2024 is set to be one of the best years for starting a business in the past half decade with 468,000 new firms having started up in the first half of the year, according to the New Startup Index by Beauhurst.
With start-ups catching up with the bigger players, there's no better time to explore the characteristics of corporate firms vs. smaller companies and which is the best fit for you.
We’ll be honing in on the financial services industry, particularly financial planners (aka advisers) and the characteristics of smaller firms that make them stand out for the better.
Perhaps more importantly, it’s also appropriate to discuss how working with a small, independent financial planner can benefit you as a client.
There is, of course, no set rule that small advice firms are superior to larger ones. But small, independent firms often provide a more personal service and good value for money.
Our firm is a ‘small firm’ in regulator’s language but we manage over £35m of client funds and have over 80 loyal retainer clients that we help on a regular basis. We are talking from our experience, not that of micro-firms ran by one person or larger SMEs with 20+ advisers.
Types of financial planning businesses in the UK
When researching financial planners and advisers, you will usually come across x kinds of business and it is useful to note this when choosing which is best for you, whilst also considering their size.
- Restricted Advisers/Planners – they only offer financial advice on a select number of funds so do not guide you on the whole of the market.
- Independent Advisers/Planners – like us, this kind of advice firm offers guidance on the whole of the market and is not restricted to a set list of funds. This means they can advise on pretty much any kind of investment; however some may choose to avoid ‘wild card’ investments such as cryptocurrency.
- Unregulated financial planners – these are financial coaches that are not registered with the FCA and therefore do not have a framework or regulation to abide by. This can cause a compliance issue as you are not fully sure whether they have the right experience and knowledge to be able to advise correctly. At Stephen Eve, we are registered with the FCA (Financial Conduct Authority) and FSCS (Financial Services Compensation Scheme), Financial Vulnerability Taskforce and our lead adviser is Chartered, so you can be assured we are definitely regulated and can be trusted to give suitable guidance.
Why choose a smaller financial planning business?
- Personal service - You will likely have a dedicated financial adviser, who you can access easily and is assigned to you as a client. Dealing with one person only (with the exception perhaps of their supporting Paraplanner or Administrator) makes life a lot easier as you don’t need to keep explaining yourself.
- Devoted to the client - They provide a more attentive service, and have the time to devote to individual clients. Frankly, a smaller business has more to lose if you as a client leave. So they are committed to client retention and ensuring you are happy.
- A closer relationship - A personal service, with someone you can trust is invaluable when it comes to financial planning. Especially as money is an emotional subject so you need to discuss it with someone you feel comfortable with and that you are able to get to know over time. It is much harder when you are working with several people and the rapport takes longer to build.
- Purpose-led - They are often values, not figures focussed. There is a reason someone broke out and started their own business and it is often because they were fed up of chasing the bottom line. Many small business owners are fulfilling a passion, which makes their business more purpose-led.
- Bespoke solutions - Many small advice businesses are un-restricted and can advise on the whole of the market to tailor a solution to you. Whilst we cannot speak for all SMEs, this is certainly the case for us and much of our network. Many larger firms, banks, building societies and network members provide only ‘restricted’ advice. This means that their advisers are told what they can and can't offer and clients are directed only to their own funds, or to a limited range from companies.
- Value for money - It isn’t guaranteed, but many smaller firms can offer good value for money as advisers aren’t bound by a large corporations strict fee policy. Some of the bigger advice companies are also part-owned by venture capital firms. This means return on investment needs to be considered and therefore bigger profits made on client fees.
- Quicker turnaround - You might find that a smaller firm can offer you a quicker turnaround time, since they often have fewer hoops to jump through with internal sign off. Whilst compliance is key in our industry, there is such a thing as too much red tape and planners in smaller firms with leaner structures may not need to share their advice with as many people or teams before it goes to you the client.
Misconceptions about smaller financial planning firms
- It is riskier to allow a smaller firm to manage my money – This is not necessarily the case. If a smaller firm is FCA regulated and part of the FSCS, your money is safe since. Many smaller companies, like Stephen Eve, are also part of bigger wealth management networks who provide insurance, compliance, regulatory frameworks in interest of the client. We work with 2plan to ensure that everything we do abides by consumer duty rules. Some companies choose to work under the networks’ brand, however Stephen Eve Financial Planning is its own brand as we choose to use the tools and knowledge provided by our network but instil our own culture and share our personality. If you are considering using a company who is part of a network, make sure you research the network too to understand how they work, their culture, and if you are happy that your adviser is associated with them.
- They won’t have a solution for my complex finance needs – If you are an investor with more assets, you don’t necessarily need to invest in complicated funds and strategies. In fact, a simplified approach can be more beneficial, as long as it meets your objectives. Investing in ‘specialist’ funds can sometimes incur higher fees due to the niche nature of the way they’re managed. That may mean a lower return. Although we are a smaller business, at Stephen Eve, we work with global, established fund managers who use evidence-based, diversified portfolios. You can read more about this here. What’s more, if your finance needs require a multi-faceted approach, we have a trusted selection of legal, accounting, and business consultancy professionals that we work with to provide clients with a holistic solution.
- They’re not as established as a large company - yes, bigger firms may have larger offices and marketing budgets but does that mean they have more experience? Not necessarily, that depends on the individual you are dealing with. Keeping overheads down means we can keep fees lower for clients.
Key takeaways
Choose the financial planner that is right for you. This will be different for everyone and there is no ‘one-size-fits-all’.
Smaller firms, like us, tend to offer a more bespoke, attentive service where your financial planner becomes almost like a friend (albeit, a professional one). Plus, they can often offer the same options, if not more, as a larger conglomerate or corporate firm.
But, if going with a larger firm feels like the right decision, that’s ok, too. The most important thing is to have weighed up all of your options and feel comfortable in your choice.
