The characteristics of top-performing advice practices

advice firms financial advisers practice management elixir consulting Virtual Business Partners

18 June 2024
| By Jasmine Siljic |
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There are six critical factors that high-performing financial advice businesses have in common, highlighted by Vital Business Partner (VBP)-backed Elixir Consulting.

The advice consulting firm has released its inaugural 2024 Advice Operations Research Report in conjunction with Colonial First State (CFS), which surveyed 171 advisory firms including 561 advisers.

More than 50 per cent of advisers surveyed belong to a medium-to-large licensee, 11 per cent to a boutique licensee, and 37 per cent are self-licensed.

The report discovered six key characteristics that bind top-performing advice practices together, as defined by their earnings before interest and taxes (EBIT) margins.

These are:

  1. Healthy culture
  2. Dedicated practice manager
  3. Documented processes
  4. Outsourced tasks
  5. Use of managed discretionary accounts
  6. Engaging with an external business coach

Commenting on the findings, Lana Clark, the report’s author and senior consultant at Elixir Consulting, said: “So many discussions about business growth and profitability are focused on recruitment, scale and M&A, but another important lever is optimising operations. Advisers can enhance client service, build a strong culture and mitigate risk by driving operational improvements.”

Clark wrote that creating a healthy work culture involves making employees feel valued, motivated and integral to the firm’s success. The author further unpacked how to “play the long game” of cultivating a desirable culture on a recent Netwealth webinar.

The results also demonstrated that employees who are satisfied with their pay are happier at work and rated the culture of their business more positively. Firms paying bonuses and competitive salaries recorded an average EBIT margin of 27 per cent, above the industry average of 23 per cent.

However, Hays’ annual salary report found there are expected to be only minimal salary changes for financial planners and junior advice positions this upcoming financial year. A financial planner is expected to earn between $95,000 and $120,000 per year, depending on the state, while an associate adviser can earn $70,000 to $90,000.

Next, separating the role of practice manager when critical mass is achieved was described as a “significant turning point” for many businesses. While it’s very common for advice principals of small firms to wear several hats, creating a dedicated practice manager role enables one person to solely manage the business and the people within it.

Advisers have debated the difficulties and benefits of scaling up as a boutique advice firm, while mid-tier practices also face burnout risk as practice principals often wear too many hats.

With some 37 per cent of respondents failing to document their processes, firms that did record and define all processes reported higher earnings and greater efficiency overall.

Sue Viskovic, founder of Elixir and head of consulting at VBP, commented: “As experienced business coaches, we know that fully tested and thoroughly documented processes are a critical step, if not an absolute must, to successfully streamlining and automating business operations.”

Hiring an outsourced staff member, typically offshore, is another characteristic that can have a clear impact on a firm’s performance. This includes delegating administrative or paraplanning responsibilities to an external provider.

Moreover, Clark highlighted the profound benefits of managed accounts in driving efficiencies. The paper revealed that 85 per cent of advisers who use these investment vehicles saved between 1 and 15 hours per week, or up to two days of work.

The final component of a top-performing advice practice is seeking the support of an external business coach. The 38 per cent of those surveyed who currently work with a coach or had in the past reported an average EBIT of 26.3 per cent, up from 22 per cent for those who sought no coaching input.

In October 2023, Macquarie Business Banking also revealed the top characteristics of high-performing advice practices, including how succession planning and client engagement drive profitability.

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Submitted by One foot out t… on Wed, 2024-06-19 08:57

A financial planner is expected to earn between $95,000 and $120,000 per year, depending on the state.
Really? I don't know one senior FP who's not on a starting salary of $140,000 plus super Min, plus bonuses. One wonders if this is the industry funds trying to lower expectations for their new Qualified advisors!

Submitted by Old Fella on Wed, 2024-06-19 18:22

Of course a survey commissioned by an adviser coaching business would find that having an external business coach is a key ingredient to being successful.

Submitted by Mark Marshall on Wed, 2024-06-19 19:35

It is about time that commentary put forward by the Financial Services industry's middleman is supported with hard facts that are measurable. People outside and within the industry may start to actually believe the commentary expressed by 3rd parties who have a vested interest in their contribution to an article.

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