When MPA Financial Management managing director Phil McGovern sat the old G60 pension exam in 1996, he was among 11 per cent of the candidates who passed.
McGovern subsequently went on to regularly coach others how to pass it at a Society of Financial Adviser study group.
Fast forward to the present and AF3, the successor to G60, has just been replaced by AF7. Meanwhile, the defined benefit to defined contribution transfer market is booming as a result of pension freedoms and high transfer values. Does McGovern worry about continuing to advise in this market, particularly given the FCA’s recent scrutiny of DB transfer advice?
“Of course,” he says. “DB transfers are generating a lot of business and we are sitting on 30-year liabilities. I know what the industry can do to things like this; drumming up a misselling scandal and every word you say being taken out of context.
“At our firm, everything goes through me. Others will do different parts of the job but every pension transfer case we do comes onto my desk and I sign it off. It’s about making sure the process is robust and repeatable over time.”
McGovern’s commitment to demonstrating a robust and repeatable process for MPA’s pension transfer business includes generating its own transfer value analysis. He does not think the firm could do its job properly by relying on providers’.
“One error in a TVAS can throw out the advice, so we have people checking the reports,” he says.
Like many advisers operating in the pension transfer market, McGovern has seen this type of business grow in the last 12 months. He often gets calls from other advisers who want him to do transfers for their clients.
He has concerns about the “obscene” fees some people are charging for pension transfers, as well as the usual worries about professional indemnity insurance. However, he is confident in his firm’s procedures, with cases proceeding only where there are valid reasons for transferring and where the numbers also add up.
Phil McGovern – CV
1996-present: Independent financial adviser, director, then managing director, MPA Financial Management
1993-1996: GN Byrd & Co, independent financial adviser
1990 -1993: Norwich Union, life consultant
1988-1990: GA Life, life inspector
Having seen one firm which is part of a network state it does not do pension transfers for anyone under age 55, McGovern finds the arbitrary nature of this ridiculous.
“What’s wrong with doing it for someone age 54 if the reasons and the numbers work? I understand that networks are only as strong as the weakest link so they have to be more prescriptive. But some of the transfer values are life changing,” he says.
“The people I see might say things like ‘I can retire now because the income is higher than I expected’ but the regulator doesn’t understand this sort of thing. I hope the FCA doesn’t demonise transfers as much as it has in the past.”
The reasons why people want to undertake a transfer often surprise McGovern.
“If they just want a bigger pension, that’s not an acceptable reason. But some will want to retire early or have other good reasons. I saw a guy who was going to be bankrupt – he was going to lose his home. Accessing his pension meant he and his family could stay in the house. But other times you look at the numbers and you have to tell people ‘you will run out of money before you die’. Sometimes you have to save people from themselves.”
Banging on the door
Saving people from themselves may not be easy if they happen to be insistent clients, but McGovern has never come across one.
“When you give people a good reason, they accept it. When you tell them their plan doesn’t stand up to scrutiny, they will accept they have to go away and adjust it,” he says.
“The biggest fear clients have is running out of money in retirement. It’s my job to ease their minds and allow them to sleep at night. Many clients are paranoid because they’ve made some bad decisions but with a bit of management, care and understanding, we can help them sleep at night.”
McGovern started his financial services career as a trainee life inspector with GA Life in 1988 after replying to an ad in The Grocer magazine for “bored graduates”.
Since leaving university – where he had studied plant biology – he had been working as a management trainee at Sun Valley Poultry in Hereford, running the production line that made chicken McNuggets for McDonalds.
“It gave me a taste of man management at a young age but wearing a hairnet, white overall and wellies wasn’t great. My brother, who worked for Clerical Medical, wore a suit, had a company car, earned good money and played a lot of golf,” he says.
From GA Life, McGovern joined Norwich Union and although the role there was not really for him, he met some good people, including MPA founder Mike Paul.
They kept in touch even after McGovern joined IFA firm GN Byrd in 1993. Three years later, he joined Paul at MPA.
“Mike needed some help when he took on a large pension scheme and it seemed a good opportunity to me,” says McGovern.
Twenty-one years on, the plan is for MPA to get to £1bn in funds under management over the next five years.
“It seems a ridiculous number in some ways but I believe it is achievable. When I became managing director seven years ago we were at £42m and we’ve grown to £350m now. But we’re talking to a company about acquiring it and that will bring in another £100m, so we will be at around £500m by the end of the year,” says McGovern.
McGovern says MPA has been in acquisition talks with a few companies in the last 12 months.
“This one is run by two guys I’ve known for years and one of them wants to retire. If you know who you’re buying from you get a better idea of what you’re buying. It controls the risk and you can make sure you don’t take on their liabilities, and that their ethos matches yours. It has to be the right fit.”
What is the best bit of advice you’ve received in your career?
My dad, who was a coal miner, said to me that you are no better than anyone else and they are no better than you.
What keeps you awake at night?
Mainly the exciting plans I have in my head. Some come to me in the dead of night and there is an amazing clarity at that time.
What has had the most significant impact on financial advice in the last year?
Pension freedoms and the impact on DB transfers. It’s a perfect storm with the change in legislation and the huge increase in transfer values but it won’t last forever.
If I was in charge of the FCA for a day I would…?
Put a levy on all products sold to pay for the Financial Ombudsman Service and Financial Services Compensation Scheme; put a long stop on complaints and then move out of Canary Wharf and find somewhere cheaper. I’d also put all the staff in an auto-enrolment scheme so they know what the rest of the world have to suffer.
Any advice for new advisers?
If you don’t like people and helping them, it’s not for you. If you just want to earn lots of money, go and become an investment banker.