Titled, The inevitable advice journey: Where professional advisory firms are set to land, the paper claims the majority of advice businesses are not yet achieving their full potential and are vulnerable to attack, despite having a compelling value proposition and robust systems and processes, because they are not scalable and lack a clear strategy to get to scale.

The paper outlines the path advisers need to take to bulk up, reduce their vulnerability to external shocks and significantly enhance their capital value.

According to Neil Younger, Group Chief Executive Officer and Managing Director of Fortnum Private Wealth, advisers have done a lot of great work to refine their value proposition and improve processes, governance and culture but now attention must be given to driving organic and inorganic growth if advisers want to create a material asset.

“Many advisers want to run their own business and many have done an incredible job to date but the industry is going through a transformational phase and advice businesses, which have traditionally struggled to grow beyond a certain point, let’s say, $2 million to $3 million in revenue, will need to get much bigger. They need to bulk up to reach their full potential and build something great,” he said.

“While some advisers are happy to run a smaller businesses and simply take home a decent salary, as the industry advances towards a bona fide profession, we’re starting to see more ambitious, visionary entrepreneurs. They are not content to run a good business. They understand the macro themes driving long-term demand for professional advice, they want to be leaders in the emerging advice profession and, when they ultimately retire, they want to have a material asset to sell.”

Presenting to over 200 advisers and support staff at the group’s national conference on October 19-20, Younger outlined the key financial and non-financial benefits of scale including purchasing power, a stronger employee value proposition to secure and retain talent, and the ability to offer a broader value proposition and “grow share of wallet”.

Citing the paper, he attributed the industry’s failure to successfully implement the integrated one-stop-shop model, despite a lot of hype in the early 2000s, to a lack of scale.

“The one-stop-shop experiment generally failed because most businesses were simply too small. They didn’t have the resources to invest in the systems, processes and skills required to expand their value proposition and efficiently execute,” he said.

“To develop and execute a strategy that will drive efficiencies, scale and capital value, advisers don’t need to do everything themselves. More than likely, they will need to leverage the expertise of experienced business partners.”

Download a copy of The inevitable advice journey: Where professional advisory firms are set to land.

The post How to build an advice business of significant capital value appeared first on AdviserVoice.