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Ken Davy

The network pioneer now believes that the days of the network are gone with depolarisation and that advisers would be better off being directly regulated and signing up with a support services firm.

The role of the network model is sadly no longer a viable option in today’s financial advice market, says its pioneer Ken Davy. The Huddersfield Town FC saviour, who is also chairman of the Yorkshire town’s rugby league team – the Giants, believes that going directly regulated is the only way forward for today’s small and medium-sized IFA firms.

Having travelled around the world several times in his early career as a photographer, Davy moved into financial services. “Even though the business was doing well, I just thought it was something I could not see myself doing in 10 years time, so I started to look around for something else.”

Davy asserts that both economics and investment have always been hobbies for him – he bought his first shares aged 18, while living in Sydney – so financial services seemed a natural second career path to take.

His joint passions for people and money came together in his first role as an insurance salesman for Abbey Life.

“Accountancy was not an option, as I wanted the flexibility of time and had to earn a decent living with my third daughter on the way at that time. The idea of selling things – credit cards, car insurance and the like – left me cold. People were what I was interested in, which left life insurance, so I joined the Leeds office of Abbey Life in 1970.”

It was this experience at Abbey which imbued in him a fundamental respect for financial advisers that he has held ever since. Davy believes the service that IFAs deliver to consumers is invaluable. But he feels they are underpaid and their services are not appreciated, understood or recognised, particularly by the media. He feels it is imperative there should be total transparency for customers in terms of what they are being sold, why they need it, what the cost is and who they are buying from. These basic values have formed the cornerstone of Davy’s business model.

“Big companies simply cannot deliver the same quality of service, looking after one business, one family or oneperson at a time. I think the strongest model for IFAs is the one to four-person practice where the principal does the advising and uses a strong support network to help him work more efficiently.”

Big banks which are setting up IFA arms within their businesses, would argue that they enjoy the double benefit of having the trusted support of a big institution while being able to offer the individual advice on a more personal level.

Davy comments: “That is all very well but it does not work in practice. If you buy from a bank, chances are that if you go back in 12 months time, you might not see the same person. If you go back in three years, it is a remote chance. If you go back in five years , it is unlikely in the extreme. With a true IFA, you can get continuous service from generation to generation.”

When Abbey made its decision in the late 1970s that advisers could only sell up to 15 per cent of other providers’ products, Davy found that he was selling more than 50 per cent of outside products so he felt it was time to move on and establish himself as a truly independent IFA. His network of support staff and administrators, some of whom have become paraplanners grew, allowing him to run the business efficiently and profitably. Davy believes that simply increasing the salesforce can be a road to nowhere, although he admits there can be exceptions.

Of his assets, Davy says: “If I have one strength, it is strategic thinking.” In the 1980s when polarisation was introduced, Davy considered that small IFAs would face problems so he began searching for a network operation, allowing him to continue practising in the way he had previously, while enjoying the benefit of a support system. “There was no one else doing it, nothing to join, so I set up my own – DBS.”

And so the network concept was born and competition soon built as other networks were established. By 2002, Davy reckons that around half the market was being run via networks. DBS was sold to Misys in June 2001, giving Davy a reported profit of around 7m. He stepped down as DBS chairman in April 2002, 20 years after founding the company. He then moved on to set up his second big IFA venture – support services firm SimplyBiz, which began trading December 2003.

Davy accepts the inevitable demise of the network model and thinks the recent situation at Bankhall is merely the forerunner of things to come. “I think Bankhall simply bowed to the inevitable. They certainly will not be the last to close down.” SimplyBiz has benefited from the fallout of ISL with some former ISL members electing to join SimplyBiz in the last month.

“It saddens me to say that the current network model is no longer viable but it has run its course. The current landscape is far better suited to having directly regulated advisers who can benefit from the offerings of a support services provider. Our model is based on finding the simplest way to solve the problem.”

Davy has been a key industry voice on regulation, with experience at board level with the LIA, IFA Promotion, Aifa, PIA and CII Pathways. But the latest campaign sees him lobbying the FSA and other regulatory institutions for a product levy versus the existing Financial Services Compensation Scheme.

“The current system is totally unfair. Put simply, the good IFAs are subsiding the bad. If the regulator is pushing for a policy on Treating Customers Fairly, surely it ought to start by treating IFAs fairly.”

Davy enjoys simple pleasures and has a great belief in life, local community and local teams and he aims to enjoy everything that he does. If his attentions to both the Galpharm (formerly the McAlpine) Stadium home sports teams unfold akin to his dedication to IFAs, then sports fans in Hudderfield could be in for a good run.

Born: 1941, Bridlington, Yorkshire

Lives: Huddersfield for 42 years, with wife Jennifer. They have four grown-up daughters

Career: 1956-58: Darkroom technician at photo lab; 1958-62: Cruise liner photographer; 1962-69: Ran own photographic studio in Huddersfield; 1970-79: Abbey Life; 1979: Became an IFA; 1983: Set up DBS; 1990: IFA Promotion; 1992: President of LIA; 1998: Aifa board: 2003: Set up SimplyBiz

Interests: Chairman of Huddersfield Giants rugby league, chairman of Huddersfield Town FC, holidays

Likes: Plain speaking

Dislikes: Curries

Life ambition: To see Huddersfield Town in the top 30 clubs in the UK by 2008, the Giants get to the top of the Super League, to see SimplyBiz continue helping increasing numbers of IFAs to grow and prosper

Hero: Winston Churchill

Drives: Jaguar X Type

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