Depolarisation is just the beginning of a massive realignment in the way that financial advisers do business, says Pivotal head John Cowan. He is looking ahead to how a depolarised world should be reflected in structuring the investment platform wing of the National Australia Bank where he took the reins two years ago.
It is a stance that makes a distinction from mainstream thought in the industry which sees depolarisation dividing advisers into tied, multi-tied and independent. Cowan believes this is only a transitional stage that will smooth out over the next couple of years to a point where traditional concepts of independence and tied will cease to have meaning. “Independence presently refers to products, not advice. Once this condition is extinct, independence will finally refer to advice.”
He says that evidence is already surfacing of the value chain breaking up which supports the theory that power is moving from providers to distributors. He points out that already advisers who use business models based on providing ongoing holistic advice are achieving much greater profitability than firms with “transactional structures”.
As something of a viability test for Pivotal's service offerings and to understand industry trends, Cowan recently teamed up with Sofa in a survey of 45 of its members, looking at the differences between firms with average profitability and those generating healthy profits.
The survey found that firms which spend more time servicing active clients that they advise regularly are earning double the profits for every hour worked in comparison with firms with limited contact with each individual client.
Cowan says more IFAs want to reduce their reliance on up-front commission and he believes this will eventually move them away from business models based on ties or relationships with providers and towards the use of outsourced platforms and wraps. “It is clear that forward-thinking advisers are keen to break away from their traditional relationships with providers. Life companies are beginning to loose control.”
It is an interesting tack from someone who has spent his entire financial services career on the life side. Cowan started at Scottish Amicable in 1969 as a sales support officer and worked his way up to director level. He was sales and marketing director at ScotAm when the Pru bought the firm in 1997 and he became group sales director of the Pru. He left Prudential in 2001 and became an independent consultant, working for Bright Grey, Axa and the National Australia Bank Group, which was looking to bring its MLC manager of managers to the UK. When the NAB committed to the UK launch, it brought Cowan in to run the business.
He says working as a consultant allowed him to gain valuable experience on the outside looking in at provider models, which has led to his prediction of the breakdown of the life model as we know it today.
“Looking at financial services from an outsider's perspective is very revealing. Often, people come into the industry from other industries and are confused by many of our backward business practices. A lot of what we still do today is based on tradition and outdated business models. The really good IFAs accept that the drivers of the industry have changed and are looking at what this will mean for their business.”
Unsurprisingly, for the head of a growing platform business, Cowan's faith is in multi-manager platforms. He points at the success of the business model in Australia and the US without using the simplistic argument that because it works abroad it will work here. “Over 90 per cent of financial services in the US goes through platforms but we are not naive enough to think markets replicate each other. We are saying there are a lot of learnings to be had from the Australian and US models that can be localised with UK common sense.”
Cowan argues that Pivotal is already demonstrating a “healthy mix” of Australian “slick” and UK “savvy”, with its MLC Mom receiving solid acceptance from IFAs and its business consultancy service attracting high levels of interest.
He feels that he has the first two parts of his market proposition down pat – a respectable Mom and a comprehensive business consultancy for IFAs who want long-term, comprehensive business coaching.
Now he is working on the final piece of the proposition -an adviser services arm that will provide outsourced compliance, PI and back office for financial advisers wanting to concentrate on servicing clients rather than tying themselves too closely to providers.
“I have travelled to Australia and the US quite a bit over the last few years and wherever you go you see that the best financial advisers are the ones that concentrate on providing advice to their clients and find the right business structure to let the rest of the business operate seamlessly and efficiently.”
Cowan also tries to do as much travelling for pleasure as he can. He is particularly interested in Cuba and Central America and has recently returned from a trip through Costa Rica.
His taste for the exotic also runs into the arts, where he says he has an attraction to “eccentric paintings and improbable sculpture”. The walls of his Mayfair home are lined with pieces which have caught his fancy and he also collects first edition books. The prize of his collection is a first edition of Harper Lee's To Kill A Mockingbird. His collection also features rarities such as John Steinbeck's The Grapes of Wrath and all of Graham Greene's novels as first editions. He says his favourite authors are Iain Banks and Irish novelist and journalist Colm Toibin.
If he has a half hour to spare, he says you will find him in the nearest bookshop and has been know to while away entire weekends scouring through the Oxfam bookshop on Marylebone High Street.
But true to his roots, Cowan rates as his all-time passion Celtic Football Club. He is a season ticket holder and attends as many home games as possible. He may now live in Mayfair but he was born in the Gorbals in Glasgow.
Born: The Gorbals, Glasgow, 1947
Lives: Mayfair, London
Education: Holyrood School, Glasgow
Career: 1969-97:Joined Scottish Amicable as sales support and worked way up to sales and marketing director (1992-97); 1997-2001: Prudential group sales director after the Pru's purchase of ScotAm; 1997-2001: a director of IFA Promotion; 2001-02: independent financial services consultant for firm such as Axa and the National Australia Bank Group; 2002-to present: Head of Pivotal Career ambition: To grow Pivotal to take advantage of the dramatic changes in the financial services industry Life ambition: To travel more extensively and be extremely happy Likes: Eccentric paintings and improbable sculpture, travelling to exotic places Dislikes: An absence of urgency and eyeball operations