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Wrapping up the future

Financial services is finally on its way out of the “industrial revolution” it has been struggling through and the future looks bright, accord- ing to Millfield chief executive Paul Tebbutt.

Tebbutt says financial services is the “powerhouse” of the country, being the biggest single contributing industry towards the UK’s GDP, and he sees increasing flexibility in the sector as great news for IFAs.

He believes that wrap will be the next big thing. “The whole wrap concept will take time for clients and advisers to get their heads around but the concept of having all your assets in one place and being able to manage them has to take off. As far as I am concerned, this is the future,” he says.

Millfield has recently sold the last stake in its Lifetime wrap proposition to Norwich Union but the IFA group will still use its facility.

When it was launched in April, 86 advisers were using it, having run Lifetime thr- ough its pilot, but Tebbutt expects that over the next few months he will see upwards of 350 to 400 users. He says: “The users will not flood it and put lots of money into it but I think it is going to transform advice with time.”

Tebbutt says the British public is now coming to terms with the fact that if they want quality independent financial advice they have to pay for it.

“And they will pay for it by fees and commission or both,” he says.

“We offer a multi-tie with over 100 products on the platform but our advisers can still use whole of market. If you move from independent to multi-tie and you have not got whole of market, what do you tell your clients?”

Tebbutt believes the wider industry will see slow but sure migration towards panels or multi-ties. “I think that very slowly but surely, people who want simplistic processes and procedures, particularly relating to mortgage advice, will go down the multi-tie road.”

He is pleased with the shake-up of the pension market and praises the Government for getting Britain excited about pensions, although he believes it may have been accidental.

“What the Government has done is got everybody excited about pensions – although pension is just a word – it is all about assets. I am sure it was pure luck, not intended at all, but once people get excited about a concept, they start to put money in,” he says.

At Millfield, both fees and commission are offered by its 1,600 IFAs, although the top advisers do not charge an hourly but a value-based fee.

He says: “The most successful people in the world do not charge by the hour, they charge by value. It is what you create. If Mercedes charged for their cars based on the number of hours they took to make, they would have to sell them at half the price.”

Millfield does provide hourly rates, varying from adviser to adviser depending on level of specialism, but it prefers its top advisers to charge on the value of their advice. The firm demands a minimum turnover of 60,000 from advisers, with its average adviser making 70,000 a year, according to Tebbutt.

He compares a pension transfer specialist with an adviser giving simple pension advice, saying the two could not possibly charge the same fee. The variation of adviser charges is monitored through Millfield head office.

He says: “At Millfield, we have lots and lots of menus and you have to send in yours to the compliance depart- ment and then qualify why you are charging those fees.”

He believes the menu is one of the best things to come out of the FSA, as it is providing a framework for flexibility.

Tebbutt says: “It is all about flexibility. According to the law of requisite variety, the man or the woman with the most flexibility will be the man or woman that wins the day.”

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