Ascot Lloyd chief eyes buys after waving bye to Bellpenny

Chief executive Nigel Stockton says 10 years from now only nine firms will do 90% of the business in the advice profession.

In the second part of our series looking at some of the biggest advice firms in the UK, we spoke to Ascot Lloyd chief executive Nigel Stockton. Read the first part of our series with Openwork here

Rewind to the start of 2018. It was then when Ascot Lloyd Financial Services and Bellpenny announced they were joining forces to become a single, fully independent IFA under the brand Ascot Lloyd.

Fast-forward to July, and Ascot Lloyd is enjoying the aftermath of its merger. New Model Adviser® talks with chief executive Nigel Stockton on how the company has changed since the merger.

In the second part of our series looking at some of the biggest advice firms in the UK, we spoke to Ascot Lloyd chief executive Nigel Stockton. Read the first part of our series with Openwork here

Rewind to the start of 2018. It was then when Ascot Lloyd Financial Services and Bellpenny announced they were joining forces to become a single, fully independent IFA under the brand Ascot Lloyd.

Fast-forward to July, and Ascot Lloyd is enjoying the aftermath of its merger. New Model Adviser® talks with chief executive Nigel Stockton on how the company has changed since the merger.

When you went fully independent, what was the experience like for advisers? What change was required?

The blunt truth of it was the advisers who were restricted working off a panel of funds in Bellpenny probably preferred to become independent. We work off a panel, but we are representative of a totally independent firm now. Clients and advisers seem to like it.

I do not see a lot of difference between restricted and independent when an adviser has gone through all the exams and become chartered, whether they have access to the whole of the market or a panel.

You see a lot of firms that are independent, then when we buy them you realise they have 80% of their assets with one provider. There is a blurring of what restricted and fully independent is.

Remind me where you are with acquisitions, following the merger. Have you made any this year?

There is plenty in the pipeline and we are very much in the market. We have a very strong backer in Oaktree Capital Management and they continue to be extremely supportive. Recently, the last couple of the Ascot Lloyd self-employed advisers have moved across to being employed.

We have a better chance of influencing our advisers if they are all employed. The compliance is easier, the regulation is easier, and the way in which the operation works is just easier.

That is not to decry self-employed models. There is plenty of space for them in the marketplace.

Is everyone who joins you coming in as an experienced adviser?

We have a sort of college going on at the moment for people who have just joined. They have done very quick administrative training as well as their paraplanning exams. Now we are training a couple of them to be advisers.

Has it become more difficult to make acquisitions?

It is not difficult at all, it has never been. Things are changing: Mifid II, the general data protection regulation, the regulatory environment, the cost of doing business, the way in which the regulator is moving.

That means, if the average age of an adviser is 56, there are an awful lot of people considering their future and thinking: ‘is this the time to maximise value?’

Markets have been reasonably kind to us for the past three years. So you are getting full bang for your recurring revenue number and it is a good time to think about selling.

Most firms are offering somewhere between two-and-a-half and three-and-a-half times recurring revenue. For your recurring revenue at the end of 2017, you would think that is actually a pretty good place to be in.

Everybody keeps saying we are near the end of a consolidation, but I do not believe that. In fact, I do not believe we have really started yet.

In the mortgages market, 92% of intermediaries are in nine firms now. If you think about that versus what we have in the adviser population, in 10 years’ time advice will be like that.

I do not know who they are going to be, but there will be nine firms doing 90% of the business. There will also be a tail of smaller businesses that have a structure that suits them. If you look at it, we are in consolidation, and we have not really started yet.

How is technology influencing the business?

When comparing mortgages and investments, the interesting thing for me is the average age of an investment customer is mid-50s. The average age of a mortgage client is roughly 35 years old.

The 35-year-old is perhaps much more comfortable with tablets and technology and is quite happy doing stuff online that 55-year-olds and above are not.

