Financial planning has never been more competitive. There has been a proliferation of alternative advice models in the last few years while the cost of delivering advice, in many cases, is increasing.

Advice firms, now more than ever, must have a deep understanding of their revenue and expenses, and how they impact on profitability.

They must pay specific attention to a client’s willingness to pay for advice and the cost of production, both of which are under pressure. To increase a client’s willingness to pay for advice, practices should improve their client propositions, clearly articulate the value of any enhancements and get clients more engaged.

Another important piece of the puzzle is to focus on lowering the cost of production. Improving productivity is something advisers have greater control over and it can have an immediate financial and client impact. Productivity gains can come from improved systems and processes to reduce double handling. The better use of technology and greater engagement of staff can foster an environment of innovation.

A practice’s competitive advantage will drive both parts of the above equation. At a basic level, businesses compete in one of three ways. Firstly, they compete on cost. They’re either low cost and operate by scale or offer high quality services and are priced accordingly. Secondly, they compete on differentiation and specialisation.  Lastly, they compete on relationship. In other words, they have a relationship that adds value to the client.

Through a better understanding of their business and making the most of their competitive advantage, practices will be better placed to reach their goals. Effective practice management initiatives will help businesses focus on delivering quality advice to clients, streamline their operations and capitalise on opportunities presented.

The financial planning industry is currently experiencing substantial disruption economically, legislatively and demographically. This throws up opportunities.

It is, therefore, more imperative than ever that practice management initiatives focus on delivering client value, improving productivity and increasing competitiveness.

The advice firms that can master these key areas will grow and be increasingly successful both now and into the future.

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