People in various industries often say the only certainty is change. Just as individuals can either embrace change or resist it, so can businesses.
Since financial information and technology business Defaqto was sold by private equity firm Synova Capital to support services group SimplyBiz for £74.3m in March, change is something its chief executive, Zahid Bilgrami, has been reflecting on – particularly as the firm is also celebrating its 25th anniversary this year.
“One of the key changes we’ve seen is from private equity backing – where the timeframe for investment tends to be short term, with private equity investors looking to sell within three to five years – to now being backed by a company listed on the stock exchange, which means we can take a longer-term view on what we are developing,” he says.
There is a sense of quid pro quo about the deal, going beyond simply money changing hands for a business. SimplyBiz will gain a foothold in the banking and general insurance markets, while Defaqto will have access to more advisers and asset managers.
“There will be no change in what we bring to the market but it will speed it up and the quality of what we bring may be enhanced from a compliance management viewpoint,” says Bilgrami. Many people perhaps know Defaqto best for its star ratings, but there are plenty of advisers who are also familiar with its financial planning software, Engage Core. Over 8,500 advisers use it for everything from risk profiling in both accumulation and decumulation, to researching products and writing suitability reports.
Bilgrami says Engage Core was developed to solve the problem of advisers having to select the best bits of technology from different providers, only to find that they did not ‘talk to each other’.
“Advisers have to deal with technology fragmentation in the market. They either used to have to stitch together bits of functionality from here and there or they didn’t and had an inferior way of operating as a result. “We aspire to provide a one-stop shop,” he says.
Bilgrami points out Defaqto employs people who used to be financial advisers, so it understands the latter’s needs and frustrations. “We also speak to advisers to hear their thoughts and concerns,” he says.
What is the best bit of advice you’ve received in your career?
To be passionate about what you do. If you lose that, you should go off and do something else.
What keeps you awake at night?
I come up with my best ideas before I sleep, so I want to do something about them.
What has had the most significant impact on financial advice in the past year?
The mountain of regulatory change – GDPR, Mifid II and the FCA getting tougher with defined benefit transfers.
If I was in charge of the FCA for a day I would…
…set up the right culture and direction – which it is already doing.
Any advice for new advisers?
Invest time in education and training, including educating yourself about what’s out there in the market and understanding new systems.
So, what do advisers make of having to pay extra for some of the add-ons that Defaqto develops? Are they reluctant to pay more to access new tools?
“You’d expect me to say this, but I think our pricing structure is great value for advisers. We regularly update functionality and don’t charge people for that. We have started doing qualitative fund reviews in the past six months, which we offer free and update,” says Bilgrami.
“There are modules in addition to the base service but the reason we structure it that way is because many advisers don’t need everything and we didn’t see the point in charging people for what they didn’t need.”
For instance, he says a number of advisers do not write protection business, so it makes sense for its comparison tool for critical-illness cover to be a bolt-on product that only those who use it will pay for. “That’s the advantage of the modular structure: advisers only pay for what they use.”
When Bilgrami joined Defaqto in 2009 as chief operating officer, the firm had a very different structure from what it has now.
“The focus was mainly on direct-to-consumer, with less on intermediaries and other third parties. We provided solutions directly to investors but, in order to be successful, you needed to have millions of pounds of marketing to get to them,” he says.
“Now we are a business-to-business organisation and the end consumer is our customer’s customer. They are key stakeholders in everything we do. Everything we do is to their benefit.”
Prior to joining Defaqto, Bilgrami was a senior figure in business management, specifically focusing on strategic change. He had qualified as a chartered accountant in 1996 while working at Arthur Anderson Business Consulting. He then joined infrastructure group Balfour Beatty in 2002, where he worked initially on the turnaround of problem businesses within the group before moving into corporate development. By 2009, he felt that he needed a new challenge.
“My decision to join Defaqto wasn’t about financial services. My background was in really large blue-chip organisations and to make decisions you needed to influence a lot of people. I had senior roles in those organisations but it was difficult to make a difference. I wanted to be a bigger fish in a smaller pond,” he says.
“I was also of the view that technology provided to users such as financial advisers was extremely fragmented and I wanted to play a part in transforming the industry.”
Coming from outside financial services, Bilgrami wanted others to see he was up to speed with the sector, so he joined some people at Defaqto in doing a Masters in wealth management. The idea was for Bilgrami to feel comfortable with his technical knowledge and to enable others to know they could have a meaningful conversation with him.
“We achieved the level 7 qualification before the RDR in record time – we did it within 18 months,” he says.
Returning to the theme of change, Bilgrami points out that regulatory change is creating a lot of work for advisers and the rest of the financial services sector, which is making people upset. Not only have they had to comply with GDPR and Mifid II, the Senior Managers & Certification Regime will be extended from the end of the year.
“In its essence, the end aim of the regulator is a good one – to prevent scandals happening again,” says Bilgrami. “You can’t fault the intent but implementation means heaps of rules and everyone moans about them.
“The cultural bit – if I do a good job it means better customer outcomes – is great. But how do you get there? That’s where the changes come in.”
2009-present: Chief operating officer then chief executive, Defaqto
2002-09: Business transformation director then corporate development, Balfour Beatty
1993-2002: Senior manager, Arthur Anderson Business Consulting