It is over ten years since Money Marketing last spent an hour chatting with Harry Katz. In 2004, the famously outspoken adviser said “we may dwindle in number but there will always be a need for good independent advisers and I plan to be in that market for a long time to come”.
Fast forward to 2015 and Katz is still a firebrand but has just sold his one man firm – Norwest Consultants – to Gale and Phillipson (jonathanfry). After a long goodbye with clients, he is about to embark on his next step as a freelance consultant.
“I’ve had most of my clients for at least 10 years or more. I’ve had one family where I’ve worked with four generations. It’s been very emotional and very touching getting the sort of emails and phone calls I’ve been getting. I’d never realised, I thought they just put up with me. It’s been very gratifying. I wish I’d known how people felt while I was doing the work.”
When it comes to the RDR, Katz is typically underwhelmed by perhaps the single biggest shock to the advice profession.
He says: “RDR has been like the curate’s egg – good in parts. I think it’s quite right that people were dragooned into getting somewhat better educated and level four is not exactly Everest. I couldn’t understand people’s antipathy for doing it.”
Likewise, on the switch from commission to fees, he does not see what all the fuss was about. He says he has charged fees most of his whole career, starting when he made the unlikely switch from manufacturing – he ran a plastics factory in Lancashire – to training as an adviser with Hill Samuel in Manchester.
“When I started my financial career at Hill Samuel the firm was suggesting that indemnity commission was the way to go. And I said ‘I do not want indemnity commission, I am not going to owe you any money; you are going to owe me money’.
“So when I started on my own I didn’t like the idea of giving people advice and not being paid for it. I didn’t want to nail them to the carpet and make them buy a product. My plan was to say ‘this is what I think you should do and that’s what you should pay for’.”
Despite describing professional advice as a “parasitic industry” that just “shuffles things around”, Katz is clear on its benefits.
“This business does have a lot to commend it. I’ve always said it’s the best chess game in town. It’s intellectually stimulating and, like any other business, if you do well it’s rewarding.
“There were a lot of culture shocks coming in and there still are today. I still feel like an outsider.”
His outsider status was assured in 2012 when he dramatically quit the Aifa council when it dropped “independent” from its name and rebranded as Apfa.
He says: “Aifa always had money troubles and, like in all walks of life, he who pays the piper calls the tune. They worried that a lot of the big advice firms wouldn’t be independent after RDR and they’d lose of members – and they were right.
“We had a two day session and it was agreed there would be a new body with a collegiate approach, which meant there were independents on one side and restricted on the other. The big players didn’t want to know – they thought they’d be second class citizens.
“I said ‘I’m supposed to represent small independent advisers but you’re not independent any more so in all consciousness I have to go.”
Almost two years on from the rollout of the RDR, the FCA conceded it needed help in defining the differences between the independent and restricted labels.
It admitted in its post-implementation review of RDR, published in December last year, there was confusion between the terms and it needed to develop a better way to communicate to consumers.
Katz says: “It’s perfectly understandable that the big outfits want to be restricted because they need to control cash flow and the old plan of bidding up commission is now defunct. It’s a business decision and you can’t blame them for that. But there’s a lot of misinformation flying about – you don’t have to tell everybody about every single thing in the market to be independent.
“You just have to be aware of it and prove you’ve been aware of it, which isn’t difficult.”
Likewise, he thinks fears of an “advice gap” are overplayed and writes off ideas of simplified advice.
“All this talk about gaps is a non-event. The people who are not getting advice generally don’t want it and the way regulation has gone means it’s not economic to serve them”, he says.
“The best thing you can give people in this gap is debt counselling. You have to think about what you are giving to these people and whether it will it change their lives. Helping them with debt and cash flow is what is required but that’s not down to an IFA because these people can’t afford it.”
Now he has given his last piece of regulated advice Katz is looking forward to not worrying about his clients and sleeping better as a result. He also plans to spend his new free time learning Italian – he already speaks French and German.
So what is he most proud of in what he calls his “second career”?
“I’m proud that I’ve made my clients money and have had just two complaints in 25 years – one went to the Ombudsman, which I won, and the other one was dropped,” he says.
“I’ve also made a profit every single year over 25 years and anyone that’s done that deserves a pat on the back I’d have thought.”
What’s the best bit of advice you’ve received in your career?
Preparation. Prepare well and you are more than half-way there.
What keeps you awake at night?
Up until last month it was worrying about making money for clients. From now? Too early to say.
What has had the most significant impact on financial advice in the past year?
Negative? The whittling away of pensions, reduced contributions, reduced lifetime allowance and the constant meddling and interference. Positive? The new rules allowing transferability of Isas between spouses.
If I was put in charge of the FCA for a day I would…
First, I would insist the Government passes its ideas through me first for approval. No good making policy on the hoof and expecting the regulator to clear up the mess later. Second, I would do away with two-tier regulation.
Any advice for new advisers?
You worry for your clients so they don’t have to. Remember, being an IFA is not a nine to five job.
March 2015-present: Freelance consultant, HA7Consulting
1990-2015: Principal, Norwest Consultants
1985-1989: IFA, Mainwaring Francis & Associates
1984-1985: Adviser, Hill Samuel
1967-1984: Managing director (finishing as), Weltonhurst Ltd
1965-1967: Management trainee, Sanitas Trust