Nigel Stockton is annoyed. When he sits down with Money Marketing it is the day after the FCA announced a probe into advice firm consolidators’ acquisition processes. The regulator is concerned about the quality of suitability checks and whether acquired clients are being shunted into centralised investment propositions.
And while the new Bellpenny chief executive says it is right the market should be scrutinised, he is quick to defend his firm’s model.
“There has been a lot of nonsense about aggregators forcing clients into things. That is absolutely not the case. It really annoys me when people believe that because the only way the business grows and gets momentum of its own is if we look after our clients.”
“There is so much misunderstanding around what we are about, with advisers thinking we’re going to be extremely aggressive. But our goals are the same as their goals: we want to give fantastic investment advice.”
Stockton has been a director of the national advice firm since it was founded in 2012 but only took over the reins from Kevin Ronaldson in September.
He spent the previous 12 years in the mortgage market, first as head of the mortgage adviser division at HBOS and Lloyds following the tumultuous 2008 takeover, and latterly as financial services director at estate agent Countrywide.
He says pensions and investments advice has lagged behind the development of the mortgage market and remains fragmented.
“You look at the mortgage industry and the top nine distributors do 90 per cent of the distribution in the UK. There is an argument that we will be in the same space in the restricted and whole of market investment advice space in five or 10 years’ time.”
Bellpenny has completed over 30 acquisitions but Stockton says adviser appetite for selling up is still growing.
“We always thought the RDR would be the game changer and there would be a window of opportunity, but we’ve probably underestimated the appetite for consolidation and to exit. The industry is fairly elderly and there are more opportunities now than there were three years ago.”
Such is the demand that the firm has taken the decision to change tack and target fewer but larger deals.
Aside from traditional IFAs reaching their own retirement dates, Stockton says the need to invest heavily in areas such as technology will also fuel consolidation.
“One of the things about being a big player is that you can get the product providers to sharpen their pencils. So we can also offer clients technology, like online valuations, and good deals. My job is to make sure the client proposition is good and to get the best prices we can get out of providers.”
Stockton predicts the Government’s Financial Advice Market Review – which closed for responses just before Christmas – will force advisers to use technology to serve the mass market.
He says: “The FAMR is going to be far more wide-reaching than people think. As always from regulators you want clear guidance on what good looks like – you tell me what game we’re playing and how you can win and I’ll try and work out a way we can do that. People will be asked how they are providing advice to the whole community. I don’t think “we’re not” is going to be a good enough answer.”
In 2014 Bellpenny acquired Torquil Clark, the advice arm of Skipton Building Society. The deal also gave Bellpenny an execution-only business with around £500m of assets through TQ Invest.
The growing realisation that the mass market was no longer being served by advisers post-RDR was the driving force behind the FAMR, but Stockton says TQ Invest means the firm has a “really strong” proposition for pots under £30,000.
He adds other advice firms will have to follow suit and develop a multi-channel distribution model.
He says: “Be under no illusion, providers are all looking at how they can serve the people with small pots and we need to do the same.
“The ultra-high-net-worths are also going to want to have valuations on their phones and using technology.
“The bread and butter is still the big pots but you have to think ‘where’s my future?’ The guy with £200,000 who is 45 will also use a tablet and won’t necessarily be satisfied solely with face-to-face.”
But while Stockton sees advisers re-entering the mass market, he thinks consumers need to be held more responsible for their decisions.
“The impact of the pension changes we’ve just gone through is still not clear. I am very concerned people might blame their advisers for letting them spend their pension on cars and houses.
“Consumers need to be held more responsible for their choices, but I understand that’s not very helpful because they do not realise the choices they are making at the moment.”
So where will Bellpenny be in five years? Was the decision to focus on larger deals made with an eye to a share offering?
Stockton guided Countrywide through its 2014 flotation but is coy on whether the stockmarket is where this firm, currently owned by Oaktree Capital Management, will end up.
He says: “In 2020 I can still see myself being with Bellpenny. I don’t know who will own the business by then. But I learnt with Countrywide that if you build a great client-facing business where people are happy and clients are comfortable and the business is growing, the future will look after itself.
“It could be a purchase by a product provider, or another venture capital fund or a small-cap float. It could be all sorts of things.”
Sept 2015-present: Chief executive, Bellpenny
2010-2015: Financial services director, Countrywide
2003-2010: Led the mortgage intermediary business across Lloyds Banking Group and HBOS; also managing director of Birmingham Midshires
2000-2003: Circulation director, Financial Times
1999-2000: Business development director for TheStreet.co.uk
1987-99: Various retail banking roles, Natwest
What’s the best advice you’ve received?
Create strong profitable businesses and the future will look after itself.
What has had the most significant impact on financial advice in the past year?
In mortgages the settling in of the MMR and in investments the pension freedoms.
We are all learning and I hope we don’t regret things in the coming years.
What keeps you awake at night?
Very little. You can only control things in your command so don’t worry about things you cannot.
If I was in charge of the FCA for a day I would…
Employ and place industry people on two- and three-year secondments (both advisers and product manufacturers) to work alongside the regulator.
Any advice for new advisers?
Be professional, always do what you have promised the client and if you have done a good job always ask for a referral.