Top performing advice businesses have plenty in common. But there are a few things that really move the dial when it comes to lifting the profitability of your practice.
I recently caught up with Sue Viskovic, Founder of Elixir and Head of Consulting at VBP, on an Ensombl podcast. Our chat followed the release of Elixir’s inaugural 2024 Advice Operations Research Report, sponsored by Colonial First State.
During the episode we unpacked the key insights from the report, which is based on a survey of more than 720 advisers from 171 advice practices from across Australia.
The reason why this work is so important is because it is the first comprehensive study of its kind that provides rich data on the engine-room of advice businesses.
We wanted to deliver some tangible insights that all advisers can use when looking to optimise their operational efficiencies. As practices begin a new financial year, I thought it would be useful to provide a quick summary of the often-overlooked profit drivers that the research uncovered.
Managing staff
An important point Sue makes on the podcast is the importance of people and culture in advice businesses.
Many practices have recognised the importance of staff involvement when setting the future direction of their businesses
The Elixir study showed that 49% of advice businesses involved all staff in strategy planning and/or business improvement initiatives and a further 21% involve those they consider leaders.
The difference in the profitability of those businesses who include staff in some way was significantly different to those who go it alone with strategy planning.
Those who involve their staff in the business strategy, including major decisions, had an average EBIT of 25%. Those who flew solo on strategy had an average EBIT of 20%.
Culture
Culture is a something that can be difficult to quantify. It is often those things that you can’t touch or see but you can feel.
How do your people feel when they come to work? How do your clients feel when they interact with you?
Influencing culture is key. If you’re a smaller firm with four or five team members, the culture is organic and comes directly from the principal. The attitude, energy and behaviour of the business owner sets the tone.
As you grow larger, there is a bigger requirement to identify culture. This means defining your company values.
An integrated approach
The founders of an advice business will naturally have some ideas about how the firm should operate. It is their business after all.
But as the business begins to scale, those who have found the greatest success are the founders who invite the rest of the team in to flesh out their values.
It’s all well and good to say that ‘integrity’ is the bedrock of your culture. But having integrity should be a given in financial advice. What does your company actually stand for?
This is a question that should be discussed in a group setting, with an open mindedness towards nailing down the attitudes and behaviours you want to be known for and can live up to.
While there is a time and opportunity cost to taking an integrated approach by including your staff in this activity, the return will be well worth it.
There is a direct correlation between a positive culture and enhanced profitability and employee satisfaction. Firms with higher culture scores notably outperform their counterparts in both EBIT and satisfaction metrics.
The Elixir survey asked firms to score out of five how satisfied they felt about the success of their business.
Firms with an EBIT of 24.5% had a satisfaction score of 4.07 out of 5. Those who had an average EBIT of 19.6% and 2.8 out of 5 for satisfaction.
Attracting and retaining talent
Finding talent is one of the trickiest parts of growing any business, but for advice practices it can be particularly challenging.
Obviously having a competitive remuneration package is key. But what else is keeping your team wedded to your practice? And how will you attract the people you need to grow?
This is where articulating your values, being clear on your culture and managing your team well all become incredibly powerful. Not only will you boost your bottom line, but you’ll also become known as the best place to work – something that no founder should ever take for granted.
One of the most exciting and difficult parts of running any business is people. By making values part of the balanced scorecards, you ensure they are lived and breathed by each member of the team.
This is also a great way to know who is aligned to your values and who might be best suited elsewhere.
