While most pension advisers will be familiar with Sipp specialist James Hay, IFG Group – James Hay’s parent company – remains something of a mystery, as does its chief executive Mark Bourke.
So before we tackle the thorny regulatory issues facing both of its UK businesses, Bourke offers a potted history of the financial services firm.
When he joined IFG from PricewaterhouseCooper’s California-based tax practice in 2000, Bourke says he found a business that was “an absolute mess”.
“The businesses I found in 2000 was a highly entrepreneurial, massively diverse collection of 25 companies,” he says.
“There was a significant level of leverage within the business and it was an absolute mess, frankly.
“It was effectively a mini-conglomerate that had gone on a debt-fuelled acquisition binge and, like all of these things, it hit the buffers. It was a business with £130m of debt and £13m of income, so you can see why there was a problem.”
As a result Bourke set about a huge deleveraging exercise, “cleaning up” IFG and shrinking it down to “a few interesting business with interesting market positions”.
As a result, IFG was left with two main interests in the UK – a Sipp administrator, which was called IPS at the time, and Saunderson House, an IFA business.
In 2009, IFG decided to expand its Sipp operation through a £35m deal to buy James Hay from Bank of Santander. The two Sipp businesses eventually merged under the James Hay.
“The story of IFG in its current guise really started with the acquisition of James Hay,” Bourke recalls.
“James Hay was effectively not making any profit at the time. It had a really good operational business but it had effectively been sat at the back of a bank being ignored and had no distribution.
“For us, the journey was to build distribution, reinvigorate the brand and take out some of the costs that were sitting in the business.”
But what does the future hold for James Hay? Bourke is focused on expanding the Sipp firm’s distribution network, aiming to treble the use of its products by the top 200 distributors.
He says: “We have got ourselves to the starting blocks with our product set but now we need to build relationships with the big potential distributors.
“Of the top 200 distributors we have about 8 per cent, but if we were punching our weight we would have about 25 per cent. So there is plenty of opportunity for us to expand our presence in this market.”
James Hay’s plans for expansion come at a difficult time for the industry, with the regulator preparing to ramp up capital requirements for Sipp administrators and raising concerns about inadequate systems and controls at certain companies.
In a consultation paper published in November, the FSA set out plans to increase the cap-ad minimum to £20,000 and link it to the assets a firm has under administration.
Bourke argues that James Hay’s scale – it has 40,000 Sipp clients – puts it in a position to thrive under the tougher regulations.
He says: “Fundamentally it is really important to be a scale Sipp operator.
“The regulator wants firms to hold enough capital to back up the assets they are responsible for and they want to see that the governance and controls of these businesses are robust.
“The regulator’s focus on this industry is absolutely huge and if you are not a scale player you simply cannot build the infrastructure or the systems and controls to service the market. It is a very difficult time if you are a peripheral player.”
Bourke expects the market to shrink dramatically once the new capital adequacy rules come into force.
He says: “You have to invest very significantly in the Sipp market if you are going to survive.
“Usually you would expect to end up with between two and five large players once a process like this is completed and we want to be one of those players.”
Bourke points to a rise in the intensity of financial services regulation as the biggest shift since he joined IFG 13 years ago.
And while many advisers lament the increasingly intrusive nature of regulation and the impact of the RDR, Bourke says both were necessary to force the market work better for consumers.
“The RDR is the first major change that the regulator has seen all the way through to the end,” he says.
“The market needed to be turned to meet peoples’ needs, rather than just selling them products, and the first successful step in doing that is the RDR.
“There has been a massive increase in regulatory intensity – it has risen exponentially over the last five years.
“But clearing away cross subsidisation and increasing transparency have to be good things because we should end up with a market which works better for the end customer.”
Education: Bachelor of Engineering, University College Dublin, Associate Irish Tax Institute
Career: June 2006 – Present: CEO of IFG Group; 2000-2006: finance director, IFG Group; 1989-2000: taxation partner, PWC
Likes: Sailing, Windsurfing & Golf
Dislikes: Health food (particularly fish)
Book: A Perfect Spy by John le Carré
Film: Tinker Tailor Soldier Spy
Album: Somersault by Chicane
Career ambition: To build the IFG (James Hay Partnership & Saunderson House) brand as the most respected in the market
Life ambition: To be well funded in retirement
If I wasn’t doing this I would be… A musician