Sue Viskovic (left) and Tom Reddacliff

Scarcity of adviser talent combined with a pressure on profit margins and growing costs makes it even harder to answer once a simple question: what advice business model is the one these days?

According to consultants in the sector, there are two types of advice businesses at the moment to look at when analysing the current market environment and each of them comes with a set of very different challenges.

The first type of business is the one which is in a relatively good shape, growing quickly and with plenty of client opportunities, where problems like “managing growth” are described as “the good problems to have” by Encore Advisory Group director Tom Reddacliff.

However, he warned, some aspects of these businesses will be also put to a test. According to Reddacliff, the businesses’ human resources capabilities, consistency of the processes and the strength of the balance sheets are the three things that need to be sorted out.

“What I would see often in the advice business is that different advice pods operate differently which creates a lot of challenges for the back-office staff and tests systems,” Reddacliff tells Professional Planner.

“They are growing on the top line but it is not turning into the profitability they want bottom line. But there are also businesses that do the opposite of what I am describing and these businesses really nailed harnessing their HR capital.”

At the same time, there are many businesses which are on the other side and are usually smaller, or even “a bit stuck”, with costs significantly going up – it’s these practices that need to focus on operating “really sufficiently” and “managing your costs really well”, Reddacliff says.

Business model of the future

Speaking about the business model of the future, Reddacliff says he has been observing the arrival of a super firm type-of-business to the financial planning space and he expects it will dominate the landscape in advice.

“The ultimate business model [what we are dealing with now] is the emergence of privately owned, big solid multi-partnered scalable firms and that is the business model of the future,” he says.