Like the continuous overuse of the term ‘client outcomes’, ‘governance’ also gets its fair share of word count. We talk about it, but rarely describe what good governance actually is. Moreover, we have come to wonder whether there is such a thing as ‘good-enough’ governance, and whether it’s a more appropriate target for financial advice businesses. Do you need to be best-in-class, or is ‘good’ enough?
Rather than simply adding my own views, I caught up with my good friend Kat Rae from Halo Risk, an expert in this space, to ask her what she thought.
John: How does good governance improve your ability to grow your advice business?
Kat Rae: For safe, sustainable growth, you need to really understand what’s going on in your business. You need to be proactive, not reactive. I’ve seen many firms over the years thrown into firefighting mode because their governance wasn’t mature enough. When that happens, growth either pauses or, worse, it sets the business back and creates financial strain. Growth without governance feels chaotic. With effective governance, you’re on the front foot and in control.
When there’s clarity around roles, decision-making, risk appetite and meaningful management information (MI), you stop firefighting and start leading. You can recruit, delegate, onboard clients and scale processes because you trust how the business is run and you can spot risks before they become issues.
Good governance gives leaders the confidence that they are growing sustainably and staying in control, because they understand the risks and know they are being properly monitored and managed.
John: Governance is no longer a hygiene factor – how does it add value to clients?
Kat Rae: Clients never see your governance framework, but they feel it in every interaction. They feel it when meetings happen on time, when advice is consistent, when vulnerability is recognised, and when documentation is clear and professional.
Good governance means outcomes don’t depend on which individual interacts with the client. They can trust the firm, not just the individual. That’s where real client value sits.
John: How does governance help you navigate a crisis and manage your reputation?
Kat Rae: There’s a line that’s always stuck with me: it takes years to build a reputation and minutes to lose it. In a crisis, you don’t suddenly rise to the occasion – you fall back on what you already have in place.
If governance is weak, decisions quickly become emotional and inconsistent. If governance is strong, you already know how to respond. You know who is responsible, how issues are escalated, and how decisions are recorded and evidenced.
John: Does good governance improve your operational performance?
Kat Rae: Yes, and often in ways firms don’t expect. Good governance enables you to look at how the business is operating day-to-day. Where time is being lost, where processes don’t quite work, where people are relying on workarounds, and where risks are building. It moves you to a continuous improvement mindset.
Instead of fixing problems after they’ve caused disruption, you start spotting patterns early through good MI controls and oversight. That leads to better decision-making, more efficient processes, and, therefore, a more efficient use of your teams.
Over time, that reduces rework, reduces errors, and frees up capacity for the things that matter – clients and growth. So, while governance is often seen as a compliance exercise, in reality, it’s one of the most effective operational improvement tools a firm can have.
John: And finally, does a firm have to be best-in-class or is good governance enough?
Kat Rae: Regulators and key stakeholders don’t expect perfection. They expect to see control, judgement and process.
Good governance helps you make the right decisions under pressure, keep the business steady, continue delivering for your clients, and ultimately protect your reputation when it matters most.
Later the same day, Claire and I met with Brandon Horwitz of the Fund Boards Council and asked him what he thought the difference was between gold-plating and good governance:
Brandon Horwitz: Many advice firms put governance off because it feels too complex or outside the comfort zone of leaders whose strengths lie with clients and growth. But good governance is really about getting the firm-level basics right, in a way that fits the size of the business.
It’s often far more achievable than firms expect – and it’s not just an overhead. It helps leaders sleep at night, while also improving day-to-day efficiency, strengthening client retention and reducing overall risk.
At The NexStage we’re minded to agree with Kat and Brandon.
Governance isn’t there to slow firms down. It’s what allows them to lead with confidence, ensure better client outcomes and grow faster, safely. Good governance, needn’t be best-in-class. It is transparent and not overburdening, and can liberate a firm’s capability to execute its plans.