One of the biggest lessons Greg Neall has learnt in his career as a chartered financial planner is to trust his own instincts.
Speaking to FTAdviser as part of our Coffee Corner series, Neall, of Wake up your Wealth, said asset allocation was the one thing that no one will help you with and the area you probably require the most help.
What are some of the areas you would’ve liked help on in the early stages of starting in this career?
“Nowadays if you're in a network or larger firm, they'll do it for you,” he said. “But when I started, I can remember phoning up the compliance team and saying, well, I know lots about pensions but I don't really know much about investing money.
“How do I know which funds to use? And they said, well, if the client comes out with a balance on the questionnaire, give them a fund that says they are balanced and should be alright.”
Neall said that was the only advice that he got and the idea of what asset allocation you are doing, what geographical exposure, sector exposure, and the ideas of volatility and liquidity and things like that were just not taught.
“I probably learned them in the exam texts, but no one really taught me how to use them,” he said.
But are there any lessons you learnt early on that are with you today?
“How to override what your client expresses for fear of poor behaviour,” he said.
Neall gave an example from 2009 when he was in a network - around the time of the stock and bond market crash of the financial crisis - when his network decided that they were going to make attitude to risk questionnaires mandatory for every annual review.
“This, in fact, was to this day, not a regulatory requirement,” he said.
“They decided they were going to impose this so I started sending out getting these questionnaires back and surprise after a massive market crash every one of them almost came back, more cautious than the client was currently invested.”
He explained that naively, he did as I was told and followed the network mantra and moved a lot of people from maybe 60 or even 70 per cent equity portfolios to 40 per cent equity portfolios when stock market prices were rock bottom.
“Those portfolios never recovered,” he said.
“You can do as many exams as you want - I'm a fellow of the PFS - but none of those books tell you that if your client wants to turn down their risk after a market crash you don't do it.Or you at least tried to talk them out of it. But no one told me that I learned that the hard way.
“I lost people's money and I still rue it to this day.”
In addition to this, Neall explained that while this is probably true of almost every industry, something he learnt was to trust himself.
“You realise that the people at the top of the tree don't understand how you do the job,” he said.
“People that run networks, people that run large firms, they don't give advice and when they did, it was 20 years ago in a very different way
“The top of the tree in this industry is all just about securing as much asset as you can with as little cost and as little risk. It's pretty cynical, and it's pretty horrible and if I had known that, I probably would have taken the path I took with more confidence sooner.”
What would you say has been the biggest change since you started out?
“The retail distribution review which I welcomed,” he said.
In fact, Neall is of the view that there is a need for an RDR Two in that, particularly with the expansion of defined contribution pension provision.
“It's really bad that people can pay for financial advice through a personal pension product, but they can't do it through an auto enrollment product and it creates lots of unhealthy divisions and also some pretty poor practices and processes in the advice industry as well,” he said.
“I don't see why we have to have a product divide of this old company pension side of the industry and personal pensions are the industry.
“We were supposed to get rid of that in 2006. And it's still there."
Is there any advice you’d give new advice business owners just starting out?
“For anyone trying to run a business my size, like a tiny community IFA, it's all about professional indemnity,” he said.
“The biggest risk to my business is that the professional indemnity market hardens further and I can't get insurance. But I think from an industry point of view, and from the advice sector of the industry's point of view, and it does relate very much to my personal experience is that I think we need advice training.”
He explained that what you see with firms is exam training, getting a diploma and then you are “thrown into it” in a traditional sink or swim manner.
“There's some value to that because you learn pretty quick,” he said. “But actually I think there is a place in the industry for advice training - not just how to communicate that's out there already, although that's part of it - but how to make decisions.
“If you come across a file and actually your choice of recommendation is very marginal between one thing and another - how do you make that decision? Do you go back to the client? Do you get that input? How do you frame it for the client so that they can make an honest and open decision?”
He explained that doing some sort of training would be helpful to them.
What would you say is the one book you’d recommend to someone in this profession?
“I think you can learn all the wisdom that you'll get in a self help book from fiction so top of the list, Crime and Punishment,” he said.
“It is all about integrity. It's all about actually, just because you do something that you can justify to yourself, doesn't mean that you can live with it.
“That resonates a lot with how to give advice.”
And lastly, what is the one thing you cannot live without as an adviser?
“Probably my calculator,” he said.
“By academic training, I’m a mathematician, maths and physics, so I do take a more mathematical approach to the job than some advisers.”
Neall said he understands that it’s essential to know the lifestyle concept but argued it's actually a whole lot easier to get into that side of the conversation if you can talk very confidently about numbers.
If you own your own advice firm and would like to get involved with the Coffee Corner interview series, contact deputy news editor Sonia Rach via email.
