Tim Horrocks is now entering new territory as he has not been directly authorised before.
Mr Horrocks has worked at a a variety of firms within financial services, including an (almost) three-year stint at St James’s Place Wealth Management.
Following this, Mr Horrocks worked at Bank House Investment Management but decided in May 2013 that he wanted to go down the DA route.
He said: “Individually I’ve had authorisation since 2004 and this is the first time that I have applied for direct authorisation as a firm.
“The reason why I wanted to be directly authorised was to ensure that I can be completely independent.
“Certainly from the way things are going, a lot of networks seem to be pushing towards the restricted route.
“I wasn’t with a network. I worked for another DA firm as a registered individual and I saw the benefits of that and I didn’t think it was so arduous to be directly authorised.
“I thought it would be a good route particularly when you are using the compliance function of a large firm so you are getting the benefit of a network as you have the support there but you are not being dictated to and you are not carrying other people’s professional indemnity risk.”
RockWealth uses True Potential for their compliance function and their technology and they also helped Mr Horrocks through the application process “which was massively beneficial”.
We’re a partnership
The IFA currently manages more than £10m funds under management on behalf of 100 clients.
Mr Horrocks is the only financial adviser in the business and is looking to attract adviser members to join the firm, ideally a total of four.
“Ideally it would be better for the adviser to have existing clients and existing experience as they would come in as a member, a partner, therefore being self-employed.
“They would be coming in as part of a novation agreement so we won’t be taking on any prior liability. We would just be liable from the day they start and they would be monitored by use of outsourced compliance functions.
“True Potential would be monitoring all of that and going forward, it is really easy for me to monitor as I can see exactly what is been submitted and take a look at the documentation if I need to. It makes the whole management much easier.”
He added that as a member they would have “some responsibility themselves so it would be in their best interests to make sure everything was tip top”.
“We would like to grow as much as possible but within reason, only in the right way. We are not going to borrow money – there won’t be leveraging at all - it will always be a case of people joining for organic growth and the reward they get for joining is a capital share in the business, a seat on the board and direction of where the company is going.”
The “capital share in the business” is the main driver for Mr Horrocks deciding to set up a limited liability partnership firm as opposed to a limited firm.
“With an LLP agreement we can word it so it will be relative to what that adviser brings to the firm.”
What happened with the Budget recently has potentially changed who would have been on your panel a couple of weeks ago to now being completely differentIndependence
Mr Horrocks believes that independence gives clients more scope and allows advisers to look at each client’s needs by starting from a blank page.
“It gives you that choice to actually select from the whole of the market and make sure you are using the best available of what is available at any given time.
“So you can make changes when changes need to happen and to know what happened over the market in the last few years so changes happen quickly – you need to be responsive to that.
“What happened with the Budget recently has potentially changed who would have been on your panel a couple of weeks ago to now being completely different. You need to be able to be a lot more responsive and finger on the pulse.”
Last month, Daniel Kiernan, director of alternative investment research provider Intelligent Partnership, said that for advisers of high net worth and sophisticated investors, enterprise investment schemes could be an excellent addition to their tool kit and be useful for efficient tax planning.
Mr Horrocks agrees, adding: “I think EIS are actually suitable for a lot of clients, in the same way that an Isa is suitable for a lot of clients really; it just depends on the risk within the EIS itself. They are very useful for tax planning.”
The Financial Conduct Authority previously said it thought it was unlikely that an independent adviser could use one platform to meet their client needs.
Mr Horrocks uses five platforms, including Skandia Investment Solutions, Axa Elevate, Ascentric and James Hay.
Cheltenham-based IFA RockWealth also has a “discretionary mandate”.
Its investment management platform offers clients access to more than 5,000 investment funds and exchange traded funds, with portfolios managed by a selection of discretionary fund managers.
“We don’t think the clients are qualified to be picking funds but neither do we think we are qualified to be picking funds as we don’t have the research capability.
“We are not investment managers we are financial planners so the idea really is we outsource that to discretionary fund management firms and it is much easier to research 30 discretionary managers than it is 30,000 retail funds and that narrows it down straightaway; what has their performance been like, how good a job have they done, what are they charging, where are they available for access for the clients.
“We can meet with them, we can get a higher service from them and we are getting something which the client would normally need a lot of money to access themselves directly.”
Why isn’t it a level playing field?
On the whole, Mr Horrocks is fairly positive about the Retail Distribution Review, believing the industry is more professional and more educated now on what they are advising on.
Interestingly he adds that advice was more expensive to clients in the pre-RDR world, due to the percentages that advisers charged.
“I think clients find it more expensive post-RDR, even though I think it’s a lot cheaper.
“Now we don’t charge percentages. A client investing £200,000 would have paid £6,000 to invest £200,000... some firms would have been paying 6 per cent on that and then we are talking up to £12,000.
“Our fee for that is never going to be anywhere near that level. If we are talking a standard piece of advice and using general investments and Isa accounts for a £200,000 investment you are probably talking about £2,500 to £3,000 for a maximum fee.”
However, like many in the industry, he does not believe that a level playing field exists in terms of adviser fees.
“[Some firms] are still able to effectively pay commission and have 100 per cent allocation where the rest of the industry have clients that pay fees. It will be good when we are all working on a level playing field.
“If I was going to argue the case that my clients can have 100 per cent allocation and yet I can still get paid a £4,000 lump sum for giving advice, I don’t think I would get very far.”
