Few would say the adviser platform market is easy to operate in. Just last month Money Marketing reported that AJ Bell chief executive Andy Bell sees profitability as a concern in this sector, even though assets are growing rapidly.
But industry talk about pricing pressures has not deterred the Embark Group from recently bringing its “low cost” investment platform to market.
To understand why, it is necessary to grasp the fact chief executive Phil Smith has had various strands of the retirement market in his sights ever since the group launched in 2013.
He says: “I set off on the Embark project with no assets, no employees and no revenue. We now have over 500 staff, almost £12bn in client assets, 100,000 plus clients and seven different business units.
“The nucleus of the Embark project was the UK demographic picture, with the ageing population needing to save money to support care and longevity in retirement. When we started, I believe only 20 per cent of savings and investments was orientated towards retirement. Now it is 70 to 80 per cent, which demonstrates our market demographic proved to be right.”
Embark is launching Vested, a joint venture with Mazars, in the employee benefits sector. However, it has grown largely through acquisition. In 2016 it acquired several businesses including the Avalon platform, Sipp and SSAS administrator Rowanmoor and fund research firm The Adviser Centre. This year, it bought DFM research provider Discus and EBS Pensions, previously owned by Charles Stanley.
Smith points out all the acquired businesses have a direct correlation to the UK demographic picture and retirement needs which underpin the Embark Group as a whole.
And so the retirement thread continues in the new platform, which Smith says is a response to the advice gap, particularly following pension freedoms.
More people need advice on the complex choices they now face while saving for retirement, yet many do not have enough assets for advice to be financially viable. The platform, which uses FNZ technology, is the group’s answer.
“If you look at the platform market, it is a very expensive tool to own the lower your affluence is. For IFAs and wealth managers, it is hard to economically provide advice for those with less than £150,000. We are priced at half the market average so there is space for advisers to come downstream and offer it.”
Smith is a lifelong Rotherham United football fan who is heavily involved in the club, which Embark sponsors.
“I’ve been a fan since I was four years old and it’s important to me, particularly club chairman Tony Stewart. It’s a professionally run club and seeing how it is run helps to guide me in my own business.”
If life had taken a different turn Smith would have made his fortune not on the football field but as a keyboard player in a pop band.
“When I was growing up I didn’t have a burning desire to get into financial services. I wanted to be a pop musician. I had a modicum of success. I played in many bands and I still do. But I realised I wasn’t going to become a millionaire through music.”
Instead, Smith took some family advice. “I had some sage advice from my father who said if you go and work with money you will always have a job.”
The way into financial services was through HR, which Smith has been in and out of for much of his career. After graduating with a first-class degree in engineering, Smith did a masters in HR management. In 1992 he joined the asset management business of Prudential, which gave him the chance of some international experience through a project in Hong Kong.
Smith went on to become managing director of Barclays Wealth, then HR consultants Aretai, before forming Embark.
The chief executive does not see other platforms as direct competition for Embark, as he regards its offering more as a hybrid of a Sipp and a platform.
“People need flexibility; something that is usable, which is at the right price and that facilitates tools for retirement saving and income. Sipps are high cost and platforms were not built for the retirement market – they were really fund supermarkets for Isa investors. The Sipp market and the platform market are merging in the middle and we didn’t want to be one or the other.”
Smith says Embark can offer a hybrid proposition because it has focused on the retirement market since its inception.
“We were straight into that space but if we weren’t in that market already, we couldn’t do it now. There are too many barriers to entry and the costs have gone up.”
A common prediction for the platform market is further consolidation. But Smith disagrees.
“I don’t see that happening. I don’t see a massive amount of new buyers in that space if platform providers don’t want to buy another one and buy the legacy risk.”
He thinks growth in the sector will be consistent at around 7 to 8 per cent a year over the next five years – not the spectacular double-digit growth some people expect.
“The platform market will increasingly turn its eyes on the workplace for business and growth because of the demographics of the auto-enrolment market. Platform providers deploy tens of millions, if not hundreds of millions, on building infrastructure and they have to grow quickly to finance new investment. But workplace savings dwarf the amount of assets that come through advisers.”
As for Smith, he says he has achieved what he set out to do at Embark – have fun at work. “It’s not about making money, it’s about doing what is intellectually stimulating and enjoying it.”
What is the best bit of advice you’ve received in your career?
A guy I used to work for at Prudential said “if you want to make it in life just work out how businesses make their money”.
What keeps you awake at night?
Not a great deal. When my daughters, who are 18 and 20, go off gallivanting I worry whether they are safe.
What has had the most significant impact on financial advice in the last year?
Mifid II – more so than the RDR for advisers.
If I was in charge of the FCA for a day I would…?
Mandate to be the “go to” employer for bright talent in the financial sector.
Any advice for new advisers?
Embrace CPD, find new clients by your own volition, embrace technology and don’t slip into a culture where you take short cuts.
2013-present: chief executive, Embark Group
2011-2015: Managing director, Aretai
2006-2011: Managing director, Barclays Wealth
2001-2006: Chief financial officer and global head of human resources, Fortis Investments in Paris
1998-2001: HR director, Arthur Anderson Business Consulting
1992-1998: HR director, Prudential Collective Investments then Asia Pacific Regional HR lead, Prudential Corporation Asia in Hong Kong