Are high housing costs impacting advice business ownership?

Speaking with ifa, Justin Gilmour, managing partner at Integro Private Wealth, explained how the rising costs of housing and mortgages over recent years have made it significantly more difficult for young advisers to start their own businesses.

“I think that the barrier to entry into the industry, into your own practice, is a lot greater than what it was,” Gilmour said.

Gilmour explained that, due to higher house prices and mortgage pressures, younger advisers are lacking sufficient equity in their homes to help them start their own businesses, triggering the need for alternative solutions.

“That developed the need to build out a funding mechanism so they’re able to buy equity in but it’s like the security of it is actually secured against the business, rather than having to secure it by personal assets,” he said.

“So we just had to look at it a bit differently to be able to achieve that model that’s realistic, to give these guys realistic growth opportunities.”

Bryce Wild, a private wealth adviser at Integro, recently became an equity partner with the firm. Speaking with ifa, Wild said this has allowed him to take on an ownership role within the business and gain valuable experience all the while maintaining a safety net for himself.

“I feel like at Integro, Justin gives you the autonomy to run a business within a business. We’re all working towards the same goal, and doing things a similar way, but it gives you the autonomy to be able to work with referral partners, to be able to look at your book of business or your client base as your own profit centre almost,” Wild said.

“In that way, as a young adviser like myself, it’s been a really good learning curve as well to be able to run a business, I know it’s not fully running a business, but it feels like you’re running a business. As well as being able to learn from a business owner like Justin along the way, without being thrown out there in the cold.”

With advice businesses also struggling under the high cost to operate as well as increased compliance obligations, Wild explained that “a lot of people who would have started up their own business are probably not going down that route, because it’s pretty difficult to make a profit”.

Another key benefit of the equity partnership, he added, is the ability for advisers to operate relatively autonomously and grow their career while maintaining financial stability for their young families.

“I think that sort of thing would probably appeal to a lot of advisers out there who have a young family that they want to support and they need to get a reasonable income month to month, but they also have the growth opportunities and that along the way, too,” he said.

Looking to the future, Gilmour said there is likely to be an increase in employee investment plans as financial pressures continue.

“Because there’s going to be increasing cost-of-living pressures and housing prices, so new advisers, or new guys coming into the market, will struggle to then have equity to go and then start their own practices,” he said.

“So I think we’ll see a lot more of these sort of equity participation schemes in the future.”