Being elected to the Nucleus advisory board over the summer means a lot to advice firm Estate Capital managing director Chris Davies. Not only is he proud of “getting the nod” from the fellow advisers who elected him, he is also relishing the chance to represent smaller advice firms. “Traditionally the board was made up of founding IFAs and larger firms. Estate Capital is the first smaller firm to get elected,” he says.
The Nucleus advisory board is the firm’s “adviser voice” for Nucleus and ensures adviser and client needs are at the heart of the business. It comprises eight advice firms, each elected for a term of three years. Davies feels this is the right approach to ensure ideas remain fresh.
“Every organisation is only as strong as its individuals. If you have a diverse group of individuals you have diverse options that challenge established things. If you have the same people all the time you don’t get the natural evolution and new ideas.”
Davies is not content to allow things to go stale. He is working with the University of Swansea financial department on plans to launch a platform-only discretionary investment service in 2018.
“I can see from our research that more advisers are delegating to investment consultants. But it’s sensible to hold assets on a platform, so investment managers plug into the platform – it gives advisers more control than if they use a discretionary fund manager.”
Contemplating the future of platforms, Davies thinks those that respond to adviser and client needs will prosper, while asset gatherers may not. He believes Nucleus is well placed to deliver via technology to advisers, although there are features he wants to see in the future.
“Platforms can bring systems into play, such as research and reporting that could allow smaller advice firms to trade up the value chain. I want to see real-time trading, pre-funded trading and more advanced trading so I can adapt to more sophisticated trading strategies.”
Unlike many smaller advice firms that have outsourced to specialists such as discretionary managers, Davies is still involved in investment selection. He runs a number of in-house portfolios and although he has used DFMs in the past, he uses them occasionally now as feels the investment returns are no better than he could get himself, particularly once the extra costs and VAT are taken into account.
“We’ve done some research on what advisers in the area are doing and many are using third-party investment management. But we’re not going in that direction in terms of the in-house portfolios. I’ve run portfolios since the early 1990s and as a chartered adviser I have a certificate in discretionary management, so I have academic qualifications as well as experience.
“I like to be in control of asset allocation and fund selection so you can answer client questions comprehensively. Asset allocation and fund selection tools are very comprehensive; we subscribe to several which makes the job easier and efficient.”
Estate Capital’s range of eight risk-rated in-house portfolios, which Davies established 12 years ago, are made up of active and passive funds. “I do enjoy running the portfolios. It takes a lot of time but it doesn’t get in the way of the day job. Ten of us work here – two advisers and eight support staff – so I’ve got people to support me.”
Like many advisers, Davies fell into financial services by accident after studying for a degree in engineering. “It was my father’s suggestion to try engineering but it wasn’t for me; it was not creative enough. But it’s a great discipline and has given me a lifetime of benefits.”
A friend at university joined a direct sales firm and it wasn’t long before Davies was invited for a 30-minute interview at the firm, General Portfolio. After one week of training, he started work as an adviser in August 1988.
Following an 11-year career in sales management with another firm, Allied Dunbar, Davies ended up as group manager with Zurich Advice Network when Allied Dunbar was rebranded. “But it wasn’t for me, so I left to go back to face-to face client advice.”
In 2002 Davies set up Estate Capital. “I left what was a significant position. I was earning quite a bit of money and my wife had just had our second child. But I wanted to take back control of my career, run it the way I wanted to and get back to doing what I enjoyed. It was the best thing I ever did.”
Building Estate Capital from scratch has been the biggest highlight of Davies’ career. “It’s bound to be a highlight as it was a tough thing to do and it has paid off. I’ve seen Estate Capital go from zero to over £100m under management. That’s a measure of trust that people have in us; looking after people’s lifetime savings is a responsible job.”
Davies unsurprisingly has plans for growth, reflected in a recent office move that provides more space for Estate Capital to expand. “Our objective is to have £200m under management in five years’ time. We have £115m under management now and the strategy for that is a combination of client acquisitions, asset management and business acquisitions.”
Davies is a firm supporter of face-to-face advice but he acknowledges that other forms of advice are needed. “An experienced, qualified adviser is well placed to understand the whole of the market and a broad range of client needs but not everyone is a viable client and savings goals need to be addressed. Robo-advice has got its place as an additional opportunity to support people in saving for the future. But the challenge for every firm is to address that form of advice in the future.
“Robo-advice could be an opportunity to review our business processes and get better at what we do. But I hope it’s not a way for large institutions using computer models to promote unsuitable products. Good, solid, robust regulation is needed and the advice process should not be compromised just because it’s computer-based.”
2002-present: Founder and managing director, Estate Capital
1991-2002: Various roles, including sales associate, branch manager and group manager, Allied Dunbar (later rebranded Zurich Advice Network)
1988-1991: Adviser, General Portfolio
What’s the best bit of advice you’ve received in your career?
To present complex ideas in a simple way and to communicate the complexity of financial services products in a simple way. I pay tribute to Tony Jenkins, a great sales manager.
What keeps you awake at night?
We have got a solid business so when I do wake up in the night it is down to enthusiasm about our new projects.
What has had the most significant impact on financial advice in the last year?
Pension freedoms. They have made people think about pensions but they need to seek financial advice to make the best decisions.
If I was in charge of the FCA for a day I would…
Like to see one professional body, more robust authorisation for advice and I might consider if certain products need FCA authorisation.
Any advice for new advisers?
Knowledge is vital, so study a detailed factfind – never compromise on the quality of factfinds.