There is no clearer sign of an industry’s appeal and future outlook than its ability to attract capital and talent.

Despite Australia’s complex tax, superannuation and social security system underpinning demand for professional advice, the financial planning industry has struggled to secure the backing of serious long-term investors. This has curbed the formation of large, sophisticated professional advisory businesses.

What capital investors are looking for can be summed up by growth opportunities and margin opportunities.

Unfortunately, a couple of major headwinds continue to impact the industry’s ability to deliver them, namely an overly tight regulatory regime and reputational issues. Both issues must be addressed to lure the kind of capital needed to take this budding profession forward.

Treasury’s Quality of Advice Review promises a more principles-based approach to regulation and, if efforts to raise barriers to entry for advisers and licensees are successful, a stronger reputation will ensue.

Assuming those two things happen, capital will flow back into the industry. It will then be up to business owners to demonstrate their capability and capacity to deliver growth opportunities and margin opportunities.

One of my earlier columns described the attributes of the ideal capital partner.

To briefly recap, there are basically two types of capital: patient and impatient.

Patient shareholders are focused on long-term value and, therefore, offer stability throughout the business cycle. This is a major advantage because it enables management to focus on building great businesses.

Impatient shareholders, such as traditional lenders and private equity, are focused on high, short-term returns. Their motives run counter to the motives of most small-to-medium enterprises.

This column focuses on what financial advisers need to do to build a world class business that can attract the ideal capital partner. We believe the firm of the future will possess five key elements: a compelling shareholder value proposition, client value proposition, employee value proposition, a defined enterprise architecture and a strong culture, evidenced by clearly articulated values and behaviours that are monitored and measured.

This column – the first in a series on the firm of the future – focuses on the shareholder value proposition.

The table below provides a snapshot of a compelling shareholder value proposition.

Table: What good looks like – Shareholder value proposition.