The annual survey commissioned by Owen James polled 100 advisers in order to identify the key value drivers of IFA business models.
The survey, which is in its second year found that there is a clear shift towards fee based advice and trail renumeration. It is also noted that business models with greater emphasis on investments as a key specialism are generating higher gross margins. The use of para-planners also typically doubled profitability of a business according to the findings.
Higher case sizes, lower cost client acquisitions and the use of technology and business transacted online were also identified as key value drivers in an IFA business model.
Owen James organiser James Goad says: “The IFAs that took time to complete the questionnaire will now have an opportunity to benchmark themselves against similar business models to enable peer group comparisons. We will be running this benchmark annually and are currently putting together a series of focus groups to ensure that we continue to maximise the value for the industry.”
KPMG strategy practice director Jeremy Oakley adds: “This years benchmark findings show the strong connection between a firm’s recurrent earnings – fees and trail – and profitability. The million dollar question of how an IFA funds the transition from initial to recurrent earnings remains a challenge for many.”