Nucleus Financial Group chairman Paul Bradshaw tells a story about being on a walking safari with his wife in Zambia. Discussing the cost of the trip with a fellow walker, the 70-year-old woman told them how she did not need to worry about money “because I am with St. James’ Place”. For Bradshaw, the moment perfectly summarises what advisers sell: peace of mind.
Bradshaw has enjoyed a long and celebrated career. He has been in his current role for over 10 years and sits on boards ranging from Sanlam to River and Mercantile Asset Management, where he is also chairman. But that barely scratches the surface.
He founded Skandia Life Assurance Company in the UK and has been chief executive of Abbey National Insurance and Asset Management (now Santander) as well as of J Rothschild International Assurance Ltd (now St James’s Place Wealth Management).
Over a breakfast of eggs and toast on Kensington High Street near his London home, we chatted about the future of platforms and the advisory market, and the role of technology.
On the RDR, he is reminded of a quote from a friend who said at the time: “If you put salespeople in charge of their commission, you should expect it to go up”. But the biggest surprise of the change in regulation was that the cost of investing did not decline. Bradshaw’s view – and he admits it is not a popular one – is that short-term investors are better off but long-term investing has become more expensive.
Even as an indsutry veteran, Bradshaw says he needs advice on his pensions. ‘They are horrendously complicated’
Demand is higher than ever, yet the technology is too rudimentary to bring the cost down. Bradshaw is critical of the current crop of financial technology start-ups. When disruptors look at the business process and attempt to mechanise it they fail, he says. To be successful, such firms need to focus on the outcome in order to identify areas to automate.
Bradshaw is an actuary at heart; it was his first job out of university with a maths degree. And as with most actuaries, demographic shifts fascinate him. He believes the implications of the UK’s demographic changes have been ignored by society, the regulator and the industry.
He is very conscious of the increased risk that comes with age and says we do not do enough to support the older generation. He notes that, even as an industry veteran, he needs advice on his pensions. “They are horrendously complicated,” he says.
He harkens back to the days of the mythical “Dickensian attorney in Edinburgh” who, while reputedly lacked any sense of humour, took care of the family’s finances across generations.
As our plates get cleared, the conversation turns to platform technology. Bradshaw had adamantly believed that if you do not own the code you do not have a business. However, Nucleus chief executive David Ferguson thought differently and argued to outsource the platform’s back-end technology.
Today, Bradshaw acknowledges that “David was right and I was wrong”. And the proof is in the profitability. Nucleus has been able to cut costs while delivering a better experience to advisers, he says.
I venture to share our view at Platforum that sustainability is more important than profitability, and Bradshaw acknowledges it probably matters less for vertically integrated businesses such as Old Mutual Wealth. For a business like Nucleus, however, profitability is critical.
The chairman sees two possible outcomes for platforms: they can be service providers to advisers or they can come to dominate the retail market. I struggle to see how this increasingly commoditised product that is forever being squeezed could dominate the retail market, which points in favour of the service provider model. But Bradshaw reminds me that platforms control most of an adviser’s proposition.
So how does one make money in this market? “He who provides the most useful service to advisers will win,” says Bradshaw.
St James’s Place is a hugely profitable and successful business but restricted models in general are expensive and Bradshaw does not see a wholesale move towards it. He believes advisers do not want to sell expensive products – but, of course, a shift to restricted advice would pose a threat to Nucleus’ business, which relies heavily on a thriving independent advisory community.
Bradshaw first entered the industry in 1971, at which time the conventional wisdom was to work at an institution and get a good professional qualification. I ask him what he would do differently if he were to start all over again today.
“I’d probably be in Shoreditch, excited to work on changing the world,” he says. Of course, his career attests to the fact he already has.
Heather Hopkins is director of research at Platforum