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Big advisory businesses are growing, seemingly at the expense of smaller practices. Is this the case on the ground and can smaller practices survive in the South African financial advice industry? The numbers say yes, and so do the clients.
Are smaller advice practices declining?
Increased compliance and regulation over the last two decades has increased admin and paperwork for every financial adviser. In practice, this means an adviser has to spend more time on admin, with estimates varying from 15 to 50% of their time, or over 10 hours a week, leaving less time for clients or income earning activities.
Add in high numbers of older financial advisers who are considering retirement and it isn’t surprising that some smaller businesses have opted to sell to or join bigger practices, where compliance and admin support is available, along with more specialist resources and expert research. International headlines, and some local ones too, suggest the smaller IFA is a dying breed. These headlines don’t tell the full story, with many small businesses thriving.
FSP numbers in SA
In the last few years FSP numbers have increased, as have smaller advisory businesses. At the end of March 2025 there were 11 897 licensed FSPs up from 10 029 at the end of March 2020.
Research from Pi Financial Services Intelligence shows that FSPs with one to five representatives grew by half a percent (CAGR) from June 2014 to June 2025. In numbers, at the end of June 2025 there were 9 533 FSPs compared to 8 415 in 2014. There has been higher growth in FSPs with more representatives (4% for FSPs with 100+ reps) but the decline of the small FSPs seems exaggerated.
On the ground experience bears this out. At 1Life we see a constant flow of new FSP licenses being issued and new practices joining our distribution teams.
Numbers aside, small advisory businesses have always been and remain a big part of our industry. From what we see, clients continue to find value in them and need them because they offer a truly personal touch.
Why small advisory practices remain an important part of our industry
Small advisory businesses not only offer entrepreneurs the opportunity to grow their own business and ‘be their own boss’, but they also offer many South Africans an excellent service that can help them protect and grow wealth and gain financial independence. This is good for clients, good for business owners and the industry and good for the country. The reasons aren’t rocket science, just good business basics.
Small advisory businesses deliver the truly personal touch
When a client asks for help with their finances, from short and long-term insurance to investments and estate planning, they are looking for a person they can trust, who they believe will care for them and their money and help them achieve their goals. A small advisory business offers this personal touch without any red tape or delays while the right person to speak to is found. It’s the one-on-one relationship we all crave when it comes to our money.
Small businesses are agile, adaptable and available
This is a big plus for clients. It’s just easier to respond quickly when you are in charge and responsible. There is no passing the buck.
And they can charge clients competitive fees
With lower overheads and agility, a small advisory business can compete effectively on costs and offer clients low fees.
But there are downsides for smaller practices
It’s not all smooth sailing. Smaller businesses have to manage their practice, cash flows, taxes, compliance and ensure targets and profits are attainable. For many, it’s late nights and weekends, constantly reading and understanding new regulations and requirements, as well as paperwork. Start up and running costs can be high, especially if you rent or buy office space and manage staff, and if you want to buy a practice or book. Some of these burdens are lessened in a large practice.
The benefits of larger advisory businesses include:
- More product provider contracts, which means more choice for clients
- Access to specialists within the business
- Co-ordinated marketing and branding activities
- More resources for research and tech support, such as developing servicing apps for clients
- Seamless succession
Smaller practices can counter some of the advantages such as by using networks, including product providers, for support.
A matter of client choice
Ultimately, as with any client-facing business, it’s about client choice. Some clients prefer smaller, some bigger. And as our business is all about our clients, there is a need for both. Smaller advisory businesses who focus on the three Cs, clients, compliance and cashflow can survive and thrive.
Necessary and valued
Much of our industry was built by entrepreneurs who saw the need, delivered appropriate advice and products and built successful businesses. Small businesses learn very quickly that if clients don’t want or need you, you will go out of business. It hasn’t happened in financial services in South Africa because many clients need and want the personal service small practices offer, certainly enough to sustain a healthy number of FSPs.