IFS Wealth & Pensions director on why being independent really matters and dodging the DB transfer bullet
Having personal experience of something gives you the authority to speak about it in a way someone who has not gone through it first-hand never can. It is what separates the pontifications of armchair critics from coalface opinions that have real clout.
During his career, IFS Wealth & Pensions director Ricky Chan has gone from being a tied adviser to a restricted adviser, before finally settling on independent advice. So, when he explains why he is proud to be able to call himself independent, it carries weight.
“Independence is very important for a young and growing business like ours. You sit on the same side as the client and without having a preconceived idea of products and solutions, you can really understand what they are looking to achieve. If you don’t have that, your hands are tied,” he says.
Chan acknowledges there are plenty of successful and established restricted whole-of-market advisers who are effectively independent in all but name. But for him, the name does make a difference.
“If you look at most areas in the profession, you never see a restricted adviser who is proud to be restricted. It’s either covered up or not mentioned at all, while most IFAs are proud to be independent,” he says. “If you’re more established, it is true that clients may not care if you are restricted as they’ve had those relationships for 30 or 40 years. But it’s different for young and growing firms. Being independent is key.”
What is the best bit of advice you’ve received in your career?
Success leaves clues. You don’t have to reinvent the wheel, just model yourself on those who are successful and you will be too.
What keeps you awake at night?
Podcasts, making Fantasy Football transfers, gaming video streams and wishing I had gone to bed earlier.
What has had the most significant impact on financial advice in the last year?
The rise in defined benefit transfers and the poor and unsuitable advice being given.
If I was in charge of the FCA for a day, I would…
Scrap the FCA Handbook and start again, implement a longstop and ban phoenixing.
Any advice for new advisers?
Find a great mentor and absorb their knowledge and wisdom like a sponge.
IFS Wealth & Pensions was established in 2013 by Chan and his twin brother, Alan. Both had started their financial services careers as tied advisers at the Co-operative Insurance Society before moving on – Chan as a self-employed adviser at a firm that was part of the Intrinsic network, and Alan at an IFA firm in London.
Setting up their own business was born out of the frustration that came with seeing how many of the bigger IFA firms prioritised shareholders at the advisers’ expense.
“It was hard to find a firm that treated advisers well, rather than just as a number. We thought, why work so hard to earn other people money when we can build something ourselves?” says Chan.
With no prior experience of running a business, the brothers launched their firm as an appointed representative of the IFS Group.
“We worked closely with their compliance director, Peter Duffy, and he has had a significant influence in our professional development since,” says Chan.
They became directly authorised in 2015 when the IFS Group was sold to a consolidator. “We had ruled out going directly authorised initially, as we thought it was too big a jump. Our peers said it was a lot of work and it looked a scary place to be,” says Chan. “But we didn’t want to risk joining a business that could be sold again or not liking the way the consolidator did business.”
Chan says if he could go back and launch the business again, provided it had the right turnover, he would go straight to being directly authorised.
“It’s definitely the place to be, providing you’ve got good advice processes and you are looking to build something long term that you have control over,” he says.
After becoming directly authorised, Chan was interested in getting into the defined benefit transfer market, as he and Alan had passed the AF3 qualification. However, Duffy advised them not to dabble in it because of the risks involved and the lifetime implications to professional indemnity insurance.
“Now we see many firms struggling to renew their PI or who will have high premiums or excesses for the life of the business, so we feel as if we dodged a bullet there.”
Chan has previously spoken to Money Marketing about building relationships with accountants to generate client referrals. Having recognised the value of professional connections early on at IFS Wealth & Pensions, he says it made sense to launch a separate corporate services firm in 2015 to help smaller businesses deal with the initial implementation of auto-enrolment. That firm, IFS Corporate Services, was able build relationships with accountants and payroll providers that would feed through to the main IFA business.
With the initial auto-enrolment staging process now complete, the corporate services side remains a very small part of overall business.
“We’re coming to the end in terms of auto-enrolment opportunities – they are few and far between. Companies do switch providers but, when it comes to growing the business, this opportunity is not for us,” says Chan.
2013-present: Director, IFS Wealth & Pensions
2011-2013: Financial adviser, Ridgeview Financial Services
2010-2011: Financial adviser, Co-operative Insurance Society
The brothers prefer to focus on growing their main business organically while keeping an eye on like-minded businesses to acquire.
“It’s not something we’ve got experience in, but speaking to other business owners, the acquisition is the easy part. Merging two businesses is the challenge, as you have to ensure the business is aligned with the processes you use and that you’re happy with any liability. If there is anything that isn’t great in its past, you have to think, do you really want to buy it?”
Not surprisingly, given the ethical slant of Chan’s first employer, the Co-operative Insurance Society, looking after clients properly also involves advising them in this area.
“Younger clients are interested in where their money is invested. I saw a new client last week who had seen her parents’ IFA and realised she couldn’t have a conversation about ethical investments with him.
“When she came to me, I told her what it means, the impact her money could have and the risks involved,” he says.
Chan has always had a close relationship with his brother, and that is reflected in their business partnership.
“Growing up, Alan and I had the same sort of friends,” he says. “We may have different opinions, but we’re both logical thinkers and we understand where each other is coming from.
“It’s hard to find someone to go into business with who you can trust in terms of pulling their weight and looking after clients properly as you would yourself. Since we went directly authorised, there’s a lot to do, so I’m happy I have Alan as a business partner.”