Are advice firms really getting larger?

Despite suggestions that self-licensed advisers and micro-licensees are a fast growing segment of the profession, new research from Investment Trends has found an accelerating shift towards larger advice practices.

But, either way, financial advice practices are becoming more profitable albeit that the research also found that ongoing advice fees are significantly higher among the top 10% of practices.

The 2025 Adviser Business Model Report produced by Investment Trends suggests that firms are expanding not only in adviser headcount but also by bringing in-house specialists such as accountants and lawyers to broaden their services and better address growing client needs.

Commenting on the report findings, Investment Trends director, Cameron Spittle said 31% of practices now had more than five advisers, and that these larger firms hold on average $15 million more in funds under advice per adviser compared to smaller practices.

“Despite their larger footprint, efficiency remains a challenge. Smaller practices continue to grapple with compliance burdens and regulatory uncertainty, while larger practices are more focused on resourcing and technology integration to scale effectively,” he said.

The Investment Trends report said that profitability continued to improve, with more than half of financial advisers (52%) reporting a rise in practice earnings, while just 11% recorded a decline, the lowest level in a decade.

“Among the most profitable practices, success is underpinned by three key levers: higher ongoing fees, leaner cost structures, and greater use of managed accounts to deliver scale and consistency,” it said.

“Efficient advice delivery models and disciplined pricing are increasingly separating high performers from the pack,” said Spittle. “We are seeing a strong focus on operational efficiency that is driving down both operating and advice production costs.”

He also noted the trends which had emerged with respect to advice fees and cost to serve.

“Ongoing advice fees are significantly higher among the top 20% of practices, far outpacing the average with ‘highly profitable’ advisers charging nearly double the ongoing fees of their peers,” he said.

“When combined with lean, tightly managed cost-to-serve models, these higher fees are translating into substantially stronger margins.”