The secret behind Novia’s success lies in its technology and large discretionary fund management range, according to chief executive Bill Vasilieff. But the path to this point has been far from smooth.
In 2001, Vasilieff worked on establishing the Selestia platform. Six years later, after it was acquired by Old Mutual to be merged with Skandia’s proposition, he went on the hunt for investors to launch his next venture. Difficult times lay ahead.
He says: “I went out to look for funding in the City to set up Novia. I got it and we set up the business in 2008. But obviously there were massive troubles at that time. We went live and then the financial crisis happened.
“We were looking to private investors but it took me a year to get that money. Having got that far you have a choice: you either delay the project or you can carry on. If we had delayed it would not have happened.”
Vasilieff brought over a small team from Selestia and managed to gather £6.5m of £10m funding to get started.
“We set the business up and a lot of the competitors tried to kill us. They said we would never survive. You do indeed need deep pockets to survive and it was very hard right in the middle of the financial crisis.”
The platform launched with the need for future capital and refinanced twice, until it finally became profitable in 2014.
“The key is to find advisers you have worked with in the past and start building up a track record,” says Vasilieff.
Novia has been investing in updates to its tools and technology, and is currently moving to version 12 of the core administration system provided by GBST.
“The core technology and admin system is built by GBST but we build our own technology around a lot of tools.
“We don’t accept paper, which really cuts down the amount of errors you make. Another thing we tend to score highly on is the functionality we have to support investments, such as setting up portfolios, managing models and working with DFMs.”
Indeed, Vasilieff argues one of Novia’s key distinguishing factors is its range of DFMs. It currently offers access to around 60, and has plans to increase this number further.
“There is a huge number of DFMs in the UK but the business tends to go to just a few. The reason for that is they do not really get business unless they are on a platform. We were the first to really integrate with DFMs.
“A lot of other platforms can’t do it properly because the way they are built means they cannot separate the pricing.
“When we set up, the average DFM’s charge was 125 basis points. We went out to market and said ‘we do the admin and you do the fund management’, so the average fee on the platform now is 25 bps. Platforms have taken a lot of the costs down.”
Novia’s in-house DFM Copia Capital Management is also a big contributor to its success, says Vasilieff. The firm is currently on a country-wide roadshow as it prepares for its model portfolio launch later this year.
“Some big players had high expectations on profits and failed. Now they are exiting. But I don’t think there is a consolidation trend”
On the future of the platform and investment market, Vasilieff has no doubt recent deals, as well as Brexit, are set to change the industry. But on the possibility of an increase in consolidation, he is not so certain.
“This year has been quite difficult for some platforms and the news around two of the big ones – Cofunds and Axa – has been significant. But I don’t think there is a consolidation trend.
“What’s happened is that some of the big players had very high expectations on profits and they have failed. Now they are exiting the market. Also, some people don’t see platforms as businesses in their own right; they just see them as a way of getting funds.”
According to Vasilieff, some of the older institutional businesses that have not embraced technology but have many employees have “real pressure” on margins.
He shows a list of life companies that used to dominate the market before platforms. Around 70 have pulled out since the 1980s. “Only a few are left and some have adopted some platform businesses.”
Does he believe the platform space is overcrowded? “I don’t think it is. It is a big market, probably the fourth biggest in the world for investments.”
As for the path ahead for Novia, Vasilieff has a very clear idea of its direction. “Our vision has always been the same from day one and a flotation is still our ambition. We are thinking two or three years down the line, depending on market ambition.
“The value of the business tends to go up every year as funds and profits grow.”
The platform’s assets under administration currently stand at £4.8bn. “In the last two months of 2016 we were up with new business. We will have ended the year up nine or 10 per cent on 2015, with a slight increase in market share. In terms of profitability we are already up from 2015.”
Vasilieff adds Novia is “a very profitable business” and will keep growing organically.
What’s the best advice you’ve received? If you are looking at a new venture, think things through thoroughly and assess the maximum downside. If you go for it, go 100 per cent and without fear.
What has had the most significant impact on financial advice in the last year? Abolition of inducements.
What keeps you awake at night? Work. I think about work all the time.
If I was in charge of the FCA for a day, I would… Stop my staff from jumping on any old bandwagon that rolls along: things like robo-advice, for example.
Any advice for new advisers? Financial advice is a great profession and a good career to be in.
2008-present: Chief executive and co-founder, Novia Financial
2001-2006: Co-founder and marketing director, Selestia
1993-2001: Marketing director, M&G
1988-1993: Product marketing director, Allied Dunbar