James Hay chief executive Alastair Conway was an adviser until 2004 when he sold his business. At the time, the lion’s share of the value was from general insurance but that has since flipped significantly, with ongoing investment advice and the client base more broadly now leading the way.
Such a change took many by surprise. The regulator, among others, did not anticipate investors would be willing to pay for advice following the RDR. For Conway, soft values have fueled the demand: “Investors want someone to keep them on track and to nudge them along,” he says.
James Hay performs well on “value for fees charged” in our quarterly surveys with advisers. Its modular approach to fees can be complex but the charges themselves are relatively low. Advisers give it a score of 3.96 – just on the border of “very good” – putting it sixth among the 17 firms we rank each quarter.
But Conway feels there is more to a successful platform than just price alone. “All platforms offer different services. How do you put a price on that? Value for money is the right question: what value are you getting back?”
While famous for Sipps, James Hay is broadening its focus across the retirement landscape while maintaining its specialisation. It attracts the well-healed, with our data suggesting the average account size stands at £410,000.
Advice firms are actively segmenting their clients and James Hay is clear about which it wants to serve: retirees and those nearing retirement. By focusing here, the firm will have to keep bringing on new assets just to stand still.
After all, clients in decumulation are, by definition, drawing down their assets. But Conway is not concerned.
“The assets go down slowly. The average client is with us for 25 to 30 years and most are sitting with between £300,000 and £450,000,” he says.
The pension freedoms were a big boost to James Hay, as well as for advisers. Conway notes the changes have allowed firms to expand the range of services they offer.
He points specifically to long-term care, equity release and defined benefit transfers.
James Hay has been particularly successful at winning DB transfer business but Conway emphasises the fact it wants the product to be used appropriately. It conducts due diligence on advisers each year, although he is quick to add it will not second guess advice.
“Advisers do due diligence on their counterparties each year and so do we. We need to make sure we know who we are working with and maintain the reputation we have built.”
According to Conway, this is a responsibility all platforms should take on, seeing as the entire market gets tarnished in the event of a problem.
Replatforming is a hot topic at the moment and Conway is keen to make as much of it as he can. He readily admits it creates a lot of opportunity for his firm, claiming that peers going through major technology upgrades will not be talking to their customers. “They are inward facing,” he says.
But there are some challenges to James Hay’s prospects. At the end of Q1, 97 per cent of the platform’s assets were in a pension wrapper and assets under administration was up 5.4 per cent for the quarter.
That growth outstripped that of the FTSE All-Share but it lagged the platform industry as a whole, which grew 6.7 per cent.
With the rise in flows to pension wrappers, perhaps the platform should be doing better? Conway counters that, while James Hay contributes growth to the Sipp side, it is not making waves in the Isa/general investment account growth figures just yet.
We also hear the platform is slowed down by older technology but this a claim the chief executive refutes.
“We use a series of industry standard systems,” he says. When the business was owned by Santander, the idea was to plumb together systems. The result is a “hybrid of us moulding systems and using market leading systems,” he says.
He does not see that changing in the near term. “We’ve got to £23bn paddling our own boat,” he says. Unlike some peers, though, this is not a philosophical issue. “We are never fright-ened to talk to people about components.”
On the growth prospects for platforms as a whole, Conway is optimistic. In fact, he expects the market to double in size in the next five years, with much of this coming from legacy pension assets.
Heather Hopkins is head of Platforum.
She can be reached at firstname.lastname@example.org
2013-present: Chief executive, James Hay Partnrship
2008-2013: Sales and marketing director, Cofunds
2007-2008: Global proposition and distribution development, Zurich
2005-2006: Head of proposition and commercial development, Sesame
2001-2004: Chief executive, The Clear Group