Knowing when to scale up an advice business
When it comes to going self-licensed, advisers need to think about what they need and how they can scale up “from a business head, not an adviser head”, according to business consultant Sue Viskovic.
In a podcast with Netwealth chief executive, Matt Heine, Viskovic discussed what an adviser needs to know before setting up on their own.
Viskovic, general manager of consulting at Vital Business Partners (VBP), said just because an individual is a good financial adviser, that this did not always translate to being a good business owner as well.
“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,” she said.
“So 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.”
Another factor is in scaling up the business as otherwise, the adviser will be burdened by too many administrative tasks and leave themselves unable to act as an adviser which is where their skills lie and where they can add value to the business.
“Without that planning, you will end up just getting to be a really, really busy adviser who’s got a massive risk in your business. If something happens to you and you are the only adviser and you can’t see clients for a little while, you’re going to be in trouble,” Viskovic explained.
“I’m not telling people to shy away, but do it with a business head, not an adviser head.
“When you’re an adviser, if it’s only you or you and one other person, you are doing $50 an hour things when you should be earning $400 an hour, and it’s very difficult to get out of that rut.”
However, she acknowledged that bringing on extra staff does entail extra costs initially which may deter advisers, especially if the extra staff are not generating revenue.
Money Management previously spoke with two advisers who debated the pros and cons of scaling up a business. Meanwhile, the "magic number" of advisers within a practice has been identified as between four and six advisers.
Viskovic said: “Often as firms start to scale and when they’re younger, they’re smaller, and they’re putting on their first, second, third adviser, that’s a big cost relative to the turnover that they’ve got. And too many firms I see do that without really good structure around client acquisition and deployment of services. So they have a big dip in their margins before they can get to a size and scale of growth.”
One way of managing this, she recommended, is to hire a practice or general manager who ensures the business runs smoothly which can be a “massive tipping point” for a new business. Although they are not giving advice, they help the business owner to run things smoothly and allow them to focus on the advice instead.
“They’re not the one giving the advice to clients, but they are ensuring that all of the operations are running really smoothly. They manage the staff, they manage the systems. That is when you can really start to get traction in a business and you do need scale to be able to do that.”
AUTHOR
Laura Dew
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