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Profile: Alan Smith on the merits of small firms and why restricted advice is like shopping in three aisles of a supermarket

Alan Smith is a fierce supporter of independent financial advice and says restricted advice puts the adviser firm’s interests above those of its clients.

The chief executive of Capital Asset Management, which was named best small adviser at this year’s Money Marketing Awards, says offering a limited service to clients is like only being allowed into part of the supermarket when you go shopping.

“Shopping in three aisles and not anywhere else is in the interests of the advice firms and shareholders rather than the clients,” he adds.

Smith worked for many years as a broker consultant at Standard Life before moving into advice but he says his firm has always had a culture of building trust and long-term relationships with clients rather than trying to sell them products.

He says CAM has always tried to challenge the traditional business model which focuses on sales, commission generation and shifting products.

“Even now, the industry is still focused on giving people advice and asking them to buy a product. We say the client isn’t interested in that. Our advisers act as a coach or good friends to clients, not focusing on whether they’ve used their Isa allowance. We do that too but the proposition doesn’t lead on it. ”

Instead, he says, CAM concentrates on solving the problems that keep clients awake at night, which he calls ‘3am moments’.

Smith spent 14 years at Standard Life between 1986 and 2000. “I had an employer who cared; a good job that was interesting and well paid and I made good progress. There was no logical reason to leave,” he says. But a sole trader of an advice firm gave Smith an offer he couldn’t refuse and by 2001, Smith was working with him. “He wanted me to join his business as part of his succession plans,” says Smith.

When the sole trader retired, Smith took over and created a new business, Capital Asset Management, in 2004. “The business has evolved, changed style and structure, but it’s still the same business with some of the clients he had back then. A lot of business can be tracked back for decades. Nobody has left the business in 10 years, certainly in terms of advisers, and that is reassuring for clients,” says Smith.

In addition to being a staunch advocate of independence, Smith says smaller advice firms are naturally better at looking after their clients’ interests than large firms.

He believes staff turnover at big firms can hinder relationships with clients. “If you are good you get promoted so you move on and if you’re no good you get fired. 

“There is no longevity of relationships. But clients share things with you that they may not have shared with anyone else and they don’t want to keep going through it all over again with different people,” he says.

He also says big organisations have a natural conflict of interest with clients where the focus is on sales and hitting targets. “It’s not their fault, it’s just the way they are constructed,” says Smith. 

“They have shareholders to look after and the way to help shareholders is through revenue and profits, which they make by selling more stuff. This may or may not be in the interests of the client base.”

Smith concedes there are particular challenges in running a small firm. 

“We don’t have unlimited resources and the deep pockets that some of the large institutions have so have to work hard with the best resources we’ve got. But if someone has a good idea, we can implement it quickly, we don’t have layers of board meetings,” he says.

One of the ideas CAM has implemented in recent years is Intelligent Investing, its range of risk-rated model portfolios that were created after the financial crisis. 

Smith says: “We had outsourced to discretionary managers and multi-managers but when we analysed the data, none of them were covered in glory. 

“We started looking at academic research and found little or no evidence that active management is likely to generate returns in excess of the rest of the market after fees. So we use index funds to achieve the desired outcomes in model portfolios.”

The recent Budget changes, which raised the Isa limit to £15,000 a year and allow much greater flexibility for pension withdrawal, have been predicted to be good news for financial advisers.

Smith says the Isa changes are nothing to get too excited about but the pensions changes should be attractive to clients.

“The changes are good news because people can save a bit more but I don’t think Isas are the tax-efficient investment of choice. If you put money into a pension with 20, 40 or 45 per cent tax relief as a bonus, the power of compounding with the tax break is significant,” he says.

One challenge for smaller independent firms is being able to demonstrate their knowledge of the whole of market. CAM’s independent status means it is unable to ignore investments such as Ucis.

Smith says: “I’ve yet to see a Ucis product that was appropriate for clients but, who knows, in the future some may be launched that will have some value.”

One year on from the creation of the Financial Conduct Authority, Smith gives it a tentative thumbs-up. “It seems more willing to engage and appears more human than the FSA,” he says.

The RDR has caused huge disrup-tion to the market for financial advice and Smith says this is providing opportunities at the top end.

Having restructured the business over the last couple of years, Smith says they are looking at growing it further over the next three years.

“We will be working on our ability to attract new clients away from their traditional homes. We are relocating to a larger space and recruiting several more experienced financial planners.”

One target for growth is among clients of the private banks and Smith says: “The private banks are expected to deliver at what is getting on for double the rate we would charge,” says Smith. 

One area he is not concerned by is the growth of direct to consumer execution-only businesses.

“They have different client bases but it’s more about different business models. It’s the transactional product platform versus the consultant relationship,” he says.



2001- present: chief executive, Capital Asset Management

1986 – 2001: account manager, Standard Life

What is the best bit of advice you received in your career?

The Golden Rule -Do for your clients what you would do for yourself given the same circumstances and always put people before profit.

What keeps you awake at night?

Very little – I generally sleep like a baby!

What is the most significant impact on financial advice in the past year?

The ongoing evolution resulting in the post RDR landscape – it’s still taking time to evolve fully but immense opportunities are being created for truly client focused boutique financial planning firms.

If I was put in charge of the FCA for a day I would…

Review the structure of the FSCS levy

What advice would you give new advisers joining the profession?

Get well qualified early on, but then learn as much as possible about behavioural skills, and building trust and empathy through the fine art of listening.


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