As a consultant, sometimes you have to tell clients things they don’t want to hear, observes EY senior adviser Malcolm Kerr.
“There are situations where you have to tell people that a deal they think is beautiful is ugly,” he says. “But clients do not pay our fees to be told what they want to hear – they pay for objective and honest advice.”
Kerr has worked in consultancy with two of the “big four” firms for the past 15 years after almost 30 years in the industry.
Like many advisers, he started his career as part of a direct salesforce, working for International Life Insurance.
After working in various marketing roles, he rose through the ranks at Albany Life to manage its 1,200-strong direct salesforce.
Following the acquisition of Albany Life by MetLife, Kerr moved to New York for two years to work for MetLife’s strategic research group. “That was the first time I started thinking about doing consultancy and strategy work long-term,” he says.
Following the buyout of Albany Life by Canada Life, Kerr became chairman of Canada Life International and headed up the firm’s IFA division.
Looking for a new challenge, he joined KPMG as director of UK financial services and six years later moved to EY.
“I was not enjoying the work at Canada Life as I felt I had done it before. I moved to KPMG because I wanted to do something other than manage people,” he says.
“I was brought up to think you work your way up a hierarchy and the more people you manage, the more important you are and the more money you make.
“But managing people is quite stressful and I wanted to do something that was exciting and rewarding but without the internal politics and hiring and firing.”
Kerr says working for KPMG and EY gave him that freedom.
“You can be very successful without having to do a lot of the things that take up much of your time in a corporate environment, like internal meetings,” he says.
“There is no business as usual, which in that sense is similar to being a financial adviser,” he says.
Kerr has worked on more than 100 engagements for EY, for businesses including platforms, life and pension companies, asset managers, banks, advice firms and networks.
“An engagement could be as simple as a day-long project or it could be three months working on identifying what a major piece of legislation like the RDR will mean for a firm,” he says.
Among the biggest developments in the advice market, he says, are shifts in distribution and the FCA’s third and final post-implementation review of the RDR, which is due to report at the end of this year.
“There is a lot of good practice out there but the one thing that concerns me is the number of advisers who still have a fee model that is dependent on a transaction taking place.
“That is changing over time but until there is complete separation of advice and transaction, there will always be a conflict of interest,” he adds.
Kerr says that following the reduction in adviser numbers in the run-up to the RDR, demand for advice is now exceeding supply.
“Demand is being fuelled by the rise in house prices, which means people are inheriting more money,” he says. “Added to that, the Budget pension reforms mean retirement planning is now a much longer journey.”
Larger firms are looking to take advantage of this, he says.
“Platforms and asset managers have bought into distribution and insurance companies are looking to create distribution. The large firms are moving to play right across the value chain and are realising advice is not as risky as it used to be because they can use technology to manage some of the risks.”
But Kerr expects banks and insurers looking to re-enter the advice market to face a major challenge when it comes to recruiting suitable staff.
“Advisers have a unique skill set, which is both analytical and creative,” he says. “They can empathise with clients and develop really strong relationships.
“If a client was getting divorced, he might well tell his adviser before he told his partner. Selling advice is very different to selling anything else – the adviser is the product.”
Kerr says the most challenging project he has worked on was for an investment bank which wanted to lend a firm a large sum on the basis it would be sold several years later.
“Both parties were very keen to do the deal and the bank wanted us to look at it and give it a tick but we could not,” he says.
“The deal fell through and the bank was not mollified until the firm went into administration a year later. That was very difficult because everyone else in the room thought we were wrong.”
Kerr retired from his role as executive director at EY in March but continues to advise the firm on a part-time basis. While he is enjoying using the freedom to write a book, he plans to continue working with EY for as long as possible.
“I have worked in the industry all my life, so I am always looking at what is happening and thinking about what it means and I want to be able to apply that. But the clients of EY are very demanding and there may come a time when I cannot deliver what they want. Hopefully I’ll realise that before the clients do.”
What’s the best bit of advice you’ve received in your career?
Sometimes you have to tell people that their baby is ugly.
What keeps you awake at night?
Happily, nothing at all.
What has had the most significant impact on financial advice in the past year?
Institutions starting to acquire and/or build advisory businesses again as they recognise that the demand for advice is exceeding supply.
If I was put in charge of the FCA for a day, I would…
Set up a panel of advisers to gain insights from the coalface.
Any advice for new advisers?
Work with the right clients and build great relationships by always doing what you know is the right thing.
2004-present: Executive director, then senior adviser, EY
1998-2004: Director of UK financial services, KPMG
1996-98: Executive chairman, Canada Life International
1990-96: Strategic research group vice president, then director, MetLife
1981-90: Sales director, Albany Life
1979-81: Managing director, Julian Gibbs Associates
1976-79: Marketing manager, Property Growth Assurance
1974-76: New business manager, Bevington Lowndes Financial Services
1970-74: Graduate trainee, International Life Insurance