Advice industry to ‘bloom in the next 3 to 5 years’

Fortnum Private Wealth CEO and managing director Neil Younger claims that advice businesses, including licensees, are only getting larger and all within the sector will need to adapt to the regulatory and structural changes “in order to remain relevant”.

In a new white paper by the privately owned licensee, The inevitable advice journey: Where professional advisory firms are set to land, Mr Younger says the majority of advice businesses have not yet achieved their full potential and that advisers must “bulk up, reduce vulnerability to external shocks and significantly enhance their capital value”.

“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,” he said.

“While some advisers are happy to run a smaller business 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.”

Mr Younger further claimed that the “integrated one-stop shop model”, which received much attention in the early 2000s, generally failed because businesses were not big enough.

“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.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.