Optimism is in the air for financial advisory firms, with many looking forward to a good year ahead. We conducted some research in partnership with DISCUS and found that 73% of advisers are ‘very optimistic’ about their business prospects for the next 12 months.

And while Brexit negotiations loom large, many of those we polled believe that the UK leaving the EU will ‘increase’ (33%) or ‘significantly increase’ (47%) the number of clients they will work with in the next two years. The message is clear: the outlook for those providing professional financial advice is a positive one.

Dealing with increased demand is a nice problem to have, but it does still require some serious attention. Put succinctly, how should businesses grow their operations so they can work with more clients, while at the same time remaining profitable?

Growing your business to support demand

Providing financial advice is a people-intensive industry, so the obvious way to grow is to simply hire more staff. Firms can take on trainees and support them with their professional development, but this of course requires a time commitment from senior personnel. Alternatively, they can bring in experienced hires from competitor firms – or even buy entire businesses.

What I think is particularly interesting however are the strategies for firms in scaling-up their non-core operations – things like administration and investment operations that are often not client facing, but are essential for delivering a quality service. They are for the most part costs on a firm’s profit and loss account and yet don’t contribute revenue.

There’s plenty of anecdotal evidence of financial advisory businesses encountering spiralling costs from investing in expensive infrastructure, such as IT systems, that doesn’t achieve its objectives. Projects in this field can often run into problems because those commissioning the upgrades don’t understand what is required. And why should they? – financial planners are not IT specialists, but are there to provide a dedicated service to their clients.

Investment management

Running clients’ investment portfolios in-house can also prove to be expensive and time-consuming, not least given all the regulation and compliance requirements that investment businesses must now satisfy. Perhaps this helps explain why, according to our research, 73% of financial advisers expect their use of outsourced investment services to increase over the next 12 months.

Working with external investment partners not only reduces regulatory costs, but also allows financial advisers to focus on what they do best – delivering professional advice. Outsourcing to a discretionary fund manager frees up planners’ time so they can work with more clients.
Forward-thinking advisory firms are clear about what is core (i.e. fee earning) activity and are non-core operations. They recognise that scaling-up the former enables a business to truly grow, but if not managed carefully the latter group can lead to white elephant expenditure that can only result in unprofitability.

Given Brexit and pension freedoms, and the complexity and perceived uncertainty this environment brings for clients, the role of financial advisers has never been more important. By seizing this opportunity and providing a professional service, with a lot of hard work they can grow their businesses. But cost control is extremely important – and will make the difference between scaled-up businesses being profitable or loss-making.


This post was created for the DISCUS website by Mickey Morrissey based on the recent Smith & Williamson adviser research. You can find out more about their investment services here ›