What is the purpose of money? This is a question that highlights the distinction between financial planners and advisers, according to Paradigm Norton chief executive Barry Horner.
Horner, whose business was voted Adviser Firm of the Year at the 2017 Money Marketing Awards, says there is no point in growing wealth just for the sake of getting rich.
“You can’t take it with you when you die; it’s there to help people achieve their life goals,” he says.
For a financial planner, these goals are the starting point for plans that make it all possible, and clients pay for this service, not a series of financial products.
“Financial advice is the sale of interrelated products and financial planning is about relationships; looking at what makes people tick, what they want to get out of life, aligning their money with their life goals,” says Horner.
“You can have good financial advice and bad financial planning. But done well, financial planning is powerful and gives a service that may or may not provide a form of investment as the solution. We do some work where there is no product.”
Horner – who was president of the Institute of Financial Planning from 2008 to 2010 – started out in accountancy in 1983 but gravitated towards financial planning because he was more interested in the financial future of clients than in their past. He has spent the last 16 years building Paradigm Norton.
“I’ve attracted other people to the business who want to do the same thing. There are no bonuses; it is all based on career progression, client service and delivering financial life change,” he says.
When launching Paradigm Capital Management, as it was known before its 2005 acquisition of Norton Partners, Horner drew inspiration from his previous career.
“It was pre-RDR and I quite liked the accountancy profession’s model of business. It was a better way of delivering advice rather than selling products. Our business is not dissimilar now. It looks like a law and accountancy firm with no bonuses and no self-employed.”
When the RDR came along in 2012, the firm was already focusing on fee-based certified financial planning.
“It’s been client led in that we were thinking about what is likely to deliver the best client outcomes. Clients might say they want to spend more time with their young family but that might mean working four days a week instead of five and cutting back in some areas like cars and holidays,” he says.
“One client is a senior lawyer in a legal practice and as a throw-away comment he said ‘wouldn’t it be great if we could take a gap year like the children?’, so we engineered that. I want to make a difference.”
2001-present: Founder and chief executive, Paradigm Norton
1989-2001: UK managing director/financial planner, Ronald Blue & Co
1983-1989: Various accountancy roles
That mission is clear even in the wording of Paradigm Norton’s one-page five-year business plan.
“We have a five-year plan to impact the lives of 2,021 clients by 2021. It’s not just about adding clients, we want to make a difference to the lives of existing clients,” says Horner.
Paradigm Norton has around 1,000 clients on the tax and financial planning side but needs to increase this to maintain its graduate programme.
“We take on two graduates a year. Around 12 months ago we started to look at the graduates coming in and realised that at some point they will want their own clients, so we need to accelerate client numbers,” says Horner.
The firm is also continuing to grow via acquisition but Horner is unable to share details of the latest deal.
“We have done six acquisitions so far and are in the process of a seventh. There are a huge number of firms looking to consolidate but you have to have the right values and culture. They might want to merge with us but they could be more focused on products, so if you put them together it would be doomed to failure from the start.
“I know a lot of good firms and they approach us. If you know the firms, the people, how they operate and their investment solutions, you will have a high probability of success. There’s always a wrinkle and a challenge with every deal but we’ve retained all the clients we have acquired,” he says.
Horner has always been active in the industry outside the “day job” and is currently chair-elect of the Financial Planning Standards Board, the organisation that promotes professional standards in financial planning globally.
He wants to make a significant contribution to the emerging profession in the UK and believes it is important to have the same broad standards in different countries, even though there will often be different nuances and tax differences.
But while he believes financial planning is making progress in its journey towards being a profession, he says there is a long way to go.
“If you look at the definition of a profession, it needs to be for the public good. If you asked the public what they know about financial planning, the answer would be something like ‘isn’t that selling a pension?’ It’s still only 50 years old; it’s in its infancy compared to other professions,” he says.
“What are we doing about it? Some people always believe it’s someone else’s responsibility – I didn’t want to be accused of that.”
So what does Horner believe lies ahead for the industry while it awaits greater public recognition?
“The market will inevitably consolidate and it will be difficult for small firms but that’s not to say one-man bands can’t survive. There will be more buyouts and the consolidators will scoop up more and more firms. Digitalisation and robo-advice will also play a part,”
“Robo advice is a key trend and, as the markets are up now, everyone is happy. But what happens if the markets go down 15 per cent and a client is getting divorced? What happens when the client complains that the computer didn’t ask them whether they were going through a divorce?’ I’m interested in how you regulate something like that.”
What is the best bit of advice you’ve received in your career?
Only do what only you can do. It means work to your unique abilities.
What keeps you awake at night?
How to help my three boys – who are all starting their own businesses – avoid the mistakes I made. I don’t worry about Paradigm Norton anymore because we have a fabulous team.
What has had the most significant impact on financial advice in the last year?
The growth in robo-advice. I’m all for innovation in that space because the advice gap is a genuine problem but I’m slightly concerned the FCA is allowing it to be not as regulated as my business.
If I was in charge of the FCA for a day I would…
Focus on areas that build public confidence in the provision of advice.
Any advice for new advisers?
The three Cs: competence, confidence and community. Competence is achieved through professional exams, confidence is built by sitting in on client meetings and taking notes and community is about getting involved with the next generation and giving something back to the profession.