For Investment Quorum chief executive Lee Robertson, no single initiative has done more for clients than platforms.
He remembers the days of ringing up insurance companies to get valuations. “They were usually late and inevitably wrong,” he says.
Robertson heaps generous praise on platforms and speaks with admiration for the businesses they have built. However, he recognises consolidation is inevitable, pointing to the hefty assets on Cofunds relative to its thin profits.
And it is not just Cofunds. “There are a few of these businesses struggling for profitability,” he says.
According to Robertson, most advice firms have by now chosen their platforms. Investment Quorum has used Transact since the start, as well as 7IM. At the height of the treating customers fairly initiative, he admits it dallied with UBS (“the platform that never was”).
It chose 7IM to migrate the assets from UBS because chief executive Tom Sheridan offered an all-in price. He praises both his choices for good service, being whole-of-market and largely error free.
Platforum has long argued the most important factors driving platform consolidation are the ongoing investment required in technology, the commitment of the parent company and regulatory burden. Robertson agrees and suggests acquisition will be a key theme.
But who will the acquirers be? Certainly, there are platforms looking to sell but who is looking to buy? Robertson points to asset management. “There have been a few dabbles so far, with the likes of Aberdeen buying Parmenion and Schroders buying Benchmark Capital.”
But surely it is quite a big cultural leap to go from managing money to administering it?
“Asset managers are looking at how to get into the distribution game. Life companies have been the acquirers so far and they too are, in the main, asset managers. So the cultural leap might not be so wide.”
Since our meeting, Standard Life and Aberdeen announced their mega-merger, supporting Roberston’s point that life companies are morphing into asset managers.
“There are a few of these businesses struggling for profitability”
The Price is Wrong?
On pricing, Robertson wishes platforms would offer a fixed fee. Investment Quorum offers fixed fees to some of its higher-value customers and in these situations it is hard to tell the client the platform is charged on basis points, he says.
If an advice firm has been working with a platform for a while, the platform knows how much work is needed for that client, so it should be easier to offer a fixed fee. That said, Robertson does acknowledge this is not easy for platforms. 7IM, for example, uses Pershing for its back office and pays it on basis points.
Robertson joined the industry in 1989 and, after a brief stint with Allied Dunbar, worked at Halifax and RBS. He then set up an IFA business with a partner and moved on to found Investment Quorum in 2000.
“I caught a whiff of where the industry might be going, so I wanted to go down the fee route.” In the early days, being a fee-based advice firm was a key differentiator. However, Robertson says the RDR proved “a pain in the backside” in removing his competitive edge.
He believes the consolidation trend will stretch wider into the advisory market too. Demographics are the main factor, followed by cost and a desire to be part of a larger group.
Indeed, he notes how hard it is to reach scale. “We have a quarter of a billion in assets under management and we’re struggling with scale because of the sheer cost of running the business.”
Admitting that managing a small company on one’s own is difficult, he finds a lot of value in interacting with peers as part of an adviser group called the Aurora Group.
Robertson is particularly passionate about customer engagement. Investment Quorum invests heavily in digital engagement and is currently building a new microsite that will include more interactive elements.
“Everyone is different and people consume media in many different ways. Investing is a big, meaty, boring topic and we need to cut it down into smaller chunks.”
As with most advice firms, Investment Quorum attracts new clients through word of mouth and referrals from a network of professional firms. But digital is becoming much more important.
Robertson says: “We won a £9m case this year that came in from a web referral.”
Customer acquisition across the advice sector is not a problem, says Robertson.
He notes “the frightened 50-year-old” remains a source of steady business. “Everyone I speak with on the adviser side tells me how busy they are. Good advice businesses are being sought out like never before. People are looking to bring a bit of structure to their finances. And that is good to see.”
Would he change anything if he were to start again today?
“I love what I do. I’d probably follow the same path. “We started with two desks, two phones and a kettle and now have £250m under management. It is remarkable.”
Heather Hopkins is head of Platforum.
She can be reached at firstname.lastname@example.org
Lee Robertson – CV
2000-present: Chief executive and founder, Investment Quorum
1995-2000: Joint managing director, Capulet Financial Management
1993-1995: Senior financial consultant, Royal Scottish Assurance (RBS Marketing Group)
1991-1993: Financial services manager, HPS Financial Services (Halifax Marketing Group)
1990-1991: Sales associate, Allied Dunbar
1981-1990: Royal Navy, Communications and Intelligence Branch