We are all heading in the direction of taking personal responsibility for our finances, according to Hugo Thorman, chief executive of Ascentric.
It is already happening with pensions and it is about to happen with investments. A combination of the RDR – which has seen independent advice rise in price and bank sales forces close – along with the rise of execution-only platforms, means that eventually many of us will do our own thing.
Mr Thorman, who founded the wrap platform six years ago, says: “It’s something that Thatcher tried to start. Most Americans have got used to platforms and doing their own thing. We’ve got to learn how to do that.
“It’s a fact of life that 50 per cent will never have enough cash to invest in a long-term product – it’s where auto-enrolment is basically saying, ‘We’ll do it for you’.
“If I’m really well off, I’ll get an adviser. But if I don’t have an adviser and I’m not well off then I’ll do it myself and go directly.”
“Research says that only 15 to 16 per cent of customers are going to want advice; there’s 20 per cent who are going to do it for themselves and the rest are going to do it for themselves with occasional input from the adviser. Eighty per cent want to deal with the platform directly, so I think it’s going to be really important.”
A big factor driving this has been the recent regulatory changes. He says: “It’s completely down to RDR, because it’s RDR that has taken away bank sales forces. Everybody thought bancassurers would take over, and a lot of IFAs have withdrwn from the market and the companies that are there are going to charge a lot of money.
“Say you have £20,000, and you say to an adviser: ‘I want you to tell me what I should be investing in’, he’s going to say ‘It’s going to cost you £1000’. If you’ve only got £20,000, you’re not going to want to do that.”
Ascentric, which sold out to Royal London Asset Management nearly six years ago, is planning on launching its own direct offering, which it is describing as B2B2C.
“What we want to do is to continue to provide the very best platform service for the customers, and giving advisers the ability to have clients deal directly on the platform, to have a non-advised platform.”
The challenge however, is risk. Since advisers come under so much pressure to make sure they get their advice correct, how does a client make sure he makes the right decision?
He says: “That’s the issue. What the customer wants is some guidance and education to know what to buy, to know what the tolerance of risk is.”
He believes the solution is off-the-peg portfolios tailored to meet certain risk profiles. It is important that clients understand the nature of investments, namely that some might be more risky than others, but that they will all go up and down to some extent.
Mr Thorman set up Ascentric after having been in the corporate world for many years. It started from the purchase of a small company called FundsDirect in 2005, and was built with financial help from friends and family.
Ascentric launched as a platform in 2007 and later that year it was sold to RLAM. It broke even in 2011 at £4bn and it now has £5.9bn of assets under administration. This puts it in the middle of the platform rankings. The company is 85 per cent owned by RLAM and the remaining shareholders are advisers and some management.
Mr Thorman said the sale to RLAM was for practical reasons. “The requirements of capital really lends the business to being part of a big group. If you’re quite small you need to be part of a big group and that’s just a fact of life.” He says there is no influence from RLAM in terms of what goes onto the platform.
But while Mr Thorman is busy reinventing his platform, the regulator is imposing its own vision on the sector.
The FCA recently launched its final rules on rebates, which have been perplexing the industry for a number of years. Mr Thorman said he thinks the FCA reached the right conlcusion by banning cash rebates, but thought it would ban unit rebates as well. However, he admits this is largely academic, since the HMRC recently announced its tax penalty on such rebates.
More challenging is the prospect of multiple and ‘super clean’ share classes, which some of the bigger platforms have been threatening. These imply that they will offer cheaper deals negotiated independently with fund managers.
Mr Thorman says: “My biggest fear is that the fund managers will give in to pressure to the big older platforms to create two-tier pricing, and that’s wrong because I think we should be competing on functionality.
“They want to get some competitive advantage from small platforms who have been eating their lunch. Smaller platforms have been offering a better service – customers will put up with a worse service so they can have access to a better price for their funds.
“Some fund managers have been quite strong, and said they won’t comply; some have been really quiet because they’re waiting to see. They don’t want to but they might feel they have to and that would be a pity.
“I just think there should be a level playing field and one price for a fund, and that’s what you get, and we compete on our service.”
For a sector that is undergoing rapid change, Mr Thorman appears ready to find his way through the turbulence.
Melanie Tringham is features editor of Financial Adviser
Mr Thorman’s career ladder
2005 – FundsDirect/Ascentric, chief executive
2004 – freelance
1997-2004 – Abbey National, including chairman and chief executive of James Hay Group, marketing director of Abbey for Intermediaries
1994-1997 – Watson Wyatt, consultant
1989-1994 Lloyds Bank – Marketing director, of Blackhorse Financial Services
