Toby Mansfield, owner of Thulston-based Clarity IFA, puts to shame advisers from bigger firms who say they cannot cope with post-Retail Distribution Review compliance demands or can no longer afford to serve lower-value clients.
Despite being a small IFA firm, Mr Mansfield says his business is growing while not only remaining independent but also keeping its full range of clients.
Independent or get out
Although he initially struggled in a rush to get the relevant qualifications, Mr Mansfield maintained his independence and joins the fray arguing that nothing short of independence is in the consumer’s best interest.
“I kept my independent status because I believe that’s what my clients want from me and that’s what clients will always want to consider when seeking financial advice.”
One argument for what some term “impartial whole of market” advice is that advisers shouldn’t be forced to advise on products which have no relevance to their clients. Mr Mansfield believes this is a false refuge.
“Are they not interested because they are told they aren’t interested or because they don’t understand all the products involved? Clients want honesty on whether or not a product could or should be suitable.
“If you look at a menu, there may be something that is gobbledygook. It may be something you wanted to eat.
“As an IFA it is paramount that a client is offered the opportunity for a full fact find where different types of products can be eliminated and the best products chosen and advised on.
“Anybody going independent is giving themselves more work to do but I’m afraid that’s what people expect in life. If you are having your car serviced you don’t want your service restricted, you want the full service, so you can ride away with the comfort of knowing that every part of your car has been looked at rather than restricted. That’s how clients want to be dealt with.”
Mr Mansfield knows what it is to be a tied agent, having previously worked for Lloyds TSB. He found the ties chafing and decided to leave so he could offer clients a more fully-rounded service.
“At Lloyds I was having clients ask me if I gave mortgage advice but I couldn’t. I took the mortgage qualification as an extra string to the bow and I also took the equity release qualification.”
Now, mortgage business makes up about a fifth of Mr Mansfield’s business.
Adding value
Another point of departure for Mr Mansfield is in how “big” a client has to be before becoming commercially worthwhile. While both banks and the majority of advisers flee from advising anyone with less than a small fortune, he maintains that the benefits of truly effective advice can outweigh adviser fees and lead to net gain for clients with as little as £10,000.
“I haven’t been able to afford to be fussy but I generally deal with £30,000 upwards.
“It may be that in the future my smaller clients may have to suffer but if a client calls me up and says I have £20,000 to invest I won’t say sorry you need another 80 grand. I’m not not going to deal with people on the basis that they don’t have it.
“Wherever there is change there is opportunity and you have got to embrace that. People will always want to have face to face advice. That’s what some clients will want and they will always want that.
“With investments as complicated as they are and financial planning as complicated as it can be people will always want somebody else to do it for them.”
He argues that if a client went direct and invested in a garden-variety, bog-standard fund, they might safely make a return. However, the benefits afforded by good advice could make a £300 adviser charge worthwhile even for lower-end clients.
Standing on the platform
Mr Mansfield primarily uses three of the smaller platforms on the market: Ascentric, Novia and Transact.
“I always tried to keep the platforms I use at arm’s length from life companies. I started using Transact because of the open architecture, the transparency of fees and the ability to invest in dimensional funds. Novia I use because they are competitively priced and offer free switching. Ascentric is for my higher net worth customers because the strength of their platform is phenomenal.”
Although he also has some funds on Skandia, he says these are historical assets placed with Celestia.
“When I do my platform analysis, whatever the client wants to achieve, one of those three platforms will almost certainly have what I need at a competitive price.
“These large companies like Fidelity, Skandia and Cofunds are almost certainly going to struggle if they don’t change themselves quickly.
“Because I want to invest in dimensional funds they only offer them to a very small range of platforms which agree to their terms and conditions.”
Don’t pass on passive
What attracts Mr Mansfield to dimensional funds in particular is their effectiveness as part of a passive portfolio.
“I believe a passive investment strategy will return better long term results. Dimensional offers the passive strategy after going on one of their courses.
“At the moment and moving forward [I use] passive-only except in markets which are not efficient. In efficient markets I will always use passive funds. It may be that an active manager can understand the shares better in that environment.”
He also believes he can get around the FSA’s decree that an IFA cannot keep their independent status with a passive-only model.
“If the FCA is going to come down on that stance I would build a portfolio with a high rating passive and a low rating active. You may want to have 80
Anybody going independent is giving themselves more work to do but I’m afraid that’s what people expect in life.