Where many advisers are quick to berate the regulator, adviser Peter Adcock believes it is doing its difficult job pretty well, with some exceptions.
The owner of Nottingham-based advice firm Adcock Financial said he likes the regulated environment and that he does not find it too difficult to operate within it, but cited frustrations including cumbersome data collection and the compensation scheme level model.
“I quite like the FCA and I have always liked a regulated environment. The reporting system could be made more user friendly and having just done one with the section K there is a case for making significant improvements to the way the form is completed but in general it isn’t that bad.
“I don’t like the levy, I think that’s a joke. Why should we pay for Arch Cru etc? That’s what PI is for. But the FCA costs are more realistic now because they are based on turnover. I’m conscious of the cost but it’s not yet a deal-breaker for us.
“Regulators are like your mother in law. You have to live with them but you make the best of it and as human beings they are generally OK.”
Client profile
Peter Adcock came to financial advice from the accountancy side of things about 20 years ago when he launched his firm, which perhaps explains why Adcock Financial is actually two companies: a regulated independent financial advisory business, as well as a full-blown accountancy firm.
Adcock Financial services generally high-net-worth clients with at least £50k to invest as well as a minimum salary of that amount.
However, Mr Adcock say he is keen on ‘multi-generational’ clients, and is open-minded about taking on the children of existing clients as they gain financial independence, even where they do not meet this criteria.
“We do completely holistic financial planning including tax planning and estate, and from there we take it into portfolio management or wealth management although I hate that term because it covers anything from a company my size to something like Brewin Dolphin.
“We have got a proposition that says we need a minimum of £50,000 and a salary of in excess of £50,000 but we make exceptions, for example senior employees that are just starting to build their portfolios.
“It’s a cradle to the grave approach. It isn’t quite literally but with some clients, we take on their children when they come out of uni. We have a lot of second-generation families. Quite a few of those if they do well are passed on to wealth management, tax planning etc.”
His firm, like so many others, is also focusing on tapping into the auto-enrolment market. Adcock Financial has helped get other companies set up for auto-enrolment this year, including a firm of 350 employees, a charity of 180 and two smaller firms.
Keeping independence
For now, Mr Adcock hopes to remain fully independent as one of two advisers at his firm. In contrast, he can see why many larger firms would be tempted to make the switch to restricted.
“My personal view is that’s likely to affect the bigger IFA networks who can’t police every single firm. It may be a necessity for them to go restricted.
“We have two advisers and we want to remain independent. The whole argument of restricted versus independent, I can see some attractions but it’s just not something at the moment we want to do. We want to continue to offer the whole of the available investment universe to our clients.
“I have got one friend who does EIS and VCTs every year. Do I really want to say we don’t do that and have him go somewhere else?”
Mr Adcock also says that although the RDR was “relatively painless” in relation to clients, the source of difficulty with regards to the switchover came from product providers.
“The biggest pain for us has been the providers. Some of them have struggled with the change to adviser charging.
“A certain fund supermarket has just been a nightmare. In February their view was if someone wanted to transfer their portfolio away they treated it as a trigger event and transferred them into clean share classes which no-one else had. It’s a joke.
Another firm has an arrangement whereby the switch to clean will reset what the client paid originally to the cost of the clean share classes, wiping out what clients paid for the ‘dirty’ shares.
“A certain Edinburgh-based company has just moved all their wrap clients over to clean share classes. Let’s say you buy £10,000 of stock in January 2006 and today it’s worth £20,000.
“That particular provider then decides to do a share conversion to clean share classes. When they trigger that conversion the computer automatically resets the base costs.
“It means that instead of seeing a cost of £10,000 and a value of £20,000 you see a cost of £20,000 and a value of £20,000. It’s the sort of thing these big providers just ignore.
“You clearly want to know what the original stock cost you when calculating gains and losses.”
Where from here?
Where many advisors are selling, buying, retiring or recruiting, Mr Adcock is happy to continue slowly growing based on the offering he has.
“Funnily enough I was talking about it to my business coach today. I don’t want to sell yet. Like most IFAs I have lost count of the many calls I have had from SJP over the last couple of months. There were one or two others but they tend to email me.
“We are still trying to grow the business. I might be interested in merging or looking at a few smaller businesses but at the moment I just see myself growing.”
Mr Adcock identifies two schools of thought: one which proposes that a lot of advisers want to leave the industry and another made companies thinking the time is ripe to go on the acquisition hunt.
Although he doesn’t think either of those is necessarily wrong, he is not looking to buy or sell. Not yet, anyway.
“There is a school of thought that the only way you can survive and be profitable is a critical size whereas I certainly think from an independent point of view, smaller may be better.
“Profits went up more and turnover was nice. The trend to disenfranchise the lower end is going to continue. We need a minimum amount of money each year for a client, £450 to £600 per year to not lose money.”
