Square Mile Investment Consulting and Research managing director Richard Romer-Lee realised early in his career that everything should begin and end with the client’s needs. A perfect circle, or a roundabout where all junctions lead back to the customer – very much in line with the RDR.
He says: “The customer needs to be at the heart of the business as they look after the people who look after them.
“The regulator has made it clear to the industry that it needs to offer suitable services and products to investors. The RDR has ensured that we have to act in the best interests of the customer. Everything we do is about suitability and if people are clear about what they are offered, the risk of it going wrong is reduced.”
As an independent research business that not only helps advisers with their investment recommendations but also aids life companies and platforms with their investment propositions, Square Mile’s customer relationships are far-reaching. Ultimately, the firm works in the best interests of its clients’ customers: the end investors.
“As a business that deals with advisers and wholesalers, we meet the needs of their customers, making their business more efficient and professional so they can build relationships and meet regulatory needs,” says Romer-Lee. He points out if investors have good outcomes, it is good for all parties – the advisers, asset managers, platforms and Square Mile itself.
“You’re only as good as the quality of your recommendations. Some fund managers over-promise to attain business and haven’t been able to deliver. That has created a trust issue. The investment industry is not very well trusted – some of that is deserved and some is undeserved.
“We want to build a business that is trusted, respected and helps investors meet their financial goals. If they get the financial planning right it improves their quality of life.”
Romer-Lee’s observations are rooted in his experience at advice firms. He started his career as an office junior at BMA Services, a firm which provided general insurance and financial advice.
After progressing as a general insurance broker, Romer-Lee moved to BMA Services’ investment advisory business. In 1989, he joined Buck Consultants, where he got into investment research and that eventually led to the creation of Old Broad Street Research. “We couldn’t find help with the investment choice so we did it ourselves,” he says.
Having moved into investment research in 1994, Romer-Lee and his colleague, OBSR co-founder Richard Downs, saw a need to help advisers with their investments. They went ahead with a management buyout of what would become OBSR in July 1999. OBSR was sold to Morningstar in 2010 and Romer-Lee stayed on, eventually leaving in 2013 to set up Square Mile. So why did he want to build another business?
“Some people are happiest at larger companies, some prefer smaller firms. There are different dynamics at work. I’ve always worked in smaller businesses and enjoyed the challenge of that,” he says.
“When setting up Square Mile I could draw from lessons learnt in the past. When setting up OBSR
I was probably wonderfully naïve in running a business. At Square Mile I had a better idea of what it needed, such as the culture of a business. It’s really important – it relies on the right people with the right attributes.
“You need people from different backgrounds, with different experience and skill sets. You need to build a team and run it with a particular culture, getting everybody involved and understanding the customer focus. It gives them a sense of purpose and makes everyone feel they are contributing.”
Square Mile has broadened the content of research since it started in 2014 and now covers closed-ended and passive funds as well as actively managed open-ended funds.
“Debates over closed-ended or open-ended, passive or active miss the point,” says Romer-Lee. “What matters is the right investment strategy and the most appropriate way of implementing that.”
Given that sectors are often made up of very different funds, Square Mile prefers to look at portfolios in terms of customer outcomes, such as protecting capital or generating an income.
Romer-Lee believes the right approach to suitability within the investment industry is to start with investor needs and work backwards to find the right solution rather than starting with the fund and working out who will buy it.
Square Mile has recently started communicating fund objectives, risks and its view of them through Talking Factsheets, which are video factsheets on its website. Finding out about investment funds through video is no different to learning about something via YouTube, says Romer-Lee. “If you are clear to investors about what to expect, they can refer to that and they get it.”
He thinks transparency is improving post-RDR but it is not yet perfect. “We’ve had unbundling of pricing but some are still frustrated at not having one measure, as investors can be charged miscellaneous transaction costs. Some funds with high transaction costs are good investments, some with low transaction costs are not. People need to understand what they are paying for.”
He also thinks a willingness to be accountable is important for the industry, particularly in fund management. “Fund managers need to be clear on the objectives and outcome of their funds. They need to be clear about that in English and in absolute terms, to enable people to work out if they are suitable. It’s early days and we are starting to see more clarity but more work needs to be done,” he says.
Romer-Lee also believes the industry should not abuse the opportunities brought about by the pension freedoms. “It gives investors greater responsibility and the freedom to do as they see fit. It’s a great opportunity but, as an industry, we must make sure we don’t take advantage of people. We should be able to demonstrate an ability to meet people’s needs and share the burden of responsibility with investors to build trust.”
What’s the best bit advice you’ve received in your career?
Don’t be afraid to give something a go. That’s how I got into investment and set up two businesses. And listen – you have two ears for a reason.
What keeps you awake at night?
Not much – I go out like a light.
What has had the most significant impact on financial advice in the last year?
The continuing legislation changes around pension freedoms.
If I was in charge of the FCA for a day I would…
Try to let the world know the industry does some good things.
Any advice for new advisers?
It is a tremendously exciting and fulfilling industry to work in and more people need advice – so fill your clients’ boots!
2014-present: Managing director, Square Mile Investment Consulting & Research
2012-2013: Managing director of European investment consulting, Morningstar
2010-2012: Joint managing director, Morningstar OBSR
1999-2010: Managing director, Old Broad Street Research
1989-1999: Administrator then research analyst, Buck Consultants
1985-1989: Office junior, general insurance broker, then administrator in investment advisory services, BMA Services