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IFA profile: Scott and Casey

A few years ago, IFAs were famously told by one life insurance chief executive that only big players or niche players would survive.

Scott and Casey Financial Management, an IFA based in Harlow and serving clients on the Essex and Hertfordshire borders, is medium-sized and generalist. But its directors, four of whom are gathered together in their Harlow office, do not appear to believe their demise is imminent.

Indeed their attitude is remarkably upbeat. The firm displays all the characteristics of a happy and successful 23-RI business with ambitions to move to 50 while scrupulously keeping costs down. It seems prepared for all the challenges regulator, stockmarket and providers can throw at it.

It has also recently taken advantage of the demise of one of those big IFAs that was meant to do so well, recruiting seven advisers from the now defunct Lamensdorf.

The firm grew out a general brokerage with a small direct financial services arm for Guardian Royal Exchange in the 1990s, moving through IFA network status with DBS to the currently directly regulated limited company.

Its attitude to costs and compliance would make sense to most in the industry.

Finance and business strategy director Harvey Gelman says: “We model ourselves to some degree on the direct sales model with a branch here but also offer home-based advisers too and that also works well for us.

“We grew rapidly to 22 advisers and obviously admin had to catch up. Now we have more capacity than we need but we now want to bring in more advisers.”

Compliance and training director Tom Kilgallon adds: “We run it like a household business. So much business in; so much spending out. We have been able to grow the business with very little borrowing. We always have our eye on what money there is and where it is going.”

By and large, Gelman says, they are general practitioners but do some more specialist work in estate planning and pension transfers.

A client base of around 6,000 has been built up mostly through referrals, 95 per cent of which is individual, though a small percentage is corporate. There are plans to build on introducer connections, too.

The policy on recruitment echoes this attitude – it is mostly by word of mouth.

Director for recruitment and pensions Dave Cox says: “First and foremost, we have recruited from where we have recruited before – various companies we have worked for in the past. We have an atmosphere based on trust, friendship and loyalty. We try to get a great atmosphere in the office and people enjoy working here.

“We have one ex-Pru adviser who is very well connected so we hope we can continue bringing people in. We need eight more by the end of the year.”

All the directors continue to advise – a situation they believe helps prove their commitment to the other staff.

They say there is no question of growing numbers for numbers sake and the directors add that “one bad apple can upset the barrel”.

Despite several directors having roots in the direct side, the firm is suspects depolarisation will only sow public confusion.

“The public expects a quality service and will come to guys like us. That won&#39t change.” says Kilgallon. He also believes that other parts of the market may become more active. “There is a risk of depolarised advisers leaving the impression they offer everything but their clients will probably realise they are better off with IFAs,” he says.

On the big depolarisation question, Kilgallon echoes the view heard from many IFAs: why not make all advisers independent?

But despite not liking the reform, he remains optimistic that those IFAs left will get a bigger slice of the cake when depolarisation, coupled with older advisers seeking an exit, cuts IFA numbers. The firm adds that its average adviser is below 40.

The firm is almost evangelical about face to face advice. Kilgallon says even people who have shopped around on the web for a mortgage tend to seek a second opinion from an adviser.

Cox says only holistic advice seems to offer the pro-per level of service – from helping someone realise what options they have on an underperforming endowment to setting an Isa in its proper tax and pension planning context.

Of course, face-to-face advice costs. But this intermediary believes it can meet the hazards of the new price capped environment.

For starters, they do not accept 1 per cent products are always best proved by the Catstandard mortgage and Isas. With an eye on Sandler they are adamant low charges are just one component of what constitutes value for money.

But, arguments aside, as a business, they are bullish and see flexibility giving them the lead over specialist advisers.

Gelman says: “If you are careful about spending, you can deal with the low commissions and invest in the business and not be handcuffed by your running costs.

“You have to change your marketing outlook. You have to be able to react.”

Cox adds: “You should be looking for ethical rebroking. The MCCB says you should be revisiting clients every two years, the same with life and individual pensions. People also need to move from higher charging personal pensions. This is the right thing to do as long as you follow FSA guidelines and ensure clients are aware of everything involved.”

There are still pressures. On compliance, which is done in house with outside consultancy help, the IFA would like FSA guidance in black and white – not in the current extensive range of shades of grey, including when asking a direct questions of the regulator.

As far as PI is concerned, Kilgallon says the firm has no endowment problems or FSA reviews. “We are fortunate that we don&#39t have any baggage and hopefully that is why we get terms,” he says. But the firm is keeping a wary eye on the issue. It views the crisis partly as a result of the way past and present regulation has been carried through. It believes PI issues may force some IFAs reluctantly back into networks. This firm had an extended period attempting to exit DBS so that is not an experience the directors would like to repeat.

Kilgallon says: “Something needs to be done because it is not fair on insurers, IFAs or clients.”

On regulation all four directors welcome Sir Howard Dav-ies&#39 recent promise that there would be no retrospective reviews. But Kilgallon would like to see a definition of misselling and indeed more clarity all round. He is also concerned about European intervention, a worry most IFAs would not have had even a year ago.

But most of this IFA&#39s intentions would please the regulator. On investment, it is increasingly looking to balanced portfolios. It wants to take advantage of multi-manager propositions and supermarkets although it insists with-profits has its place as a choice for clients, particularly given recovering markets and indeed recent performance compared with directly investing funds.

The advisers are all taking the new savings and investments paper but there is reluctance to take others.

Cox says: ” It is debatable whether G60 will be as relevant if the pensions green paper is implemented. It is a shame if the qualification you worked so hard to obtain is not worth as much due to changes in legislation. It all costs money and you need to know you are getting value.”

Scott and Casey might be small compared to the Inter-Alliances and Millfields of this world but it still believes its size helps.

Gelman adds: “We are a key account, we do get support, not just people coming along and saying they want our business but also providing training and education. That is because of our size.”

“You can&#39t see that happening with one man bands. This is the way the market is going,” says Cox. In the 1 per cent world, as a niche player, you are in trouble, says Gelman, adding that his firm operates over a wide spectrum.

Perhaps the new mantra for IFA success should be “stay medium-sized and generalist”.

Based: Harlow with links with an estate agents and a general insurance brokerage

in Barnet

Firm history: The IFA has its origins in Scott and Casey insurance brokers as a direct sales arm which was set up in 1990 with three advisers selling financial services as representatives of Guardian Royal Exchange. Became an IFA in 1995 following a restructure of the company and became a DBS member. New structure created in 2000 following recruitment of new directors from Prudential, at which point, the firm becomes a limited company.

RIs: 22, including two appointed reps.

Directors: Philip Scott, Tom Kilgallon, Harvey Gelman, Dave Cox, Duncan Burns

Turnover: On target for about £1.2m

Type of IFA business: General practice

Client base: Around 6000

Telephone: 0845 310 8866 www.scottandcasey.com

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