This third part of my look at the changing face of independence starts with my arrival in the research and technical support department of DBS in 1995. Ken Davy had set up DBS some years before. He was an inspirational leader who genuinely believed in independence. I arrived just as the firm was debating whether or not to continue with broker funds. I weighed in straight away on the “against” side, citing the experiences of my two previous employers. DBS agreed. It looked good.
DBS set out to allow members the maximum amount of freedom in what they did, they just had to do it compliantly. The staff in Huddersfield were enthusiastic and genuine people who really wanted to help the members run successful businesses. I worked umpteen hours of unpaid overtime but it was a joy to me.
A key duty was the compiling of fund panels. We did it honestly. Sure, providers threw a lot of money at DBS to buy a presence at regional meetings and enhanced commission deals were done, particularly on bonds. But nobody ever tried to compel me to panel a provider because they were paying. Nor was I ever prevented from panelling providers that were not. Panels, in any case, were not exclusive. Members could sell non-panelled funds and products provided they wrote their own justifications and recorded their own research.
Not everyone appreciated our independence, however. I got hauled up once to explain why I had issued a newsletter detailing the advantages of unit trusts over bonds. One large insurer – a significant “supporter” – had taken serious exception and demanded I issue another newsletter retracting the first. I refused. The article was factual and correct so why would I? A compromise was reached. The insurer got to issue a blurb pointing out the advantages of bonds as it saw them. I counted it as a victory for independence and objectivity.
The network independent model had a fatal weakness, though. Members equated independence with their ability to sell anything they chose, resisting the notion we could “ban” certain products. And they still expected the network to carry the can. This caused tensions. Naturally, compliance wanted a tighter approach but those charged with driving profits were focused on keeping the members happy and not losing them to competitors. The problem was a mismatch between the members’ power to sell what they wanted and their willingness (unwillingness, actually) to accept responsibility for doing so.
In 1998, after a few regulatory problems, DBS’s board seemed to lose confidence in its own ability to run the business. It also seemed to lose direction. There was much introspection as to what the firm’s network model should actually look like. That resulted in the hiring of management consultants.
The changes they put in place were disastrous but before that fact was realised the leader of the project had created a position for herself as member services director. In 2000 she fired the manager of our department to bring in someone new of her own choosing. That marked the beginning of the end of my time at DBS. It also marked the beginning of the end of DBS’s real independence.
Neil Liversidge is managing director of West Riding Personal Financial Solutions