Turnover is not the sole metric a firm should focus on; the argument for profitability is valid. However, to quote Anthony Robbins–“if you’re not growing, then you have a job, the business meets only your needs”. According to the consultant Brett Davidson, most financial advisers would be better off employed, I’d agree with him.
The significant problem for growth is a shortage of new advisers. Recruiting for a small advisory firm today looks impossible. I often see advisers on social media lamenting the pointless proposition of using a headhunter who never delivers, but trying it yourself is probably equally senseless.
Much has been written about Sesame’s closure of its training centre. This was seen as the last prospect for bringing in a fresh class of adviser. The large insurance companies do not seem interested in a direct offering, the investment platforms won’t go near organising their own distribution and small firms have not the time or resources (or skills) to school their own team of advisers.
The boom in FinTech companies is also gaining momentum and who knows where it will lead? For those advisers who believe they will always be needed, as clients require human, face-to-face contact, I would remind them that change is not just possible but inevitable. We are pretty close to the driverless car (pure science fiction 15 years ago) and Facebook has changed the way the world communicates in just a few years. In short, what seemed impossible yesterday maybe implemented tomorrow.
Financial advisers need to innovate. Regulation is an issue, but it is not insurmountable. Compliance firms who want to protect their profits will stifle progress with their scaremongering. Still the general clamour from the FCA is “innovate, innovate, innovate”. The regulator is actively trying to encourage FinTech companies to work with it through the imaginatively named ‘Project Innovate’.
All this could add up to mean traditional financial advice is dying. But even if it is, it will take a few years for its passing. The service offered now is a high standard.
Advisers are more professional and most offer real value added services like lifestyle planning and cashflow modelling. But it will take more to grow a small advice business, to innovate, to push forward with new ideas and create something really remarkable. I have yet to see Seth Godin’s purple cow in financial advice, certainly there are plenty of old bulls.
So what is the answer? The financial advice sector needs business people, skilled entrepreneurs and innovators. The combination of regulation and poor growth in the sector means no dragons from the den are coming in to deliver a tangible future.
Once, when asked why he was so successful, Peter Hargreaves said, “There are no business people in financial advice, I had no competition”. He should know, while most advice firms are deteriorating, he has retired with all their money.
Richard Bishop is a financial adviser.
