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What’s the ideal shape of an adviser business?

The structure of the adviser business has been changing, says Sam Rees-Adams, head of External Accreditation, Chartered Institute for Securities & Investment

Do you know which body shape you are? There’s an unbelievable amount of information out there on the subject if you can be bothered to look. Apparently the mesomorph is the ideal shape and whilst those of us who are not natural mesomorphs may never quite achieve it, there are things we can do to help us get closer.

Is it helpful, or even possible, to think in the same way about organisational body shapes? Companies are so very different; it’s not so easy to come up with a meaningful classification and an ideal shape to which all should aspire. However, there are general principles that can be applied and lessons that can be learned from other industries. Take the concept of ‘lean’ for example. Manufacturing may have been where it began but it has applicability to services too. Ensuring that every step adds value can transform client focused businesses such as financial planning. Whilst clients may interact primarily with the financial planner – and increasingly the paraplanner – they are invariably looked after behind the scenes by a number of other people. All of this involvement contributes to the total service received and the shape of this needs to be right for the service to be consistently excellent.

In the dim and (perhaps not so) distant past, many financial planning firms were shaped like an inverted triangle, with three or four financial planners being supported by one paraplanner and maybe half an administrator. The more enlightened firms would perhaps be closer to a 2:1:1 ratio, but invariably there would still be more planners than paraplanners. In many cases this was more to do with the evolution of the firm than a conscious decision to adopt that particular model.

A notable and welcome trend has been a move away from the inverted triangle model. Some firms have achieved a 1:2:3 ratio for planner, paraplanners and administrators. Others have not gone quite that far, but have consciously increased the size of the paraplanning and administrative functions in relation to the number of planners, whether paraplanning is outsourced or done in house. For this to work properly, it requires a fair degree of discipline in determining the precise activities of each role and then sticking to it. However, it enables planners, paraplanners and administrators to spend more time on what they are best at, and make full use of their particular skill sets. Ultimately, when you have the right people doing the activities they are best suited to do, better results will be achieved for clients.

But not just for clients. As an example, one financial planner had spent a number of years building a sound and profitable business. She had excellent relationships with clients, and staff who worked well together. Paraplanning was done in-house and the business ticked along smoothly. However, when she turned her business model on its head and moved to a 1:2:3 ratio her business revenue trebled. An already profitable business moved into another league.

The law profession has long recognised the value of a bottom-heavy business model. For every partner, there will be several associates, in turn supported by paralegals and an administrative team. Financial planning may have been slower to come to this realisation, but it is catching up fast. In both professions, the stakes are high when dealing with matters that have the potential to cause significant harm to clients if done badly. The ultimate responsibility and accountability may sit with those at the apex of the triangle, but they cannot fulfil their obligations if they don’t have enough people with the right knowledge and skills supporting them. Just as with body types, a healthy financial planning business model is all about balance.


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