Putting the right people in the right positions with the right training is the single most important thing a chief executive can do. With the right team, everything is possible.
For advice firms, the right team will include qualified advisers, as well as paraplanners and administrators to provide support.
However, margin pressure is now building due to a shortage of highly skilled advisers and paraplanners, with both groups commanding higher wages.
Last month, Money Marketing highlighted research by recruitment firm BWD Search and Selection, which found average total adviser earnings reached £93,100 in 2017, up from £81,500 in 2016.
Allied to this is the fact 7,000 advisers are set to retire within the next five years, increasing to 13,000 over a 10-year period, according to Libertatem.
A basic understanding of economics tells us that scarcity equals higher prices.
The second key role of the chief executive is to shape the firm’s strategy. This can only be achieved with an understanding of the external environment.
The concern over scarcity must be on every business owner’s mind who wishes to grow by recruiting advisers, as well as to replace those looking to retire. The realisation is beginning to dawn that it is increasingly expensive for some to operate profitably in this market, and scarcity of much needed resources is going to further push up costs.
Separate research points to the fact that advice fees are going up. The top 100 firms typically charge about 87 basis points, compared to around 50 bps at the time of the RDR.
But is it enough to keep pace with the increase in costs? Based on BWD’s research, to recruit a new adviser, a firm will need at least £12m additional assets under advice to pay the salary and employer’s National Insurance, and that is before all other costs are included.
So, where to look for a solution? One area businesses must focus on to a greater degree is inefficiencies.
Advisers and paraplanners are doing things they simply do not need to be doing.
For example, consultancy firm Scydonia director Innes Miller highlights the need for technological improvements, such as back office systems thatsave advisers from double keying client information, which could boost margins.
EQ Investors director Jeannie Boyle says: “You have to look at the way you are providing services and if they are the ones clients want and need.
“That may mean moving away from face-to-face advice, not necessarily to robo, but looking at how you deal with clients. Not every firm is well placed to deal with the change in how people want to do business with them.”
Combine all the little efforts and look at the substantial efficiencies they will generate for your firm. For many of us, making the effort to improve efficiencies is the strategic solution we need to deal with increased costs and increased scarcity of resources.
Tim Sargisson is chief executive officer at Sandringham