Many advice firms are still operating with a small business mindset, which an industry expert says is leaving little room to fund M&A growth as rising costs continue to pressure profitability.

Nearly half of advice businesses are generating less than $500,000 in annual revenue, raising questions about whether firms are pricing their services to support growth or simply maintain the status quo.

The issue comes as industry discussions around M&A continue to focus on scale, succession and growth, with smaller firms often struggling to participate in consolidation activity.

According to Forte Asset Management founder and director Steve Prendeville, the challenge for many smaller businesses is not a lack of ambition but a lack of capacity and profitability to fund growth initiatives.

Recent research from VBP Consulting highlighted the persistence of a “small business mindset” across parts of the advice profession, where firms prioritise lifestyle outcomes over building scalable business assets.

Prendeville said this was often reflected in businesses that had limited ability to reinvest in people, technology and operational improvements, as well as any M&A ambitions.

“The reason that they’re inhibited to some degree is that they’ve got very little room on their balance sheet to reinvest in their business, one; to manage organic growth, and then, two; actually fund inorganic strategies,” he said.

“So, there’s capacity issues, which can only be really solved by systems, processes and people.

“They’re naturally inhibited, because they just don’t have the robustness to be able to grow to a large degree.”

The comments come as many advice firms continue to grapple with rising operating costs, including technology expenses, compliance requirements and staffing costs.

While inflation has lifted the cost of running businesses across the economy over recent years, Prendeville said many mature advice firms had been reluctant to review their pricing structures.

He argued that advisers needed to view pricing through the lens of both service delivery costs and long-term business sustainability.

“Because the price of operating a business is steadily increasing and you need to be able to match those increases in the value chain, but also secure your profit margin, which is ideally around 35 per cent or more,” he said.

“On what is your cost of inputs, build your margin of 35, and there’s the cost for your service.”

Failure to regularly review fees was having a direct impact on profitability, he said.

“I find that mature businesses haven’t shifted their pricing in the last five years, even while we’ve had fairly strong inflation, and also the costs, and it’s impacting on profitability.”

In some cases, Prendeville said advisers were prioritising client loyalty over commercial considerations, despite the risk that under-pricing could ultimately weaken their businesses.

He said many firms viewed their practices more as lifestyle investments than scalable enterprises.

“It’s more of a lifestyle investment rather than a business asset so they’re comfortable with the status quo, and nothing really changing,” he said.

“There’s nothing wrong with that except that they’re probably likely to be bringing home less if it’s maintenance of the status quo.”

Rather than seeing fee increases as being at odds with client relationships, Prendeville argued that maintaining a sustainable and profitable business was ultimately in clients’ interests.

“The loyalty to clients can be reversed, the most loyal thing you can do is still be there,” he said.

“And still be able to provide proactive services.”

References

Article: https://www.moneymanagement.com.au/status-quo-or-no-advisers-pricing-for-maintenance-or-growth/

Author: Shy-Ann Arkinstall 04.06.2026