Dan Mahony does not have a crystal ball but his job would be an awful lot easier if he did.
As a director in business consultancy EY UK’s life and pension practice, Mahony’s role is to take a view on where the industry is heading so the firm’s clients can position themselves ahead of the challenges and opportunities.
He says: “As a firm we need to make sure we are being proactive in judging where the disrupters are going to come from. It’s easier to be reactive to needs.
“There is a massive amount of regulatory change and a massive amount of things companies need to have adapted to: legislation change, the RDR, pension freedoms. It feels like the industry is coming through that. We are trying to be on the front foot, spotting the trends.”
Mahony says it is important for EY to be partners in its clients’ future growth, identifying how change can enhance their business models, rather than helping them undertake mandatory adjustment after the event.
“Robo-advice is one of these things. We need to understand the propositions out there, take a view on who is going to win and make the right connection with our clients.”
Collaborate and listen
It is striking that the approach is collaborative, rather than competitive. Mahony accepts that, in the past, new players with disruptive ideas in financial services were more likely to lose the battle, as barriers to entry were high and bigger firms with financial strength either copied the ideas or dealt with the threat by buying the new kid on the block. But he thinks technology is helping to change the models of the past.
“In other industries, disrupters have been digital and barriers to entry are low. Large providers are realising they have to work with fintech and disrupters.”
EY’s view on robo-advice is that it will not replace face-to-face advice but there are a lot of opportunities to use automation in the market. An example is increasing the productivity of advisers by automating the back office, reducing the time spent on things like producing suitability reports. Mahony thinks this is one way to tackle the advice gap, given the demand for advice is exceeding the supply of advisers.
“If you can increase the productivity of the advisers we currently have by automating the back office, more efficiency should reduce the cost. But for providers, because you’re taking the subjectivity or emotion out of the process, the problem is how you differentiate your products and propositions. The distribution function and robo-advice function can become quite powerful.”
Like many people, Mahony fell into financial services due to the necessity of getting a job.
“I went to a temp agency on 11 September 2001, just as the twin towers were falling. A week later I was doing data entry at Prudential.”
Over the next seven years, he worked his way up to become operations manager at the group.
“Because you’re taking the subjectivity or emotion out of the process, the problem is how you differentiate your products and propositions.”
In 2008, Mahony moved on to become operations director at Living Time. “A bunch of us at the Pru were approached by entrepreneur Kim Lerche-Thomsen, who had started the new business. It was a start-up in the third-way annuity space. I was young and carefree, so I thought I’d give it a go and gave up the security of my job at the Pru.”
So how did he find the transition? “There was a massive culture shift from a big company structure with a lot of corporate governance and red tape to a hand-to-mouth, dynamic start-up. I learned more at Living Time than I did in the rest of my career. “It was a vibrant team, with everyone pulling in the same direction. It felt like we had a noble endeavour to reform the retirement market and that shared experience was life changing.”
However, Living Time – which eventually became Primetime Retirement – suffered in the financial crisis and other entrants came into the market, squeezing its position.
Mahony left and spent a year at Friends Life before joining EY in 2012. He says the culture at EY is close to the entrepreneurial spirit he enjoyed at Living Time.
“It doesn’t feel like a big organisation; it feels like a group of entrepreneurial people. We are given free rein to develop ideas, take them to the market and hopefully create a successful firm.”
In his teens, he wanted to get into politics, so he studied the subject at university but found it difficult to get a job in the field. Now he thinks being a career politician is not such a good thing.
“It is important to have lived a bit of life before you move in that direction. I’m still interested in a secondary career in politics but local politics is a big-time investment and trying to balance that with a job and a home life is tricky. One day it might be of interest.”
Mahony likes the way their freedoms have made pensions “relatively sexy”, being found on the front pages of the mainstream press and the subject of dinner party discussions. But he thinks there needs to be more plain speaking and less jargon before the public becomes interested in any innovative products yet to materialise.
Staying with the subject of products, does Mahony think annuities have much of a future, given providers such as Prudential have pulled out of the market?
“Annuities have become a slightly toxic term among more engaged consumers and some advisers. But I still firmly believe there is a role for lifetime annuities for a significant number of people. For a lot of people security of income and certainty is important, but they forget that an annuity is an insurance contract rather than an investment.
“Since pension freedoms, investment markets have been good. But when we get that first downturn and the market has a shock, it will be interesting to see what adviser and customer behaviour looks like.”
What’s the best bit of advice you’ve received in your career?
It’s fine to be the last person in the bar, but be the first in the office in the morning.
What keeps you awake at night?
Being the last person in the bar!
What has had the most significant impact on financial advice in the last year?
A new corporate offence of facilitating tax evasion. Advisers are a high-risk category and I’m not sure it’s getting enough attention.
If I was in charge of the FCA for a day I would…
Stand back and think about why there is a shortage of advice – and how to create the right environment to bring new talent in.
Any advice for new advisers?
Play the long game. Be prepared to take time building relationships and investing in clients for the future.
2012-present: Senior manager EMEIA Insurance Services then director, EY UK
2011-2012: Head of operations delivery, Friends Life
2008-2011: Operations director, Living Time
2001-2008: Various roles from data entry to operations manager, Prudential