Advice firms ‘running out of road’ due to outdated models

Advice firms are “running out of road” as the models used to build the UK advice industry are now holding it back, a joint white paper has argued.

The paper, published by Jigsaw Tree, The Flower Group, Plannr and Seccl, said that bolting on new technology to a ‘1980s engine’ would not get advice firms to 2030.

It estimated that an average 10-adviser firm wasted £360,000 a year on qualified professional time, with 40 to 60 per cent of adviser time spent on administration that does not require a qualified professional.

Almost one in three (29 per cent) advisers said they could not absorb 50 new clients today, while 7 per cent were already turning clients away.

The paper argued that the capacity issue was not a people problem, but a systems problem, which was getting more expensive each year.

Two thirds (66 per cent) of advisers were spending less than half their working week on tasks that justify their fees, according to the report.

It said that, by 2030, the market will be divided into firms that transformed their operating model, and those that did not.

Advice firms were operating across five to 10 disconnected systems, the paper stated, including CRM, cashflow software, investment platforms, and compliance spreadsheets.

The report outlined three transformation scenarios: keep hiring, transform operations, or deploy full technology and outsourcing leverage, and modelled the economics of each across a representative £100m AUM firm over three years.

The difference in cumulative profit between the traditional path and the leverage path was up to £1.5m, and by year five technology-enabled firms were projecting net margins of 55-72 per cent compared to 36-42 per cent for firms that stayed the course.

“We have mapped processes inside more than 400 advice firms,” said Jigsaw Tree founder, Chris Baigent-Reed.

“What firms think takes three days actually takes seven when you count every email, every login, every handoff, every wait state.

“Client onboarding isn’t a three-day process interrupted by delays. It’s a seven-day process with four days of invisible waste baked into the model.

“The extra four days aren’t bad luck. They’re the cost of a business built by accumulation rather than design. That’s what process mapping makes undeniable and it’s what this blueprint shows firms how to fix.”

Seccl executive chair, David Ferguson, added: “Much of the technology that drives our market is losing its relevance: scarcely automated, poorly architected and badly connected.

“The result is clunky manual processes, poor data flow, slow transfers – and advisers spending far too much time compensating for systems that should be doing more of the work.

“When the architecture is right, admin starts to drop away and firms can grow without simply adding more people, more process and more cost.

“And it is becoming easier and easier to come by – whether directly through API-first infrastructure, or indirectly through the modern platforms already built on top of it.”

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