CompaniesFeb 10 2016

Firing Line: Roger Brosch

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Firing Line: Roger Brosch

Foster Denovo is a firm that rose out of the ashes of Millfield 10 years ago, but, for its chief executive and founder Roger Brosch, that was all a long time ago.

The prospects for his current company, in which he holds a 10 per cent stake, are bright, and work on an entirely different model to the Millfield version.

Mr Brosch said: “The founders of Foster Denovo were very keen to do something more on a partnership basis, not trying to focus on scale, but focus on quality and the relationship particularly with the client. These are more important things to us.”

He believes the problem with Milllfield was the acquisition of Inter-Alliance, which was chaired at the time by his current non-executive chairman, Keith Carby. Mr Brosch thought that the merger of the two public companies would bring problems, but: “institutional investors had different views”.

As sales director, Mr Broscch was happy to walk away and set up a new business on a smaller scale, devoted more to the client experience. The business – a limited company – has 80 partners, with a mixture of employed and self-employed.

The big growth area for the firm is in the corporate arena, with more companies engaging with workplace pensions, and changes are afoot that could shake up the industry.

Mr Brosch said: “There’s a huge demand in that space: pension freedoms, changes in pension funding levels and the lifetime allowance are creating a very significant increase in demand in that space.”

He sees opportunities in providing more advice – for example, Foster Denovo has reached a deal with Friends Life/Aviva over being a point of contact for their clients that need advice, and Mr Brosch also aims to expand his work with the SMEs – firms ideally with 800 to 1000 employees.

Foster Denovo can advise at both the corporate level and the member level. He said: “Every business has particular needs; we are able to look at both levels and that makes us the central partner for the SME market.”

In April, commission on workplace pensions will cease and this is likely to prompt some big upheaval.

“Not all corporate clients are going to want to pay fees in relation to that commission. That change is going to put those relationships under pressure. Not all corporate adviser businesses will have the scale or efficiency to make the transition.”

This means, he thinks, that many adviser businesses will want to exit this sector of the market, be that to a greater or lesser extent. Mr Brosch said: “We are actively considering acquisitions in that space. It will be a small number of good quality acquisitions – I do think the market will consolidate.”

He does see trouble ahead though. The charity sector is an example. Mr Brosch said: “We’ve got 200 charities as clients. We have successfully delivered good quality corporate advice to the charity space that will be delivered on a commission-based product.

“The changes brought about by the DWP should remove commission from workplace pensions completely in April. The advice we were providing in that space was funded by commission. We’re having to charge fees to charities, and they’re finding it difficult to afford that.”

In fact, he thinks the whole system of commission in financial services needs to be rethought. In the same week (9 January) that FCA acting chief executive, Tracey McDermott suggested in a radio interview that commission could be brought back in some form, for Mr Brosch, it is no-brainer.

He said: “Why wouldn’t you want the option for someone to consider an alternative method of payment? Can I pay for this advice over the course of the product’s life?

“Most people can’t pay for a car in one go. We do need to think a bit outside the box as to how advice might be paid for.”

And, like many he is not surprised we have ended up with an advice gap. Mr Brosch said: “I think we should have expected this. We took commission out of the market that was funding advice to the mass affluent and we created an advice gap. It’s not a big shock.

“I think it could be filled by banks coming back in, simplified advice models and related advice.

“Robo-advice will play a very important and complementary part of the advice process in time, and to my mind has a three to five-year horizon before it delivers real substance.

“Very few of the businesses are delivering any money at the moment. We will definitely want to be in that space. The reason we want to have a solution is because of the amount of money we see in the workplace.”

He believes that robo-advice could complement the traditional advice from the workplace.

Mr Brosch has been in financial services for 30 years, starting out at Financial Planning Services, an IFA brokerage.

He was head of sales at Millfield for almost seven years before going on to found Foster Denovo. The equity of the business is owned by 150 shareholders across the business, and he has no plans for a stock market listing, being able to fund any acquisitions from his balance sheet.

He dismisses recent stories about departures, explaining that the largest – 14 individuals – left as they went with one of the equity partners in 2014.

Mr Brosch said: “We’re not a consolidator with a five-year plan. We want to deliver a really good client experience.”

Melanie Tringham is features editor of Financial Adviser

Roger Brosch’s CV highlights

2005 to present Chief executive, Foster Denovo

1998 to 2004 Distribution Director, head of sales, Millfield Group

1992 to 1998 Regional director, General Assurance National

1986 to 1992 Branch manager, Financial Planning Services

1980-1984 BA Hons Business Studies, Marketing, Finance, Business Management, Kingston University