A billion pounds of client money is the threshold at which a financial advice firm stops being a practice and becomes an institution, and the two require almost nothing in common from the person running them. McGovern has stepped down as chief executive of MPA, a firm sitting on roughly that figure, which is a useful moment to notice how thoroughly the job has been rewritten underneath everyone holding it.
Advice firms of this size in the UK grew up as professional partnerships. The founding logic was relationships: a planner who knew a client’s business, divorce, children and intentions, and who was paid for judgement delivered face to face. That model scales badly and beautifully at the same time, beautifully because the client retention is extraordinary and badly because the asset is a person’s diary. Everything that has happened to the sector in the last decade has been an attempt to industrialise that relationship without destroying it.
What arrived instead was weight. Consumer duty obligations that require a firm to evidence outcomes rather than process. Centralised investment propositions that have to be built, monitored and justified. Professional indemnity costs that reward scale and punish independence. Consolidator capital hunting for firms exactly this size, which changes every conversation a chief executive has with their own shareholders. None of that is advice. All of it is now the chief executive’s job, and the result is that running a billion-pound advice firm has become an operating and compliance role performed by people who were usually hired for their client skills.
The cafe analogy is almost too neat. There is a moment in the life of a very good coffee shop when the owner, who opened it because they loved the bar, realises they have not pulled a shot in four months. They are doing rotas, three leases, a supplier dispute and a hygiene inspection, and the thing they were excellent at is being done by someone else, slightly less well, while they sit in the back office doing something they were never trained for and do not enjoy. Growth did not reward the skill that caused it. The second site is a different business from the first, and the only question is whether the person who built the first wants to run the second.
That is the most plausible shape of a transition like this one, and it is worth stating without the usual euphemism. Chief executives leave firms of this scale for three reasons: the board wants different capability, the market wants the firm and the exit is being prepared, or the incumbent has looked honestly at the next three years of the role and concluded it is not the job they signed up for. All three are rational. Only the first is a problem for the clients.
The structural point underneath is that the UK advice market is mid-consolidation and consolidation is a process that eats mid-sized firms specifically. Below a certain size a firm can stay a lifestyle practice indefinitely. Above a certain size it has the infrastructure to buy others. In between sits a band of firms with institutional costs and practice-scale revenue, and the strategic options there narrow to acquire, be acquired, or invest heavily in becoming the kind of operation that can do the former. Every one of those paths requires a chief executive hired for a different reason than the founder was.
Leadership changes at this level are read by advisers as instability and by capital as positioning. The second reading is usually the accurate one.
A billion under advice is not a bigger practice. It is a different trade wearing the old firm’s name.
Source: Citywire New Model Adviser, “McGovern steps down as CEO of £1bn firm MPA”
