Personal Touch Financial Services has come in for some flak in recent months.
It took the step, under chief executive Max Wright, to dramatically cut its membership and raise its fees, all the time while offering the same service.
The impact on the bottom line has been immediate. According to the latest set of results, annual pre-tax profit rose by 21 per cent to £482,895 for 2013, while turnover dropped 11 per cent to £51m.
But the move was not popular among advisers, with complaints about unfairness and overcharging.
Mr Wright said: “We weren’t charging enough. We were significantly underpriced; what we did was to move our price to being aligned with the market and competitors.
“For more productive firms our price remains very competitive because it’s a flat fee.”
Two years ago, the company took the decision to move to a flat fee for investment and pensions business, and raise fees for mortgages and protection - the large bulk of its business.
Mr Wright said: “We have a transparent process on price, where what we’re doing is looking at our long-term future, and members’ long-term future and looking at how we can manage our costs.
“It’s in our members’ interests that we’re a well-run business. The worst thing that can happen to a member is lock into a network whose financial position is unstable.”
Networks are dealing with plenty of change at present. Many advisers are turning to support companies and preferring to stay directly authorised, keeping back a larger proportion of their income, than going to networks that evolved from a commission-based environment.
So it might seem odd, then, that a network might actually turn away financial adviser firms, but this is exactly what happened.
A year ago, Personal Touch decided to weed out a large number of ‘undesirables’, adviser businesses who were not particularly wanted by the network. The network numbers went from 576 to 329 ARs, and adviser numbers from 1,161 to 673.
Mr Wright said: “We took out the firms that weren’t writing much business or those that didn’t fit with the way we wanted our business to develop, which was around quality of advice to the customer.
“Some selected themselves because of the way we changed the price. We used a whole series of quality indicators to see who we wanted to keep.
“If we consistently found ourselves chasing firms for information - it didn’t make sense to continue with firms that were reluctant members or who didn’t see their membership was core to the way their business should develop.
“The firms who were most engaged with us were subsidising those firms that we were chasing up all the time. That didn’t seem to be the sensible way to develop our business - there’s a huge proportion of the intermediary community who are in networks but don’t want to be in networks.”
This does raise the spectre of whether networks have a long-term future in themselves. Mr Wright said: “Business outsourcing has a long-term future, networks are a type of outsourcing , and face-to-face advice has a long-term future. As long as there is face-to-face advice, advisers will want to outsource, and that could be anything from IT to compliance to bookkeeping, through to the regulatory model .
“If they outsource and join a network, they have the advantage of a large organisation supporting the advisers.”
Mr Wright became chief executive of Personal Touch in 2012, after Doug Crawford left to join another business. He had been a non-executive director at the business since 2009, when he had a portfolio of business interests where he was a non-executive director.
Other places where he was a non-executive director include the National Skills Academy for Financial Services and Integrated Financial Arrangements, a wrap service provider. Before this, he spent seven years as chief executive of EMXCo, the mutual fund technology provider which was sold to Euroclear, as well as Eagle Star, where he managed strategic accounts through the late 1980s to the late 1990s.
So what drew him to Personal Touch? He said: “I think I saw a very strong business that had a lot going for it. The advice sector was a good space to be involved in. Financial advisers being involved in a space with the consumer, would be an enjoyable and exciting thing to do.”
But the future of financial advice itself is not so certain. Mr Wright said: “I think there’s a lot of pressure from technology. I think there are also changes around the message from government which is that you can get advice for very little or for free.
“The message is ‘I know a bloke who can do this’, whereas they need to sit down with someone and deal with their needs.”
Melanie Tringham is features editor of Financial Adviser
Career ladder
2009 - present Chief executive, Personal Touch Financial Services
2002 - 2009 Chief executive, EMXCo
2008 - 2009 Non-executive director, National Skills Academy for Financial Services
1999 - 2002 Network director, Misys IFA Services
1987 - 1997 Strategic Accounts, Eagle Star Life
