View more on these topics

Enter the dragon

The latest series of Dragons’ Den is well into its stride and for me it is compulsive viewing. After each episode I think how I would pitch the typical financial advice model as a scaleable business but I am not hopeful of securing an investment.

The vast majority of regulated firms are little more than distribution businesses and, with the exception of Hargreaves Lansdown’s direct-to-consumer fund supermarket, there has been no significant innovation in the distribution of regulated products and none at all in the delivery of advice. Peter Hargreaves says his model would be hard to replicate due to the investment required, and he is probably right.

Putting aside the bigger firms, how would smaller ones fare in pitching for some Dragon investment? The sad truth is they would do badly. Small and even medium-sized firms have nothing remotely attractive to a Dragon investor. No patents, no proprietary tools and no means of taking market share and locking out the competition. We remain essentially a cottage industry full of lifestyle businesses that rely on putting advisers and clients in the same room as one another.

It is a problem that countless firms have tried to conquer, but always in the same way – by harnessing as many cottage industries as they can under one umbrella. Yet, despite some profitable business models, there is no real innovation, they have just become more efficient and eventually the gains will tail off.

Meanwhile, a huge market for advice is being ignored as businesses seek to maximise the value of their time – the one thing they cannot manufacture. Everyone is trying to shift up the value chain with the hope of generating more income from every hour spent in front of someone. At the same time, an increasing number of people are priced out of the advice market and into the clutches of banks foisting products on to them.

Where is the next big innovation? Somewhere, there must be a firm with a great idea that taps into the unfulfilled need for straightforward financial advice. Surely, what Hargreaves Lansdown has done for DIY investment can be mirrored on the advice side? After the RDR, will we see a new name gradually eating into the advice gap – I hope so.

Of course, there are those whose only contribution to the innovation debate is to lower client costs of investing by embracing tracker and exchange traded funds, only then to ramp up their fees, charging more for doing less.

In the words of a Dragon: “Let me tell you where I am on that one – it’s a ridiculous idea, it’s not a business I can invest in, so I’m out.”

Dennis Hall is managing director of Yellowtail Financial Planning

Recommended

Fry role at Apollo

Apollo Multi-Asset Management has appointed former Crosby Asset Management chief executive Simon Fry as non-executive chairman. CAM terminated its joint venture with Apollo last week.

Wrap margins are starting to widen for IFAs

Nucleus says new data shows that advisers are now taking the lion’s share of the margin on its wrap while asset managers are receiving a smaller proportion.

UK gilts: Shaken and stirred

Mike Riddell, fixed income portfolio manager at Allianz Global Investors, reviews the performance of the UK government bonds market post-Brexit and assesses its future prospects, as well as giving his outlook for global fixed income markets and yields movements. In addition, he provides a brief analysis of the impact of Brexit and the Bank of […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com