Intrinsic’s chief executive is focusing on growing the firm’s protection proposition, which he regards as one of the keystones of financial advice that will keep income flowing through the challenges of the retail distribution review
Interview by Natalie Holt
A military man by background, Intrinsic Financial Services chief executive Richard Freeman says there are interesting parallels between army life and a career in financial advice.
After 16 years in the army, Freeman was looking to a change in direction but his chosen academic field of aeronautical engineering provided no job opportunities. An advert in a regimental magazine to join the officers’ club at Allied Dunbar caught his eye and within two days of sending off his CV, Freeman landed an interview.
He joined as a sales associate, or financial adviser, and after 18 months began to work his way through the ranks to management level, overseeing first branch, then group sales and regional sales before becoming area director.
He says: “The two jobs are totally different but there were elements I could use from my army training when I started out in financial advice. Skills such as leadership, recruiting and motivating people are all useful, particularly when you are building a branch.” Given this was a time when industry recruitment often came from outside of financial services, it helped that most of the branch staff Freeman was working with were also ex-military people.
Despite originally seeing Allied Dunbar as “a good bridge to a proper job”, Freeman went on to stay with the firm for the next 16 years and remained there after it was bought by Zurich Financial Services in 1998.
When Lord Sandy Leitch left his position as global chief executive of Zurich’s life businesses in 2004, several senior executives followed him, Freeman among them. The six Allied Dunbar executives went on to found Intrinsic and the network was launched in 2006, having secured the backing of Sanlam, Friends Provident and HBOS. Freeman began as Intrinsic’s sales director and was promoted to chief executive in 2010.
Five years on from launch and Intrinsic now has around 1,720 advisers. In 2010, the company posted a 47 per cent increase in profit to £2.85m. It aims to increase adviser numbers to 1,870 this year.
He says: “We are behind where we said we would be in our original business plan and that is down to 2009 when we plateaued. Our growth slowed but we have picked back up again and hope to get back on track this year or next year.”
Freeman says it is still difficult to increase numbers, given that mortgage advisers are continuing to leave the industry. Intrinsic is also selective in the advisers it takes on. The network receives around 900 to 1,000 applications each year and, including pre-application enquiries, 25 per cent are rejected.
Intrinsic has operated a dual-pricing structure since it launched, which charges advisers based on retaining commission and a monthly charge to cover IT, FSA levies and professional indemnity insurance. Freeman is proud that, to date, monthly fees have remained at £149 plus VAT for mortgage advisers and £290 plus VAT for financial planners.
“For five years, we have reviewed our charge and a couple of times we have thought we ought to increase it but at a time when advisers are feeling the pinch, we have always decided against it. I can not say we will never do it and I gave warning at our conference in March but it would be a last resort.”
The network has several initiatives in train to help its financial advisers prepare for the retail distribution review. It has invested an extra £1m in its RDR training programme, which will pay for members to take the ifs School of Finance diploma for financial advisers. Intrinsic is offering what it calls “a pass guarantee”, meaning it will pay for training and exam costs until advisers have obtained the qualification, regardless of the number of attempts. The company has also established a business transition team to help financial planning firms move to an adviser-charging model and set up a protection academy to encourage advisers to boost protection sales.
Freeman says: “If you go back to the Allied Dunbar years, one of the keystones of financial advice was to get protection business in place and then everything else would work around that.”
As part of the focus on protection, Freeman has recruited Friends Provident head of distribution for protection Ed Stuart-Brown as Intrinsic’s group protection director, who will also head up Mint Financial Services, acquired by Intrinsic in 2008.
Freeman says: “We hope to increase our protection sales this year by about 10 per cent. If we can keep growing that over the next couple of years as we move through RDR, that helps everybody. It is the right thing for the clients and for advisers and it keeps the funding flowing.”
Earlier this year, the FSA warned that the network model poses a growing risk of consumer detriment due to weak systems and controls and pressure on income. But Freeman says the Intrinsic model is robust enough to withstand aggressive stress-testing.
He says: “We have stress-tested losing 30 per cent of our financial planners and losing 50 per cent of the business of the ones that remain. We still survive even at those extremes.
“Where we see our strength is that only 50 per cent of our headcount is affected by the RDR. The next two years will be challenging for everyone but we have every confidence for the future.”
Education: Dursley Grammar School, Gloucestershire; Royal Military Academy Sandhurst; Royal Military College of Science, degree in aero-mechanical engineering
Career: 2010-present: chief executive, Intrinsic Financial Services; 2005-10: co-founder and sales director, Intrinsic Financial Services; 1989-2005: sales associate to area sales director, Allied Dunbar/Zurich Financial Services; 1973-89: major, British Army
Likes: Bath Rugby, saxophones and most forms of music
Dislikes: Bureaucracy and long meetings
Drives: Aston Martin Vantage
Book: The Kite Runner by Khaled Hosseini
Film: A Few Good Men
Album: The Joshua Tree by U2
Career ambition: To build a lasting legacy where we treat all our customers fairly and our members and employees feel proud to say they work with or for Intrinsic
Life ambition: To remain fit and healthy for as long as possible and get better at playing the tenor saxophone
If I wasn’t doing this I would be…Playing saxophone in a small band in a warm climate