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Phil Wickenden: Will your firm survive and thrive in the immediate term?

Herbert Stein famously said that “if something can’t go on forever, it will stop.” Stein’s law is frequently quoted. It is also, unfortunately, inescapable.

One of two fates will befall every advice business: either they will sell up or they will stop trading. Eventually. There may be a whole bunch of other permutations in the interim, including mergers, succession and so forth, but in the end it is one of the two.

Granted, that is all a bit moribund but the implications are more interesting if we add Blanchard’s corollary to the mix: 1) that for every thing that cannot go on forever, there will come a time when it begins to stop; and 2) that people who wanted it to go on forever will vehemently refuse to recognise that it is stopping.

But here is the rub – things that cannot go on forever do not always stop at once. There often comes a moment when all the signs are there that the game is over, or at least changing, but that happens well before the fat lady sings.

Recognising the signs, doing what we can to adapt and also accepting the things we cannot control are key. Difficult but essential.

Next generation advice models (and the development thereof) are a good example. Given the average age of principal advisers, who are looking to sell their businesses in the not too distant future, the low appetite for the level of investment required to radically re-imagine an advice business fit for millennials (who are not yet, in the main, viable clients for most) makes sense.

Most advisers are servicing a smaller group of wealthier and older clients than they did before with traditional advice models that have served them well to date.

First and foremost, businesses have to survive and thrive in the immediate term – and that means giving clients what they want now. And there is no doubting the present and future value of face-to-face advice.

But does a business only able to service existing (and, let’s face it, ageing) clients with traditional advice models retain much residual value? The problematic and unavoidable question remains. How much is a business with a dying client base worth?

While providers continue to gobble up distribution, the need for change remains less pressing. But it will not last forever. Neither will baby-boomers who will, at some point, toddle off into the sunset. What and who will be left to service tomorrow’s client?

Phil Wickenden is managing director at Cicero Research

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  1. Quite a few “dying client bases” will be passing on a sizeable chunk of their assets to those nominated under pension freedoms, many of whom will already be a party to, and aware of, such planning arrangements.

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