Sole advice practitioners lacking business plans

While business plans are a necessity to drive growth and resilience in financial advice firms, only 33 per cent of sole practitioners have one, Adviser Ratings reveals. 

The research firm surveyed approximately 500 advice practices, discovering that just 37 per cent of all advice practices have a business plan.

With one-person practices being the least likely to have one in place, Adviser Ratings found this is primarily due to the perceived simplicity and flexibility of their operation.

The research firm stated: “These solo advisers often rely on their intimate knowledge of their client base, lean operational structure, and adaptable decision-making processes. 

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“They argue that the time and resources required to draft and maintain a formal business plan might outweigh the benefits for a small-scale operation, and that their agility allows them to pivot in real-time without the constraints of a rigid document.”

Some 19 per cent of sole practitioners have no business plan, while 16 per cent are currently developing one and 31 per cent need to update their existing plan.

For firms with two to four advisers, 35 per cent have a business plan in place and 42 per cent said theirs needs updating. In addition, 12 per cent are currently developing one and 11 per cent lack one at all.

Notably, nearly 70 per cent of practices with five or more advisers have an up-to-date business plan. Close to a quarter have an outdated plan, 3 per cent are building one, and 3 per cent have no plan.

The benefits of business plans include having a long-term plan for the future, rules to navigate regulatory challenges and helping become an attractive acquisition or merger target. However, the clearest advantage is increased margin.

Using an average salary of $120,000 for the principal, Adviser Ratings revealed that firms with active business plans operate on average margins of 26 per cent compared to 17 per cent for those without. 

In August, a study conducted by Business Health also found that half of advice firm owners say they have not shared their high-level business goals for the year ahead with their staff. 

This is compounded by the popularity of remote working, meaning staff may feel disconnected or isolated from the rest of their teams.

Adviser Ratings continued: “Our findings underscore a critical point: it’s not just a formality – it’s a tool for growth and resilience in the ever-evolving advice landscape.”