Seaview Consulting directors Bob Neill and David Fotheringham believe that financial planning businesses face a decision about the type of business that they are going to be in the future.
Looking at the accounting practice experience, Seaview’s Neill and Fotheringham have observed a number of parallels and implications for financial advice practices.
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’.
There was an evolutionary change driven by the tax and legislative amendments of the early and mid-eighties 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.
This gave 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, this being tax, audit, corporate advisory, insolvency, business services and related activity.
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, according to the consultants.
“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,” said Fotheringham.
“This is only in its formative stages but will gather momentum quickly and the choice will be forced on business owners to adopt this scale push or prepare to compete against it.”
Neill and Fotheringham say the need for specialist management skills has come to the fore, often in the guise of a ‘General Manager’ with broader operational skills in technology, process design, training and supplier management including outsourcing.
“Quite simply the management role will generally be the first time a ‘non-revenue generating’ senior person will be employed. The business must be robust enough to cover the cost of this management level and that can only be achieved by investing in the staff, integrated processes and infrastructure to make it work, in other words build economic scale.”
So what are the consequences of not adopting this scale view of the future?
Neill and Fotheringham maintain that in the immediate term probably little consequence as activity will continue as it has for a period of time. However, as the momentum gathers pace, clients will be offered a greater range of services at perhaps a lower cost with the advantage of cohesive delivery by the competitors of financial advisers.
“Financial services practice owners must consider very carefully today, what they want their business to look like five years out!”
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