Although Mark Hibbitt, director of the Bristol-based firm, admits that it will be tough for the firm to see that kind of growth within the next five years, he believes that turnover can jump by two thirds by boosting the number of clients serviced by each of Sovereign’s three IFAs.
However, Mr Hibbitt told FTAdviser he doesn’t want to grow the business in terms of financial advisers, adding that the firm can cater for more clients without any additional recruits.
The three advisers within the firm currently service 150 ‘premier clients’ with more investable assets and who warrant at least an annual review. However Mr Hibbitt is planning to grow this to between 100 and 120 each. The firm is rebranding in October but Mr Hibbitt is confident this will help pull in more clients.
“So it’s case of how do we go out and get those. We are just going through a rebrand which will get launched in October and from the rebrand, we’ve got a marketing strategy so we are looking at implementing that from October.
“Our marketing strategy will be completely focused about efforts to attract a certain type of client over the next how many years and try to fill that space in terms of the number of spaces we have got for annual review and premier clients.”
As well as three advisers, there are two mortgage brokers, one of which was recently employed.
Mr Hibbitt highlighted that although the mortgage market has picked up, the reason for having a mortgage adviser is primarily to have someone to focus solely on mortgages so that the the IFAs can focus on investments and pensions. Plus, it is a lot more efficient rather than having advisers dipping in and out of mortgages, he added.
Testing advisers
The three advisers were also well within the RDR-timeline in terms of getting qualified, however Mr Hibbitt is doubtful that it will stop there, predicting that within the next six years the regulator will force advisers to be level 6 qualified.
“I think it’s in line with other professional industries if we want to be professional.”
However, Mr Hibbitt adds that the bigger question is actually how advisers are tested.
“I think that from an exams point of view there are a lot of conversations around whether it was fair to make people take exams.
“You know given their levels of experience but our view was if you are that experienced, the exams wouldn’t be too much of an issue. I don’t even think it was that difficult as it is still not at degree level. I’m really not sure what the big deal with that is.
“The only issue potentially is the way that people were tested and whether that’s right. In terms of the exam structures and whether that is actually worthwhile, for example I took a long term care exam which was probably one of the easiest ones that I have taken, but a year down the line how much of that do I remember from the format of sitting an exam, I am not sure. So actually on the job experience does cement that knowledge a lot better.”
I just honestly think that the fear around fees is more in the adviser’s head as clients actually like transparencyIt’s in your head
The firm has been charging fees since 2009 and Mr Hibbitt is critical of firms who struggled with the move from commission.
“I just honestly think that the fear around fees is more in the adviser’s head as clients actually like transparency.
“When we explain to clients that look we [charge] a fee for our report and if we are going to implement a new product and it’s the right thing for you as a new product, then fine and we will charge on implementation and if you don’t want to write a cheque, you can pay via the product just like you did with commission.
“But we won’t double charge so if the right thing for you is to set up a new plan or policy then you won’t pay a report fee, or at least it will be offset so there is no double charging.
“It doesn’t necessarily mean it is more expensive and actually because we levied the report fee upfront. It guarantees that we will give them advice so if the right advice for them is to stay in the same pension contract but simply do a fund switch we will tell them that as they will pay us for the report and our point will be if you are going to over the road to a firm that charges commission ‘free advice’, we guarantee they will recommend you a new product whether you need one or not, they will definitely do that because that is the only way they get paid.”
Clients rely on the Sunday papers
The firm is independent, largely because consumers have a high regard for the term ‘independent’.
“The Sunday papers and consumer press and Which? tell people, whether it is a misconception or not, independent is better. So that’s where we need to be because if that is what the public is being told by everyone they listen to then we want to be in that space.
“Do I think that’s right? Not necessarily. And actually 99 per cent of clients could be dealt with by a restricted adviser, perfectly independently if that makes sense.”
Like most in the industry, Mr Hibbitt is critical of the ‘restricted’ term but also believes the regulator itself does not like it.
“I was speaking to a guy who works at the FSA last year and he said ‘we don’t even like the term but we really struggled to think of anything else’.
“He said ‘we thought specialist but that’s worse almost as that makes them sound like they are experts in a particular field’. So, I don’t even think our regulator is particularly happy with the branding.”
Life offices are struggling
Mr Hibbitt agrees with industry commentary that some providers have adapted better than others in the post-RDR world.
He believes that wraps have adapted well but adds that “they were always unbundled and always fee-based, essentially fee-based models”.
“I think there are a couple of providers that maybe their strengths lie in products that lend themselves to salesmen-type IFAs, and I wonder if they’ve found it tougher.
“They are probably finding their business is slower because the sort of advisers that were using them a lot might have been the sort of advisers that is finding things challenging now.”
Mr Hibbitt believes it is a “definite possibility” that providers may go direct to consumers.
“They are struggling as money and fund under management seem to be walking out the door onto wraps and platforms so that is tough for them. Some of them already do have other avenues.
“Some may be big in the group scheme market, some of them big in corporate pension markets, in life assurance which is still going fine with commission – no changes. So yes it depends, but some may well look to bring back sales forces. It wouldn’t surprise me at all if that happens.”
