Profile: Group IFA boss on why insurers are facing extinction

Group IFA chief executive Philip Rose on the changing industry, and the FCA dragging it into a profession 

Group IFA chief executive Philip Rose – the current PFS chartered financial planner of the year – does not beat about the bush in his outlook for UK financial services.

“Insurance companies are dinosaurs and will have all died by 2030,” he says. It may be a bold prediction but Rose has clearly thought about the way things are moving before drawing his conclusions.

According to Rose, changes in financial services such as the shift in the advice market from selling products to holistic financial planning are contributing to the eventual demise of insurance companies.

He sees most advisers now focused on growing clients’ wealth rather than selling insurance products.

“The majority of advisers want to gather assets, as their business is valued on recurring income. If they are asset gatherers, all they need are investment companies. They don’t do things like life cover,” he says.

For Rose, Standard Life’s recent acquisition of Aberdeen is an example of the industry’s move away from insurance towards investment.

“Aberdeen is an investment house and Standard Life has morphed into an investment house with the acquisition of Aberdeen.”

Rose says changes at the top of Standard Life – with new co-chief executive Martin Gilbert having an investment background – bears this out. “In the old days, the chief executive would have been an actuary. The new chief executive is an investment guy, not an insurance guy.”

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Rose says the decline of insurance firms in the UK can already be seen in the way many have focused more on global distribution or pulled out of the UK market altogether. He believes the UK market has become less attractive and profitable due to increased regulation leading to a lower return on capital.

“Axa has pretty much moved out of the UK and Prudential gets over 75 per cent of its revenue from the Far East. Companies are thinking ‘we can go anywhere on the globe and get a better return on capital; why have a business in the UK?’”

Rose also feels the penalties issued by the regulator can be disproportionate.

“There could be a problem with reconciliation on client accounts. It might only be £20 that has not been reconciled but the company could be hit with a £20m fine.”

What comes across when speaking to Rose is how he supports regulation that is done well – he “likes the things the regulator does to drag our industry into a profession”.

However, like many advisers, there are aspects of the broader system he feels are unfair, such as the Financial Services Compensation Scheme levy.

“I have been in the financial services sector for nearly 30 years and my clients have never needed the services of the FSCS levy. We spend in excess of £300,000 a year on internal and external research on investment solutions for clients.

“Advisers who change with the wind, recommend Ucis, carry out no due diligence and enter their business in administration using the FSCS levy have no room in this profession. But the FCA allows them to reincarnate and set up a new business either before or just after entering into administration.”

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Rose wonders if PI run-off cover could be used to replace the FSCS levy, thereby reducing costs for advisers and clamping down on phoenix firms.

“What we pay for PI insurance has come down as we have had no claims in 12 years. It’s probably around £60,000 but we paid a £134,000 FSCS levy. If we had run off cover it couldn’t have cost £134,000.

“PI insurers can do it and the premiums would go up, but not to the extent of the FSCS levy. And assume I go to an insurance company as a phoenix – I’m not too sure they’d want to insure me again. But the regulator would authorise me again.”

Rose started out in financial services just as advice became regulated in 1988, after a five-year spell in the army. Concerned about being posted away from his son if he stayed in the forces, Rose joined Liverpool Victoria as a sales agent.

He soon gravitated towards independent advice and, after joining IFA firm Munro-Greenhalgh in 1991, Rose bought out the firm’s other partners. That business was eventually sold to Numerica, which Rose joined as part of the deal. Numerica then sold it to BDO Stoy Hayward (now BDO) and Rose also moved across.

But the experience led him to conclude that the “big six” accountancy firms should not provide advice to individual private clients because it is different market and the level of fees are disproportionate.

This realisation led him to set up his own advice firm, which eventually became Group IFA.

The group now comprises a wealth manager Rosebridge, employee benefits firm Sovereign, Sipp and SSAS business The Pension Partnership and an advice firm specialising in advice to sports professionals, ProSport.

Why diversify through a range of brands under one umbrella?

“I wanted to provide a one-stop shop to deliver services to high net worth owner-managed businesses and entrepreneurial family businesses. The target client would normally have or previously had a business and hold the property in the SSAS/Sipp. They would also require group pension scheme advice for their members of staff,” he says.

Rose says one of the benefits of having several specialist brands under one roof is the ability to pool in-depth knowledge and work as a team on clients’ requirements.

“It’s similar to accountants or lawyers who have various specialists within the enlarged business.”

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There is one area that Rose has not managed to crack. In 2015, he set up Rosey Futures, a comparison site with the aim of comparing pensions, life insurance, annuities and protection, then directing visitors to online or face-to-face advice if needed.

Despite some success, the business has been shelved as Rose found the costs prohibitive and the clients it attracted were not a great fit for the rest of Group IFA.

“This was my passion – I spent £120,000 a year on Facebook advertising. We had around 4,500 clients in 12 months and something like 300 to 500 leads a week but the cost is a bottomless pit and the type of client is also alien to my experience,” says Rose. “We deal with multi-million pound clients, not £10,000 Isa clients.”

Five questions

What is the best bit of advice you’ve received in your career?

When I started out, my mentor said: “If your car breaks down and you knock on a client’s door, make sure they’d give you a brew.”

What keeps you awake at night?

Not a great deal as I’m comfortable with where we are as a business and a profession.

What has had the most significant impact on financial advice in the last year?

Mergers between companies we use so there are less out there. Advisers may have more money invested with a single company.

If I was in charge of the FCA for a day I would…?

Communicate more. It does a great job but doesn’t communicate very well.

Any advice for new advisers?

Keep obtaining knowledge as people pay us for our knowledge.

CV

2006-present: Group IFA, managing director

2005-2006: Director and board member, BDO Stoy Hayward

2002-2005: Director and board member, Numerica Financial Services

1991-2002: Partner, Munro Greenhalgh

1988-1991: Sales agent then inspector, Liverpool Victoria

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Rose wonders if PI run-off cover could be used to replace the FSCS levy, thereby reducing costs for advisers and clamping down on phoenix firms.

    “What we pay for PI insurance has come down as we have had no claims in 12 years. It’s probably around £60,000 but we paid a £134,000 FSCS levy. If we had run off cover it couldn’t have cost £134,000.

    “PI insurers can do it and the premiums would go up, but not to the extent of the FSCS levy. And assume I go to an insurance company as a phoenix – I’m not too sure they’d want to insure me again. But the regulator would authorise me again.”

    A good idea in theory but in practice it wouldn’t work. As when most firms go out of business there is no money left to pay the premiums and if the premiums aren’t paid there is no cover.

  2. You don’t really get fined for a £20 discrepancy. If you read the enforcement notices the failings, are far more serious but with the size of fines you can understand why people are worried.

    With the long term nature of insurance I doubt it will be all gone by 2030 but platforms and investment are taking most of the new business.

    There are still, however, a lot of insurance business about and life cover is often accompanied by other benefits.

  3. What a load of tripe.

    Some people just love the sound of their own voice.

  4. Firstly, Insurance and Investments are different products.

    Secondly, not all clients have a multi million pound portfolio.

  5. Insurers are like the tobacco companies. When the former saw their sales slide due to health issues they decided to get the less developed markets hooked. Insurers are running the same strategy. Everything we banned them from doing is all the norm in the less developed and they have had a field day. If anything they will be even bigger than before just NOT in the UK.
    Sadly very few foreigners or expats pay any attention to blogs on how awful these products are.

  6. In finance

    fpi om rl z et al = big C

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