceed a 40 per cent profit margin.
“Success will be determined by who manages the business the best. No business, irrespective of size, is immune to the need to continually innovate and change,” Prendeville wrote.
Earlier this week, Vital Business Partners' general manager for consulting, Sue Viskovic, discussed how advisers need to consider their practices from a business owners perspective when it comes to scaling up. Being a good adviser does not necessarily mean they will be a good business owner, she said.
"Make sure you know what it is to run a business, because being a good adviser doesn’t necessarily mean that you’re a good business owner. They are two different things,
“I think just be really, really clear on what it is that you’re trying to achieve. Understand all of the machinations of a business as in your pricing, your business strategy, your operations, what kind of resource network you’re going to put around yourself, and plan out how you are going to get to scale as quickly as possible.”
AUTHOR
Laura Dew
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