We believe there’s a sweet spot where advice firms retain their identity, culture and qualities, while professionalising their business to generate opportunities to grow and develop their people, client base and services. The result is a multitude of dynamic, profitable businesses, which are great places for people to work, and equally important, provide a much-loved service for their loyal clients.
Our strong belief in the mid-market is what distinguishes us from other investors in the advice sector – those who doggedly focus on building efficiency and profits through scale alone. Yes, such scale outfits are decent value for shareholders if they work, but often they don’t. The fact is, there are more failures than successes with this approach. The need to quickly ramp up business value via scale and efficiency measures can push destructive short-term thinking to the fore. This is bad for advised clients, and terrible for everyone else who has to hang around and pick up the pieces afterwards.
Crucially, this drive-for-scale business model isn’t much fun for the majority of people who work in such outfits. And if it isn’t enjoyable or satisfying, the very people relied upon to be highly motivated to make the business a success will often simply lose interest, lose heart and leave… or just tick over on minimal effort.
The latest data from the FCA shows that firms with over 50 advisers have been hit the hardest in recent times, with average pre-tax losses surging from £304,140 in 2021 to £553,225 in 2022, and to an eye-watering £3,202,765 in 2023.
This creates pressure and short-term thinking.