Freedom in a Framework. The foundation for the inorganic and organic growth

Financial Advisory

23 June 2022

AdvisorsAdvisory DistributorsClientCultureFinancial AdvisoryGrowthOrganic GrowthRecruitmentvalue

Facilitator: John Chapman Expert: Nick Blake


  1. Successful practices engage their people to co-create an operating arena that provides for ‘freedom within a framework’
  2. It is important to engage stakeholders when building an operating framework
  3. Co-creation of the framework creates a sense of ownership of the outcome and the framework provides the boundaries within which people are free, and expected, to operate

Discussion points:

A function of business valuation is the discounted profit built into the years ahead. The most valuable businesses are those demonstrating secured revenue streams from a growing, engaged and loyal client base. In turn, those loyal clients are those receiving exceptional service on the back of high performing, culturally aligned people within the business, working within an agreed propositional and operational framework.

Particularly in a fee-for-service world, making sure your ‘promise’ to your client is backed up with operational rigour is important.

Attempts to align people to a common approach can often fail because the approach is either too facilitative (allowing any path to be followed) or too directive (over-prescribing the approach). Being too facilitative can introduce extra risk or inefficiencies. Being too directive can cause resentment and risk alienating people.

The Framework should include a “Beacon” approach that serves two purposes:

  1. Acts as a benchmark, against which an individual’s approach can be measured. Over time, this will inform the extent of the boundaries and whether they need to be reconsidered.
  2. It also informs the extent to which an individual’s approach strays from the efficiency/best outcome of the beacon approach. Over time, individuals tend to gravitate towards what is seen to be best practice.

In growing a business through inorganic growth, businesses are predominantly private equity backed and the valuations for acquired business are very similar. Acquiring firms have to ensure they have a cultural edge and competitive advantage and an example of sympathetic harmonisation was how one firm is trying to create that difference.

Over time, it will be interesting to see if sympathetic harmonisation adds to aligned growth, or detracts from operational efficiency and adds risk.

Key Takeaways:

  • Organic growth is a challenge for the industry as this strategy requires investment in people (recruitment of advisers, paraplanner and support staff) and marketing
  • It requires strong management and vision to invest in organic growth, and as an industry, we have to try to think of ways to recruit more talented individuals into the industry
  • Although challenging from a regulatory perspective, it should be relatively straightforward to align cultural behaviours and outcomes for the clients and the firm to the reward structure for staff
  • Whilst ensuring not to introduce ‘inappropriate bias’, aligning incentives within the firm’s remuneration structure to the ‘beacon’ outcomes means that people enjoy participating in the healthier outcomes for the business and clients