Reflect, plan and achieve: It’s a powerful time of the year for financial advisory firms

For firms seeking to enhance their results in the upcoming financial year, active engagement in strategic planning – and involving the entire team in the process – is essential.

There’s never been a better time to run a financial advice firm. The opportunities are outstanding: demand for financial advice has far outstripped supply, there’s a high barrier to entry that benefits established firms and the pendulum of over-regulation seems to be swinging back, creating a more favourable operating climate. However, despite the opportunities, many firms are not achieving the level of profitability they deserve.

The 171 advisory firms we featured in our Advice Operations Research Report 2024 achieved an average EBIT of only 23 per cent (after normalising principal’s salaries at $150,000 plus super), despite the fact that they’re targeting, on average, 34 per cent EBIT. While this average actual EBIT is consistent with many research reports across the profession, 23 per cent is not enough given the risks and complexity involved in running an advice firm and the significant positive impact that financial advisers deliver to their clients. Most of our clients are working towards 35–40 per cent EBIT, and that’s not a pipe dream – there are many successful firms in Australia that are already achieving over 30 per cent (27 per cent of the research participants achieved over 30 per cent – in fact, 8 per cent achieved over 40 per cent EBIT).

A desire to lift profitability is not uncommon – in fact, when asked about their strategic priorities for the coming year, the top three areas of focus for firms in our research were:

1. increasing profitability
2. improving efficiency
3. expanding their client base

These are worthy goals, indeed – given the number of clients in need of advice and the fact that participants felt they could only manage an average of 148 ongoing client relationships per adviser on their current operating model. As a profession, we must keep working towards increasing the number of clients that each adviser can serve, while elevating the quality of services they provide. The answer to a more profitable, sustainable business is not limited to targeting complex clients who will pay higher-than-average fees, there are myriad ways to increase your impact and your business success. However, to seize these opportunities and achieve outstanding results, firms must focus on strategic planning and actively work on their business, rather than just staying busy with client work (in the business).

The power of a clear vision

One significant finding from our research is the positive impact of having a documented and regularly shared vision. Those firms with a clear vision reported 26.4 per cent EBIT and a satisfaction score of 3.8 out of 5. Those who shared this vision regularly with their team saw EBIT rise to 27.2 per cent and satisfaction improve to four out of five. These figures stand out compared to the average EBIT of 23 per cent and an average satisfaction rating of 3.6 out of five, suggesting that a clearly defined and shared vision positively impacts both financial performance and stakeholder satisfaction.

Involving the entire team

Another key insight from our research is the value of involving all staff in strategy planning and business improvement initiatives. Our study showed that 49 per cent of businesses involved all staff in these processes, and a further 21 per cent included those they considered leaders. The difference in profitability was significant: businesses that included staff reported an average EBIT of 25 per cent, compared to 20 per cent for those that relied solely on the owners. This collaborative approach not only enhances strategic plans but also fosters a strong team spirit, making everyone feel invested in the success of the business.

Reflecting on achievements and setting new goals

As we close out the financial year, it’s crucial for advisory firms to reflect on their past performance and set ambitious yet achievable goals for the year ahead. Our Growth Alliance members are creating their one-page Evolution Map – an actionable plan for the 2025 financial year – in workshops we’re running around Australia in July and August. Whether you seek assistance or go it alone – there are two undeniable facts.

1. Your business won’t improve beyond what it’s doing now if you don’t undertake good strategic planning.
2. That planning will only be effective when you identify your goals for the year AND the strategies/projects you’ll implement to achieve them.

With that in mind, I wish you all a very happy New (financial) Year!

Sue Viskovic heads up Elixir, a specialist consulting division of Vital Business Partners.