Factors affecting the growth of small privately‐owned financial planning businesses

Over the past 10 years, there have been many financial scandals in the financial advice industry, which has caused substantial losses for investors. Large wealth institutions controlled by major Australian banks have significantly contributed to investor losses by promoting their products which were not always in the best interests of clients. The aim of this study was to explore the factors affecting the current and future growth of small privately‐owned financial planning businesses as a competitive marketplace provides better consumer outcomes. The study undertook a qualitative approach using an exploratory research design which involved the recruitment of 51 privately‐owned financial planning practice owners who were personally interviewed with semi‐structured interview questions. Using a theoretical framework based on Michael Porter's five competitive forces model, the study found that the main factors enhancing growth were differentiation of service, technology enhancement, target marketing and business and client referral arrangements. Factors that negatively affected growth included the affordability of providing advice due to regulatory changes and the negative public perception associated with various industry scandals. The results provide existing and new entrant adviser practices with valuable knowledge to make informed decisions in the areas of practice management and direction. Additionally, the study provides policymakers and regulators with further knowledge to better support the privately‐owned financial planning sector, thus enabling consumers to benefit from a more competitive marketplace.