Advisers are at a critical stage in their fast-evolving development. The FSA's proposed changes look...
Advisers are at a critical stage in their fast-evolving development. The FSA's proposed changes look set to fundamentally change the way advisers work, requiring business efficiency, reduced costs and better systems.
Unfortunately, for smaller intermediaries who do not have the benefits of scale, this may be the end of the road.
Scale is now essential for advisers. Operational economies of scale can be achieved through back office integration, helping to reduce overheads and improve margins. Fixed costs can be reduced through efficient property and location management and integrated IT and compliance systems free up time for advisers, allowing them more time to advise existing clients and meet new ones.
Equally, these efficiencies extend to training and professional development programmes, allowing more effective development of advisers, leading to higher calibre programmes. Large organisations can introduce graduate trainee schemes, which fast track the future stars of the industry into high earning advisory positions.
Scale allows greater business development, enabling advisers to do business with certain types of companies that will only do business with large organisations. Equally, a sizeable organisation has the resource to excellently service other large organisations. National organisations even have the capability to deliver national solutions on a regional basis, thereby securing business that smaller advisers cannot win.
Size also facilitates brand, through distribution and delivery of that brand. For a truly national retail financial advisory brand to succeed, advisers must be available to offer their services, and this requires scale and distributive reach.
Equally, only a sizeable organisation will have the financial and human resource to create a significant brand, which in turn can open doors and allow advisers to operate in new markets.
The collective bargaining power of a sizeable adviser should not be underestimated. Scale helps negotiate the best deal for advisers, and reduce costs through bulk buying. Large organisations can influence key decision-makers, effectively representing its advisers in political and industry fields.
Big firms also have the resource to capitalise on new economy opportunities. Capital intensive technology such as account aggregation can be constructed and strategic partnerships forged to introduce more clients to advisers.
Size gives access to greater investment opportunities to help build businesses. Large advisers can float to raise capital, giving a heightened public profile and attracting investment from Institutional investors.
Such investment allows further scale and efficiency to be built, empowering a company with faster growth. This creates a virtuous circle of greater growth, greater efficiency and greater levels of support and service for advisers.
Advisers outside this circle may find themselves adrift in the fast evolving financial services world. Many may find, to their detriment, there is one clichÃ© that rings true for the adviser community ' big is beautiful.
Charles Ansdell is corporate relations manager at the Inter-Alliance Group
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