Face-to-face advice in investments has at least 20 years left to run. I am probably wrong and overestimating it, but I am positive there is still a good 10 years left to go.

In mortgages, I would expect the number of advisers in the next five-to-10 years to come down quite significantly, as people increasingly do everything in digital formats.

It is all going to change in the next five years. We are investing quite a lot in our mobile app, which will be ready in the next quarter. It will do valuations and give clients their tax tables. I have a beta version on my phone, which means I can get a valuation of my ISAs at Ascot Lloyd at any time.

We launch our telephone service fully in the next few months. But customers have a choice.

There will be people who have £10 million and choose their information to be delivered by phone, while there will be multi-millionaires who do all their banking with the online app.

How much money is required to become an Ascot Lloyd client?

I am not going to talk about my charging in a press article. But I will say we are in line with the marketplace.

We are very fair and good value. I always think it is up to us to show value the other way. If you have over £2 million, you would expect to see an adviser and receive some form of profit and loss (P&L) product. We use Voyant, which just puts into place where you think your investing priorities are.

The other key thing is risk profile. You can have as much money as you like. But if you want to keep it all close to you, and you are just going with fixed income, gilts and bonds, there is not a lot of space for an adviser. And that is my point about channels.

Can you explain your centralised proposition?

Yes, we have a centralised investment proposition which has been tremendously successful. It is a very standard and simple structure.

We use Distribution Technology and the risk profiling, then we have Parmenion pick our funds and fund of funds propositions in the risk profiling. That works out very cost-effective for the client.

The advisers like it because it matches suitability risk profiling with the client requirement, and for anything below, say, £650,000, that is a great option.

But it does not always fit all clients. For example, the client might be wedded to Fidelity, in which case we will not change that. But most times it will be cheaper for the client, which gives the adviser reassurance they have given good advice.

Above that, we use discretionary fund managers. We have very good relationships with Tilney, Brooks Macdonald, Quilter Cheviot and Brewin Dolphin.

We use those depending on whether they give the most suitable advice. The key to all of this is ensuring the client has what they want.

Most of our new money goes into one of those options and it works extremely well. We have very good partners with Zurich, Parmenion, Fidelity and Aegon. It works really well, but we do not force anything.

Presumably you have quite a belief in active management.

We believe in active management, but we offer a fund of funds and risk profiles for passive. If that is what a customer wants, at the end of the day you have to remember this is about client outcomes.

When I first arrived at Bellpenny two-and-a-half years ago, client outcomes were not at the top of its priorities. Perhaps we were not listening to what the client had to say, nor what our advisers were telling us.

Now we listen, and make sure we have a good set of propositions advisers are confident with. Most importantly, we make sure clients are getting what they want.

What is your attitude towards defined benefit (DB) transfers?

We will do pension transfers. We treat all of those as high risk. They are independently assessed and we take it seriously.

I do not know what is happening with British Steel. If the stories are right, it is disgusting. We will not move a person out of a final salary or DB scheme unless it is absolutely clear it is the right advice to give. In most instances, it is not.

There are times when scheme members are being offered 10 or 20 times for surrendering.

We have recently seen examples in bigger firms, like Barclays and British Telecom, where the offer to leave is so good that we accept the transfer. But that normally is not the case in the majority of instances.

Who are your clients?

It is a completely broad range. We have around 40,000 clients; as a result, we have one of everything.

We have clients who are over 100 years old. I was talking to one such client the other day; they are very vulnerable and we must get a compliance check on all those guys. We count anybody over 65 as a vulnerable client.

We have people who are sons of wealthy fellows. They are isolated and, again, they are vulnerable because they can do some unbelievable things with their money.

We have people who specialise in divorced couples, and we have people who specialise in people whose husband or wife has passed away and they need some estate planning. We have a tax service. We have a mortgage service if you are moving house.

We are no longer just little old Ascot Lloyd or little old Bellpenny. We are a major firm now, and we face the same issues St James’s Place or Tenet face.

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