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Tom Baigrie: Regulatory constraints do more damage to savings than fraudsters

Tom Baigrie

The commercial challenges involved with growing a small business into a big one are tough enough in any field. Building a management team able to lead the culture needed to maintain quality when dozens do what a few once did, not to mention managing the technology required to accurately replicate personal service at scale, are difficult enough.

But in financial services the regulatory risks of trying to break through the small business, then SME, ceilings now demand far greater capital reserves than ever before. And capital, of course, is the very thing small businesses hardly ever have much of.

Escaping a Catch-22 is tricky work. I have had two goes at it and found routes through both times but in very different ways. In the more lightly regulated general insurance or Icobs market, LifeSearch is the largest business doing what it does in the UK. In Baigrie Davies’ Cobs world of more complex regulation, however, the normal ways of self-funding growth and transitioning ownership looked plain foolhardy.

Given the unpredictability of Financial Services Compensation Scheme costs, Treasury and FCA rule changes and Financial Ombudsman Service decisions, suggesting the planners, management and shareholders take on the personal debt needed to fund growth would have been irresponsible. No longer is the journey upwards a tolerably safe one for those without genuine capital strength.

Our alternative would have been to not grow but a business that seeks to stand still only ever fades away. And so the journey we started 30 years ago will now continue forward in the hands of Standard Life: a business with just about the deepest pockets there are. It helped that its advice firm 1825 is not seeking to consolidate, but rather to buy and build a genuine national financial planning business, and that its management team is keen to learn as well as lead. But there is no doubt it was the regulatory commercial risks of going on alone that originally put us in listening mode.

Ironically, there was a point 10 years ago when regulation unintentionally stopped us building a financial planning business of real scale by ourselves. Back then, we spotted quite a few of the new clients LifeSearch was attracting with its transactional insurance advice were well off enough to need wealth management. If they could be successfully passed across to Baigrie Davies we would have created that rarest of things  – a wealth manager with a low-cost route to market that produced a stream of new clients.

That plan was aborted as the RDR created a no-man’s land between the transactional advice so many consumers want and the holistic fee-based sort it required in investment and pensions. That gap simply became too wide for consumers to cross. Regulation has created endless versions of that story and, sadly for society, those well-meaning professionals who led our regulatory rulers do not seem to understand the lack of those many different business models causes more damage to society and a savings culture than all the fraudsters they ever put out of business.

Tom Baigrie is chief executive of LifeSearch


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  1. As is so often the case, Tom’s analysis is spot on.

    The vast majority of regulators have never worked in the real world – some would go further and say they have never worked.

    By not understanding the psychology of buying nor the subtleties of consumer interaction these possibly well-meaning individuals continually deliver rules that they believe will lead to a financial nirvana.

    The never-ending mantra can be reduced to, “more regulation = greater consumer trust and hence involvement”. Let me educate all regulators that 1 + 1 = 2 never works if distilled in isolation.

    Regulators do not know what consumers want, they think they know what is best for them and for us but they don’t – plain and simple.

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