Boards, advisory groups and mentors: Building governance for a growing practice

As financial advice practices mature beyond their founding years, principals increasingly recognise that sustainable growth requires more than technical expertise and client relationships. It demands structured governance, external perspectives and deliberate succession planning. For Australian advisers navigating this transition, understanding the distinct roles of boards, advisory groups and mentors has become essential to building practices that outlast their founders.

The case for formalised governance

Research consistently demonstrates that businesses with structured governance outperform those without it. According to the Business Development Bank of Canada, small businesses that established advisory boards grew sales by 66 per cent on average in the first three years, with annual sales running 24 per cent higher than comparable businesses without such structures.

The Australian Institute of Company Directors notes that advisory boards enable business owners to access an independent view and a safe place to discuss issues of major significance. For advice practices specifically, this external lens proves invaluable when confronting decisions around technology investment, service model evolution or preparing for ownership transition.

Understanding the governance spectrum

Formal boards of directors

A board of directors is a group of individuals who are legally responsible for the governance, control, direction and management of an organisation. Directors bear fiduciary duties to act in the company’s best interests, can be held personally liable for breaches, and make binding decisions on behalf of shareholders. For larger advice businesses, particularly those with multiple principals or external equity, formal boards provide accountability structures that protect all stakeholders. However, the compliance burden and personal liability means many growing practices find this structure premature.

Advisory boards

Advisory boards occupy a middle ground that suits many advice practices. Unlike a board of directors, the members of an advisory board are not authorised to act or make binding decisions on behalf of the organisation and they do not have any fiduciary responsibility. Advisory boards are not legislated or regulated by the Corporations Act or any corporate governance codes within Australia.

A typical advisory board includes two or three independent members, meeting six to eight times a year. Members are often chosen for specific expertise, including marketing, technology, human resources or industry experience, that complements the principals’ capabilities. The Australian Advisory Boards Institute observes that well-structured advisory boards help business owners break through growth ceilings by accessing skills and experience they would not otherwise have.

For advice practices, advisory boards prove particularly valuable during critical transitions: launching new service lines, evaluating technology platforms, expanding into new markets or preparing for ownership changes. The structure allows principals to maintain decision-making authority while benefiting from rigorous external challenge.

Mentorship arrangements

Mentorship represents the most flexible governance support available. Individual mentors provide personalised guidance drawn from their own experience, offering a sounding board for day-to-day challenges and longer-term strategic questions.

Effective mentoring relationships typically combine industry veterans with emerging practitioners, transferring tacit knowledge that formal training cannot replicate. Mentors might help with client relationship management, practice valuation or regulatory navigation.

Governance and succession planning

The intersection of governance and succession planning deserves particular attention. Within the next 10 years, almost 40 per cent of financial advisors are expected to retire, yet even among those advisers with plans for near-future retirement, one out of four say they are unsure of their succession plan. Structured governance helps address this challenge from multiple angles.

Advisory boards can provide objective assessment of potential successors, helping principals overcome the emotional attachment that often clouds internal succession decisions. They bring external perspective to talent development and facilitate transition planning conversations.

Mentorship programs support succession from the other direction, developing next-generation advisers who might eventually become internal buyers. Sourcing, developing and mentoring young adviser talent to become potential successors requires an intentional approach and a commitment to investing in their careers.

Implementing governance structures

Establishing appropriate governance requires honest assessment of business needs and readiness. The AICD suggests owners consider several questions when selecting advisory board members, including: where can I source the best advice from someone who understands my business? What skill gaps require filling, such as strategy, human resources, marketing, legal, technology, operations and finance?

Practical considerations include defining clear terms of reference, establishing meeting rhythms that balance rigour with practicality, and ensuring advisory board members understand their role boundaries. Businesses should document arrangements clearly to prevent members from inadvertently assuming director-like responsibilities.

For practices not ready for formal advisory boards, peer advisory groups offer an intermediate option, bringing together principals from non-competing practices to share challenges and solutions.

Looking forward

The advice profession’s ongoing evolution makes structured governance increasingly relevant. Regulatory complexity shows no sign of abating, technology continues reshaping service delivery and demographic shifts demand fresh thinking about practice sustainability. Principals who build robust governance frameworks position their practices to navigate these challenges while creating businesses capable of outlasting their founders.

Whether through formal boards, advisory groups, mentoring relationships, or combinations thereof, the key lies in recognising that external perspective and structured accountability improve decision-making. For growing advice practices, investing in governance today builds the foundation for sustainable success tomorrow.

James Dunn

James is an experienced senior journalist and editor of The Inside Network's publications.