Neil Chamberlain, director of Worldwide Financial Planning, is passionate about independence, a stance he attributes to his legal services background.
Despite the moribund attitude promulgated by many as a result of new requirements for IFAs under the Retail Distribution Review that many see as prohibitively onerous, Mr Chamberlain believes that firms who are innovative can deliver efficient and effective independent advice.
He adds that he feels protecting independence is important, as it is only advisers with the breadth of perspective of an IFA that offer the education required for clients in this climate.
WWFP has been around since 1988, although Mr Chamberlain did not join the firm until 2001.
“It was little more than a corner shop then with a few advisers who had all come from a direct sales background. Coming from a professional background in the legal game, I kind of recognised that the environment needed to change.
“It needed more bricks in the foundation and a few pointers to align the outlook and the view of everybody. I am passionate about independence, obviously coming from working with solicitors.
“We deliver the advice and the education and that value can only be delivered in the independent sector and not the restricted sector.”
Innovate, don’t exclude
Mr Chamberlain believes that the Retail Distribution Review is more than a change in the regulatory environment, but is also a change in mindset for the industry.
In particular, he cites the need to move away from a transactional sales approach, which he says the vast majority have not yet achieved.
Mr Chamberlain says: “About 85 per cent of this industry sell things, they don’t advise. Unfortunately I think that’s where also the regulator has to flip its idea of what independent advice is; it’s not selling products to people.”
Like others in the industry, he admits that one unintended consequences of the RDR is the advice gap, but believes that the sort of innovation firms must show to survive can be used to bridge this.
“As a firm we need to continue to employ a competitive strategy in the marketplace and the RDR is actually an evolution.
“Independence and inclusion are an evolution, as you need to be innovative to deliver something of value to the needs and wants of that excluded market from an independent advice consideration, rather than let an excluded market stagnate or make choices of little value.
“If you just focus on a particular market, then one of the consequences of the RDR is exclusion.”
One key element of the survival of independence, he says, is the perception that IFAs must understand “everything” about every viable product in the market.
“Rubbish. Absolute rubbish. The fundamental considerations are basically what are the key things that we do and we manage people’s risks.”
However, Mr Chamberlain admits that an understanding of what goes on below the supposed features and benefits is needed.
He says: “Most of my advisers carry screwdrivers and hammers around. They will take a look at this shiny red Ferrari which looks like one but once they get the bonnet up and start taking it apart they might find out there is a little lawnmower engine in it.”
I don’t really want to start hoovering up firms that aren’t aligned with our way of doing things.Platforms
Worldwide Financial Planning uses a number of platforms, the effective use of which Mr Chamberlain believes is equally as essential for independent advisers.
“You need to work out what is of benefit and what do they need when you go through the process of knowing your client, then you know you can match what your client needs - whether it would be of benefit to them to be on a platform.”
Mr Chamberlain says the firm examined what benefits clients would get from using platforms and which clients would benefit when they segmented their clients. However, he says he does not see the value of continuing to obsessively review the whole platform market.
“I did about three years of due diligence from 2003 to 2006 before I actually decided that there was a number of key platforms that were of value and we keep up to date with whether or not they remain of value.
“We don’t distract ourselves by looking at the 30-odd players that are in the market at the minute.”
Like other market commentators, Mr Chamberlain anticipates a shrinking platform market and believes that over the next five years, the market will consolidate to about four or five big players.
“I think there will still be some niche boutiquey-type products floating around that people will use but the main players in the market will shrink to four or five.
“This is on the very basis of the business model required, volume with low margins because consumers I think have set out their needs and wants and one of them is not to pay through the nose.
“I think certainly within the next five years there will be a price war between the platforms and the ones that will win are the ones with the technology and service propositions.”
Loss of knowledge
Mr Chamberlain admits that one aspect of the RDR is the loss of advisers, or “fee-earners” as Mr Chamberlain calls them, who did not want to sit the exams. The firm currently has 15 fee-earners, but pre-RDR there were 18 fee-earners in total. Three of them have now retired.
“I think there were a number of individuals who were very experienced and I suppose it’s another unintended consequence of RDR.
“The move to qualifications was obviously different for different individuals so the majority of our fee-earners are graduates but for some of the guys going back to school after 20 years was going to be more difficult than those that have recently done their degrees.
“Some of our senior advisers decided to retire rather than to qualify. I consider that a bit of a shame because there’s a considerable amount of knowledge lost in that way.
“In terms of operating as a firm one of the things that you gain over a period of time is that tacit knowledge, which is an advantage to your firm and now we can’t rely on that experience and knowledge that was there previously.”
The 15 fee-earners are made up of 12 FCA registered individuals who are all level four or above, as well as three that do mortgages, general insurance and commercial lending.
In spite of all of this, Mr Chamberlain remains a big believer of qualifications, particularly as it has raised the barriers to entry.
“It’s as good thing. If the barriers to entry are higher, this will make the financial services industry better as not just anyone can come in.”
Acquisitions
In 2004, WWFP completed a couple of acquisitions and in 2005 was labelled as 48th largest UK IFA firm. However, Mr Chamberlain says the firm is no longer pursuing an acquisitive growth strategy, unlike many other sizable firms in the market.
“We acquired these firms and then restructured them. We are now not particularly focused on this and we haven’t got any real commitment to acquiring firms, but one of the things that we never do is overlook something that would be of value.
“So if there is a company there that fits in with the way that we look at things and mirrors things it would be something worth looking at, but I don’t really want to start hoovering up firms that aren’t aligned with our way of doing things.”
Mr Chamberlain believes that certain firms are “hoovering up” assets under management and “realistically probably don’t care about the advice that is given”.
“They just want the assets under management to gain particular kind of size in the marketplace. I don’t think they are focusing on anything other than gaining the market, so we are not like that. We would rather not take over the world but do things properly.”
