Your Firm, Your Choice
Building a Cohesive Team
What's your vision? What kind of financial services business are you building?
Simply saying "a bigger one" doesn't provide enough direction.
Most financial services business owners, when asked, have a vision for their company. The truly successful firms have crystal-clear visions that have been refined through years of self-reflection and asking, "What are we truly building here?"
Once you've established your vision, you need everyone on your team to align with it. This alignment isn't optional—it's essential.
While you can influence this through effective communication, how successful will that be if your advisers believe they work primarily for themselves?
Even the term "self-employed" sends problematic messages. Most self-employed advisers genuinely believe they operate independently, despite the significant infrastructure and support the firm provides to help them succeed.
The self-employed mindset can be, at minimum, unhelpful and sometimes actively damaging, creating division between business owners and their advisers.
The Financial Reality
The most significant issue with the self-employed adviser model is compensation structure. Often, these advisers receive 55-60% of the revenue they generate or manage—sometimes even more.
As the business owner, profitability becomes nearly impossible at these percentages.
Here are the key financial ratios for a successful financial planning business:
From 100% of revenue, adviser compensation should be capped at 40%. This applies to owner-advisers as well.
Up to 35% of total revenue should cover all other business expenses: administrators, paraplanners, offices, technology, software licences, marketing, accounting costs, Professional Indemnity insurance, and all other operational costs.
This leaves 25% as genuine net profit—your reward as an owner for your investment and risk. This is over and above what you earn for your day-to-day role. This margin allows you to take additional dividends as a shareholder and reinvest in business growth.
Another benefit: during market downturns when your recurring revenue might temporarily decrease, you have a buffer. The business can sustain itself without requiring you to become the bank and take a personal pay cut.
Important notes:
- Maintaining overheads at 35% of total revenue isn't easy. Many firms struggle with this.
- If you're paying advisers 60% of gross revenue, profitability becomes virtually impossible.
Common Complications
These structural issues typically manifest in two ways:
1. Motivation Plateaus
When self-employed advisers earn enough to meet their lifestyle goals, good luck trying to increase their productivity or annual revenues.
2. Misaligned Client Targeting
Most self-employed advisers source their own clients. Rarely does their individual target market align with the firm's strategic focus. This creates exceptions in your operations and increases business complexity—an absolute liability in today's competitive market.
The Productive Financial Services Model
What constitutes good productivity for a financial adviser?
£100k-£200k annually is standard. £300k-£400k is very good, and £500k-£600k represents excellence.
If you're not hitting these numbers currently, don't be discouraged. With the right support structure, reaching these targets within three to five years is achievable.
Consider the implications:
As a solo practitioner, you could generate £600k annually with a small support team. A two-partner firm could reach £1M+. A four-adviser firm could exceed £2M.
We've spoken with firms employing ten self-employed advisers generating £2M in annual revenue, plus necessary support staff. That's an extremely challenging business to manage. Adviser performance typically forms a bell curve, with two or three exceptional performers, two or three underperformers, and the rest somewhere in between.
Which business would you rather own and manage: the smaller, focused firm or the larger, unwieldy one? The answer seems obvious.
Finding the Right Fit
Building a successful financial services business requires clear vision from ownership, aligned values across the entire team, and a commitment to continuously improving productivity.
If your current self-employed advisers don't align with your vision and resist adaptation, our advice is straightforward: let them go.
You may need to downsize significantly—releasing some self-employed advisers, reducing office space, and cutting staff and overhead expenses.
However, even with substantially reduced turnover, you'll likely generate significantly more profit.
The Exceptions
Does this mean there are no successful firms using a self-employed adviser structure? No. However, we can only identify one or two that contradict these observations.
Your Firm, Your Choice
Remember: turnover is vanity, profit is sanity. How do you want your financial services business to look when it's fully realised? As the architect of your firm's future, you have the power to shape it according to your vision.
Use that power wisely.