I’m going to attempt to share my observations from 2021 without using the ‘C-word’ (COVID).
Ok, I just failed in the first sentence, but that’s it. No more mention of that damn disease, despite it dominating the headlines all year. Let’s focus on what affected financial planning:
1. The power of the financial planning model
The power of the financial planning model was shown in 2020 and reinforced in 2021.
Ongoing revenue makes up 80%-90% of a financial planning firm’s total revenue. So when the economy seized in the early phases of (you-know-what, I’m not using that word), most financial planning firms held up just fine.
The businesses that were hit harder were older model firms who still rely on a lot of new business income. Pre ‘you-know-what’, their renewal income was maybe 50%-60% of their total revenue. When new business stopped for a few months, that put them under tremendous strain and they had to react quickly and dramatically.
After the initial shock in 2020, clients have come bounding back to financial planning firms seeking advice and that has continued strongly throughout 2021, further validating our amazing business model.
2. Sale and consolidation
Business sales and consolidation continue unabated. However, for the first time I’m seeing and hearing some quality players enter the space to assist business owners who are contemplating a sale.
That’s right, you can find people out there who will give you advice on how to make the process go well. (Drop me an email to email@example.com if you want a connection)
Why is that happening?
Because so many sellers have felt anywhere from mildly disappointed, to outright dudded by their selling experience. Remember, there’s an information and power disadvantage at sale time; you do this once in your life, while an experienced buyer might have done it dozens of times before. Seller beware.
If you’re looking to sell your business, don’t just wake up one day and think “I’ll sell my business today.” There’s work involved in getting ready for a sale and doing that work can dramatically raise the saleable value of your firm, not to mention make you more attractive to a wider number of potential buyers.
In recent years I’ve seen a lot more owner-advisers joining my Uncover Your Business Potential programme with the sole purpose of getting ready for sale in 3 years time.
If you’re looking for some guidance on the sales process the best paper I’ve read is this one:
Don’t be put off by the title. It’s a great read for sellers too. I wish I’d written it.
While there is clearly lots of selling type action going on, there’s also a lot of succession happening within firms that just aren’t happy selling to a consolidator.
Succession is hard, but rewarding too.
You need to have identified an internal successor that is interested in taking that next step and that has the capacity to become a business owner. It’s much easier taking over an existing business than it is to start one from scratch, so don’t let the work involved put you (or your successor) off.
As you develop your successor, your role changes from player to coach.
Like with businesses preparing for sale, I’m getting a lot more owners joining my Uncover Your Business Potential programme and attending with their successors. It’s like an MBA for the future owners of your business.
4. Change is a comin’
A few weeks ago I launched my latest White Paper, What Next For Financial Planning In The UK?
I’m worried that with the pace of technological change that our cushy, beautiful business model might get disrupted before it ever achieves the heights that we all want to see it hit.
If you’re interested in knowing more and creating strategies that will help you survive and prosper in the next phase of our profession’s development, then grab a copy and have a read (or a listen – we did an audible style version too). You can access all formats here.
5. Digitisation of advice
At the CISI Financial Planning conference, Colin Dyer, Managing Director of Financial Planning at abrdn (formerly 1825 Financial Planning) gave a great presentation on the steps his group have made in digitising the advice process.
While there were plenty of great takeaways, the one that struck me as most prescient, was Colin’s observation that for most clients, reaching out to an adviser for advice is a huge step and pretty intimidating. (What. You, intimidating?)
So they’ve created an online gateway to advice (my words, not his) where a new potential enquirer can complete just 5 minutes of questions online to receive a free report on their retirement plans. This is an easy first step for a prospect to take and delivers them some instant value added. I love it.
Just think about almost any other online buying experience and you’ll notice two things:
- If there’s any friction you’ll probably ditch it and go somewhere easier (e.g. Amazon).
- You need to receive some educational information that truly helps your buying decision BEFORE you’ll feel comfortable committing to a chat (online or face to face).
There’s nothing stopping smaller firms from thinking about and creating their own low-friction pathway into advice for new prospects.