Embark Group’s head of strategic partnerships and Discus co-founder Gillian Hepburn on why the FCA is right to challenge the market on orphan clients
This week’s interviewee is Gillian Hepburn, head of strategic partnerships at Embark and co-founder of DFM consultancy Discus. As we meet, the interim findings of the FCA’s platform market study have just been published. Armed with coffee we try to process the implications for the industry.
Hepburn’s career in financial services began accidentally like so many others. Her passion for English literature led to a degree in the subject, but a week’s teaching practice was enough to convince Hepburn that it was not for her.
Her next-door neighbour, Standard Life’s then head of HR, convinced her to try a summer job at the Edinburgh firm. The following year, 1988, Hepburn was one of the first to be accepted into its new graduate programme.
In today’s world, financial services and technology run hand in hand. But it was not always so. Hepburn was involved in the nascent Standard Life Wrap when “there were six of us sitting in a room scratching our heads”. The team had heard about the platform revolution in Australia and involved FNZ early on to build it.
“At that stage, one of the first questions we asked financial advisers was whether they had broadband. That was only 12 years ago. We have come so far,” she says.
It was a world in which some advisers were still earning 8 per cent commission on bonds. But the enlightened could see the writing on the wall. The Standard Life Wrap team wanted to use tech to help advisers make the transition by getting them to start thinking about how they could build client-centric advice models and embed value.
“We were driving people to think about the service they wanted to offer, how to segment their clients and what the ongoing charge should look like.”
So, 12 years on, does Hepburn still believe platforms can help drive advice businesses forward? And how will they be affected by the FCA’s platform market review?
2016-present: Director, Discus; Head of strategic partnerships, Embark Group
2012-2016: Consultant, Quality Platform Solutions
2010-2012: Associate director, intermediary business, Cornelian Asset Managers
1988-2010: Wrap business development manager, Standard Life
She is interested in orphan clients and the pool of potential investors that many advisers still do not believe they can serve profitably.
The FCA picks up on this issue, highlighting the fact these individuals may be paying significant advice fees through their platform without the benefits of proper advice. It says platforms could warn them about the possibility of being short-changed and the fact they could switch.
Hepburn raises a critical point: a client who decides to invest in a risk-rated portfolio on a platform, either advised or direct, is entrusting the platform to look after their money. So it is not surprising the FCA is challenging them to do more to drive better client outcomes.
But critics of the FCA question whether platforms should be expected to act as the industry’s police for orphan clients. And they make a valid point: independent advisers, and even many restricted advisers, use more than one platform, so each one often does not hold all of the client’s investable assets, or know about its off-platform assets or financial history. So how can a platform ever be confident a client is actually an orphan?
Embark, the newest adviser platform running on FNZ technology, has a clear target of mid-market clients. Hepburn says she has learnt a lot about client engagement from its work with robos – it is the provider of Nutmeg’s e-Sipp (Embark Group also owns Sipp providers Hornbuckle and Rowanmoor).
She says platforms have to think more about their relevancy to the end consumer: “It’s not about the brand, it’s more about the functionality.”
So perhaps instead of whistle-blowing to orphans platforms could do more to help advisers serve clients profitably where they have fallen away from advice. If the adviser cannot or will not do this, why shouldn’t adviser platforms offer a direct-to-consumer service or integrate with D2C platforms to offer such clients a choice?
It is clear that Hepburn and Embark are thinking about these issues, and others are too. “Orphan clients have worked hard to earn that money and they are entrusting their money to us.” The FCA is right to challenge us to help them.
Miranda Seath is research director at Platforum