Advice practices need to update their business model or risk wiping out their chances of a “successful exit” from the industry, Connect Financial Service Brokers has cautioned.
Many financial advisers are “steadfastly ignoring” warnings from dealer groups, associations and consultants that their practices need to be run as businesses, Connect chief executive Paul Tynan said in a statement.
Mr Tynan said many advisers were ignoring “the very real long-term advantages” of operating a proper business model, and are instead content with the profit their work generates being their salary.
“One major benefit lost is the potential to increase the value of the business and capital at time of sale for exit or succession purposes,” he said.
Mr Tynan said one way businesses could look to improve their business model was to outsource certain functions, something he said too many practices currently overlook.
“Outsourcing or contracting out business tasks has the ability to provide efficiencies, best practice service and profitability, as well as allowing organisations to keep pace with this new technological business environment and rapidly changing consumer expectations and demands,” he said.
The use of new technology platforms and artificial intelligence, Mr Tynan said, were also avenues practices could explore in order to shift to a better business model.
Mr Tynan noted while the number of practices adopting better business models is likely to increase, a “greater number” will continue to resist change.
“In doing so, they will destroy a lifetime of effort and value in their businesses and potential for a successful exit and comfortable life in retirement,” he said.
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