You might not expect the chairman of a large adviser network to admit he was interested in Marxism as a young man, yet Sesame Bankhall Group’s John Cowan is very open about his past.
Then again, not every financial services boss was raised in tenement housing without hot water or central heating, and with one shared toilet for 17 people on a single floor.
Over pastries and coffee at his favourite local, the Grazing Goat in Marylebone, we discussed vertical integration, platform consolidation and his time in Paris in the 1960s.
“The RDR was 10 years in the making,” says Cowan. “It was way back in 2002 that then-chancellor Gordon Brown and Ron Sandler set the wheels in motion.”
At the time, Cowan was with National Australia Bank. He remembers a conversation with a young McKinsey consultant in Sydney, who asked whether Sandler might be right and change was coming. Cowan’s snap reply: “Change is absolutely coming. But we have no idea of timelines.”
Today, Cowan foresees substantial change on its way for the platform market. Will that be in the form of consolidation? “Some think there will be a royal battle and just three or four platforms will be left,” he says.
“Some platforms will become advisory firms; others will go D2C. Some will be economically squeezed out. This is an expensive business and requires a big capital play.”
On the specifics, Cowan is tight lipped. “I am not the owner of a crystal ball,” he says. However, he does suggest the consolidation could come from the underlying technology.
“The tech companies might show the platforms how to amalgamate their businesses and offer to stitch three or four of them together.”
On Standard Life’s acquisition of Elevate, Cowan says we need four or five years to pass before we can judge whether it was a good idea.
“Now they are talking about two doors to enter the market. Standard Life and Elevate are very different propositions. The ideal would be to stretch the platforms across the entire platform market but that won’t happen for a while.”
He is well equipped to make such calls, having worked in companies like Scottish Amicable and Prudential, as well as National Australia Bank.
The conversation shifts to platforms running proprietary technology, which Cowan believes face a risk of being “outgunned.”
So is vertical integration the way forward? The chairman feels the FCA has been tolerant of some quite pricey propositions but that it will start to apply greater scrutiny. In his view, it will look at whether vertical integration has been good for consumers, particularly whether they get value for money.
The biggest industry issue for Cowan is the fact people are not saving enough. For him, the jury is still out on the success of the RDR. Indeed, while he acknowledges the fact industry standards have risen, he notes advisers are not reaching a wider community. There is no incentive to broaden access to advice and, to that end, the RDR seems to be failing.
Some platforms will become advisory firms; others will
go D2C. Some will be economically squeezed out
Rise of the machines?
That said, he questions whether digital technology and artificial intelligence could change things, bringing down the cost of advice and enabling advisers to work better with clients.
He criticises the “deniers” who think “nothing will replace the nuance of humans in judgement calls”. Instead, he imagines a day when advisory firms employ robots as paraplanners.
Such musings are a long way from Cowan’s humble beginnings in the tenement flat above a shop in Glasgow. After a brief university debut he found himself in Paris during the famous and riotous year of Les Événements, 1968.
Living on rue de Vaugirard with American draft dodgers he had met in Cannes, he relished expat Parisian life (including attending a demonstration with over two million protesters led by Jean Paul Sartre).
Cowan left Paris for the UK and a series of labouring jobs. He was a dustman in Coventry and worked in the shipyards in Glasgow. It was in Glasgow he met a girl, and a friend suggested he find a professional job.
“I went from fiddling with Marxism to a white collar job at a life company,” he says with a raised eyebrow.
So what would he do if he were starting his career afresh now? With fatherly pride, he tells me of son, a political journalist on BBC’s Good Morning Scotland. That is what he would do, he says. Or he would run a small art gallery. He is a fan of the Scottish Colourists, as well as abstract art, and tells me every bit of wall in his flat is covered with works he has collected over the years, on his travels far from a Glasgow tenement.
Heather Hopkins is director of research at Platforum