The Four Key Indicators of a High-Risk, Low-Value Advice Business—and How to Address Them

Running a financial advice business comes with its challenges, but some firms carry more risk than reward. Certain advice models can be difficult to scale, operate on razor-thin margins, or create hidden liabilities that erode long-term value.

Many advisers build businesses over decades, only to find that when they want to step away, they face barriers to exit—whether due to client dependency, regulatory risk, or unresolved advice liabilities.

So, how can you ensure your business is not only profitable today but also viable in the long run? We spoke to Poppy Morrison, a business consultant who works with SJP firms navigating these issues, about four key risks that can weaken a financial advice business and what you can do about them.

Risk #1: Thin Profit Margins

“If you’re not closely monitoring your cost-to-income ratios and the impact of rising costs, your margins can shrink without you realising,” says Poppy.

Regulatory expenses, PI insurance, compliance oversight, and technology costs all add up. Independent firms often carry these costs alone, making it difficult to maintain profitability, especially when revenue is unpredictable.

How to spot this in your business:

• Do rising costs make it harder to remain profitable?
• Are regulatory or operational expenses eroding your margins?
• Have you benchmarked your costs against industry standards?

What you can do:

• Streamline your overheads – Break down every cost and assess what is essential.
• Evaluate your risk exposure – PI insurance, regulatory changes, and legacy advice can all impact profitability.
• Strengthen your pricing model – Ensure fees align with the value you provide and are sustainable over time.

Risk #2: Difficult to Scale

“As your client base grows, your operational model needs to grow with it,” Poppy advises.

Firms that rely heavily on a single adviser or outdated processes struggle to scale efficiently. A business built around one individual’s relationships can risk a bottleneck situation, limiting growth and making succession planning difficult.

How to spot this in your business:

• Are you personally managing too many client relationships?
• Do compliance or admin processes take up a disproportionate amount of time?
• Would your firm struggle to handle an influx of new clients?

What you can do:

• Invest in scalable processes – Streamline operations with technology and delegation.
• Reduce admin burdens – Automate compliance and client management where possible.
• Build a structured growth plan – Identify areas where efficiencies can be gained without adding excessive cost.

Risk #3: Unresolved Advice Liabilities

One of the most significant risks for advice firms—especially those built over many years—is legacy advice liability.

“Firms often focus on growing their client base and revenue, but they don’t always think about the liabilities they are accumulating along the way,” Poppy explains.

PI insurance provides some protection, but limitations on cover, excess payments, and potential claims post-sale mean that historic advice can remain a financial and operational risk long after an adviser steps away.

How to spot this in your business:

• Are you carrying historic advice liabilities that could impact a future sale?
• Have you reviewed your PI cover and its exclusions?
• Would unresolved liabilities create challenges if you wanted to exit?

What you can do:

• Audit your liability exposure – Assess how historic advice is covered under your current PI policy.
• Consider risk transfer options – Certain business models, such as networks or vertically integrated models, offer indemnification against legacy advice claims. SJP is just one example of a firm that offers this protection.
• Future-proof your exit strategy – If liability remains with you personally after sale, your exit may not be as clean as you expect.

Risk #4: Limited Long-Term Value

Many advice firms operate successfully in the present but fail to create value beyond the individual adviser. Without a clear succession or sale plan, owners can struggle to extract value when they retire.

How to spot this in your business:

• Do you have a defined exit strategy?
• Would your business hold value without your personal involvement?
• Is your client book structured for continuity beyond you?

What you can do:

• Develop a structured exit plan – Engage early with potential successors or sale pathways, ideally at least 10 years pre-sale.
• Protect client continuity – Build relationships at a firm level, not just at an individual level.
• Assess market demand for your business – Understand what potential buyers value and how to position your firm accordingly.

Strengthening Your Business for the Long Term

For many advisers, running a firm is about more than just today’s revenue—it’s about building something that holds value in the future. That means:

• Balancing profitability with sustainability – Keeping costs controlled while ensuring the right support structures are in place.
• Managing risk exposure – Understanding and mitigating advice liability to avoid surprises later on.
• Planning for an eventual exit – Making sure the business is structured to be saleable when the time comes.

If you’re thinking about how to secure the future of your business—whether by improving efficiency, reducing risk, or planning for an exit—it’s worth exploring the different models available. Taking steps now can make a significant difference when it’s time to move on.

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