Lothian clearly comes from a musical family. Before setting up his insurance business, his father had been a successful music promoter, bringing the likes of The Beatles and the Rolling Stones to Scotland in the Sixties and his grandfather was a professional musician who played the piano to accompany silent movies in the ballrooms of Dundee.
“It was under his gaze that many couples met and courted,” recounts Lothian nostalgically. Now Lothian sings occasionally in a Steely Dan tribute band called the Bodacious Cowboys.
“Those too young to remember the music may have heard Aifa’s Chris Cummings refer to the FSA’s Dan Waters as Steely Dan at the latest PFS conference,” he jokes.
Reputation counts for a lot when you live in a small city, or “Scotland’s largest village”, as Lothian describes Dundee. He recalls how he once got into a fight at a party when accused of being just another “shyster” IFA by a fellow guest who knew nothing of his professional standing. Perhaps this helps explain why at the PFS he is so keen to spread the message of professionalism.
He has had come into contact with poor advisers over the years although fortunately he believes they are in the minority.
On one occasion Lothian had a long-term client who lived so far away and had insufficient investments for it to be profitable to cover the advice costs through trail commission. As she did not want to pay fees, Lothian decided to refer her to another IFA in the directory who lived closer. But he says: “To my horror, I discovered that two months later he had transferred all her investments, including deposit accounts, Isas and a whole-of-life policy on the life of her sick husband – a total of £100,000 had been cashed in and put into a single-premium investment bond. She was a non-taxpayer and the IFA had taken 7 per cent commission.”
From early in his career, Lothian says he felt uncomfortable with the commission-based advice model as he did not like the fact that it was necessary to recommend a product in order to be paid.
He says: “The commission levels seemed to be very often disproportionate to the amount of work involved and I saw many advisers taking what I perceived to be an obscene level of commission where there was very little effort.”
Instead, he sought to move away from this by charging fees and/or offsetting commission.
Distinguishing between advice and commission-driven product sales is a key tenet of the retail distribution review and Lothian is pleased with much of the latest paper’s content but he still has concerns about the labels attached to the different categories of adviser.
He believes the restricted advice label is not clear enough for consumers.
“It is amazing what the right marketing and branding can do – like posh letterheads and marble floors. This is why the labelling is so important, so that people know when they deal with a firm whether it is whole of market or not and how well qualified the advisers are. If a firm is just flogging products, then the client should know that.”
He also believes there should be regulation for the products covered by basic advice as the qualification standard for this level of advisers is not high. But Lothian is supportive of the professionalism element of the paper, even though he personally hopes that over time the QCF level four bar will be raised even higher.
In his own career, he saw professional development as one means of distinguishing himself from an insurance salesman and took the AFPC exams within two years of becoming an IFA. He later returned to education and received a first-class honours degree for financial services from the University of Abertay, Dundee.
As well as his role at the PFS and running Dundee-based IFA Verus Chartered Financial Planning, Lothian currently sits on the board of his father and brother’s professional training and development firm Insights. The pair established the firm in 1988 after his father sold his insurance business. The company offers a psychological profiling tool based on the work of psychologist Carl Jung, which firms use to help improve team dynamics.
He says: “I was motivated to get involved in my PFS role because I saw the opportunity to actually perform that function in the professional body. If you think of the drivers within our industry, people are self-motivated to an extent but they need examples to follow. I saw the PFS as an ideal way to try and promote the values that I personally espouse.”
He is optimistic about what the IFA sector can achieve and predicts that the number of chartered financial planners will increase from 1,700 to 3,000 by the time RDR is implemented and estimates that in five years’ time the number will hit 5,000. But he warns that IFAs must not “bury their heads in the sand” in the belief that the RDR will be scrapped if the Conservatives get into power.
He says: “Whether the FSA continues to hold its mandate or not, the RDR will be implemented in some form and I am fairly certain that higher qualifications will form part of that. Advisers should assume that is the case and those who need to should get on with upskilling.”
Born: Dundee, 1968
Lives: Dundee with wife and four children
Education: St John’s RC High School Dundee; University of Abertay Dundee – first- class honours degree in financial services; University of Abertay Dundee – postgraduate diploma in information technology
Career: November 2008-present – president, Personal Finance Society,
November 2007 – vice- president, PFS; November 2006 – elected to PFS board; 2005-present – director, Verus Chartered Financial Planners; 1988-2005 – IFA and insurance broker, Independent Money Information Ltd; 1985-1988 – commercial and general broker, Lothian Insurance Brokers
Likes: Seeing my children learning and having fun. My beautiful wife’s lovely smile
Dislikes: Selfish or incon-siderate behaviour
Drives: Volvo V50R (safety comes first nowadays)
Book: A History of the World in 10 ½ Chapters by Julian Barnes
Film: 12 Angry Men
Album: Aja by Steely Dan
Career ambition: To always make a positive difference to my clients’ financial affairs and to be valued and respected by them
Life ambition: For my family to always be happy and financially secure
If I wasn’t doing this I would be… Wishing I was