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Mid-size advice firms tipped to be model of the future

Mid-size advice firms tipped to be model of the future

The future looks bright for mid-sized advice firms providing they invest in strong technology and diversify their specialities and client base, a report has claimed.

The Future of Advice - Beneath and Beyond report, published today (July 30) by AKG, stated there was a “powerful case” for the “right sort of 5-10 adviser business”.

This was because they were more likely to run an efficient business, invest in technology and branch into different specialisms and client banks than the smaller firms and they did not come across the same problems as larger consolidators and vertically integrated companies. 

The report said the need for advisers to combine good relationship skills with “hard-nosed business management skills” went against the long-term success of one- to two-man bands, while larger, vertically integrated, firms were seen to be “lacking in transparency” and having high charges.

Consolidators, although there was an increasing trend of mergers and acquisitions in the adviser space, were likely to face roadblocks as the “economics of the business come under threat”, it added.

The report said: “A much more powerful case can be made on the basis of this analysis for the right sort of 5-10 adviser business, properly structured with strong technology, and a multi-specialist, multi-faceted approach.”

Peter Chadborn, director at Plan Money, which falls into this advice business category, agreed with the report's conclusion.

He said "One of the main advantages of firms our size is the ability to make effective decisions relatively quickly.

"There is enough diversity of experience and expertise to make well-informed and balanced decisions, without the need to submit proposals through tiers of management."

Scott Gallacher, director at Rowley Turton, thought the idea that five to 10 advisers was the "sweet spot" was a "little too specific", but agreed with the principle of the benefits of a mid-sized firm.

He said Rowley Turton, which has three advisers, benefited from "several efficiencies" and was "small enough to care but big enough to cope". 

Better service

However, in order to succeed, mid size firms needed to embrace the needs of the younger client as well as the those of asset-rich consumers, the report said.

This was because the number of “asset-rich” clients who had been “accumulating wealth alongside generous defined benefit pension arrangements” was likely to dwindle looking forward, so firms needed to offer a “multi-faceted, multi-channel access”.

AKG’s research showed advisers were already widening their offering, either via referrals or in house.

Some 23 per cent of the 100 advisers polled in April said creating referral partnerships for specialist advice - such as equity release or pension transfers - would help save time and cost, while 20 per cent were looking to specialise their in-house advice offering.

Better use of technology was also touted as a way advice firms could improve their business. Some 59 per cent thought better use of back office tech would help while having a platform was on the minds of 32 per cent of firms.