Nicholls Stevens managing director on how to solve the problems created by pension freedoms
A combination of being technically minded and looking for areas with recurring income that suited her business model set IFA Carole Nicholls on her path as a pensions specialist.
The managing director of Bristol-based firm Nicholls Stevens realised early in her career that she needed to find her niche by being good at something people needed. That meant making the most of her natural aptitude for technical knowledge, with pensions being the obvious fit.
Picking apart pension freedoms, Nicholls discards the well-worn industry script about how wonderful it has been for the world and its wife. As with many things, it depends on which way you look at it.
“Pension freedoms is almost like two sides of the same coin. It has been the making of good IFA businesses, particularly if specialising in retirement planning. In the past, clients came to get a recommendation and would wave goodbye to you after that. Now they don’t.
“You do their cash flow, you review their cash flow – you get closer to clients, if anything.
“But the other side of the coin is that it’s very scary and I don’t think that, in the long term, it is going to work. People live a long time and a lot of clients don’t understand the volatility of investments. People don’t really understand the potential for running out of money and they could end up putting a strain on the NHS and on the state in other ways as their funds run out.”
For Nicholls, the solution is simple. “Everyone should have a minimum guaranteed income – a bit of state pension and annuity – then they could run riot with the rest.
“That would protect people with more modest funds as they would end up with most of it in a secure pension and a little bit left to do what they want with. That sits more comfortably with me because they would not be on the breadline at 92.”
Nicholls says her “bête noire” is the way many people talk about passing their pension funds on to their families, when the reality is that longer life spans mean they will have nothing left.
“People get lulled into this but, rather than giving to your family, it’s more likely the family will need to support you. People just don’t understand their finances – financial education is so poor.”
After starting to go down the teaching route and realising it was not for her, Nicholls got into financial services through temping. It was not long before she was taking exams, such as the ACII life and pensions, and using her technical skills to work her way up the career ladder at Lloyds of London broker Richards Longstaff.
“Richards Longstaff didn’t have much technical back-up and that was something I knew about. At the time, some women were a bit diffident, standing back a bit, but I felt confident in the fact that I had my exams,” she says.
Nicholls acknowledges there was not the same focus on exams and technical knowledge as there is today, but points out that, in the late 1970s and early 1980s, life inspectors or broker consultants –the traditional route to becoming an adviser – needed to take the ACII exam in life and pensions to be qualified to do their jobs.
“At that point, people were well qualified, but that changed when the selling culture came in with the introduction of unit-linked insurance, as you had to sell the products,” she says.
After eight years at Richards Longstaff, Nicholls eventually decided to start her own business.
“Richards Longstaff was a good company; it was very forward thinking and it appealed to my technical mind. I flourished there, and was made managing director of its life and pensions subsidiary. It was only because it was bought out by another company, a bank, that I decided to leave. The business was sold because it needed more financing, but the organisation it was sold to wanted to make it into an Allied Dunbar type of company, which wasn’t for me.”
Nicholls Stevens was established in 1986 with a view to doing things differently to its peers.
“At that time, everyone was interested in new business. They had to get new business because commission was loaded upfront and there was not much ongoing. That potentially led to bad outcomes, as nobody bothered to go back and review anything,” says Nicholls.
“I wanted to build a business on recurring income and could afford to do that as I had some money from shares. I’d started in pensions and they were good as they had fees or recurring income of some sorts. So that’s how I started the business, with a trail of money coming in.”
As a former president of the Personal Finance Society, Nicholls feels that the industry has come a long way since then and has more grounds to be regarded as a profession. However, she admits to being “very sad” there are still not enough women and younger people in it.
“When I go to conferences, the average age is 50. We haven’t honed in on how to get enough young people. Many IFAs are small businesses. These advisers don’t have the time to train up young people and I think they are missing out. It’s alright if you’re an enormous organisation with your own training department; that makes a big difference.”
Nicholls also feels the industry is yet to strike the right balance between technical and relationship skills in the training of advisers.
“We’ve gone from one extreme to another. In the days of Allied Dunbar, training in personal skills and communication was second to none and there was not much focus on technical skills. Now there is not much training in communication skills, which you need to get clients to talk and feel relaxed. It needs to be taught, as it doesn’t come naturally to everyone.”
One thing Nicholls would like to see is more independent training. “A lot of training is delivered by investment houses and insurance companies, and even though it’s not supposed to be biased there is still product bias going on underneath,” she says. “Would advisers pay for independent training? If it was at a reasonable cost, I think many would do so.”
What’s the best bit of advice you’ve received in your career?
The head of my sixth form told us we could do anything we wanted to if we set our minds to it.
What keeps you awake at night?
Nothing. I sleep through thunder and trees falling down
What has had the most significant impact on financial advice in the last year?
Having to deal with the complexities of GDPR and Mifid II has taken an enormous amount of time and diverted advisers’ attention.
If I was in charge of the FCA for a day I would…
Ensure that every employee in a management role worked in a client-facing role at an IFA office for six months.
Any advice for new advisers?
Listen to your clients – don’t talk over them. And listen to other advisers to learn from their mistakes.
1986-present: Managing director, Nicholls Stevens Financial Services
1978-1986: Various roles at Richard Longstaff, including managing director of its life & pensions division