25 years later...

25 years, two and a half decades, quarter of a century, who’d have thought it? Certainly not the 23 year old the Natural Sciences graduate who joined the financial services industry on the 26th April 1999. This is not an opinion piece, just a reflection on how an industry has changed over the time I’ve spent in it. All change brings positives and negatives, on balance I think it has been for the best, but back to the beginning first.

Having left University with still no firm idea of what career I wanted, I focused on the IT and financials, progressing furthest with Somerfield (now best remembered for it’s cameo in Hot Fuzz) and Endsleigh Insurance. Having managed to get into two different interview processes for the same position it seemed like fate that I would join City Financial Partners Limited (CFPL), starting in a profession that I hadn’t realised even existed before my first interview. While there is more financial education for children these days, indeed I’ve been into schools as part of the CII/PFS’s Discover Fortunes outreach programme, speaking purely as a parent, financial education is still somewhat lacking, though I completely appreciate that the curriculum is crowded enough as it is!

CFPL’s offices on the 20th to 25th floor of Centrepoint (apparently secured on a 25-year lease in the 80s at a bargain rate) offered a journey into finance with the opportunity to earn well and retire by 30 (The recruitment scene from Boiler Room (https://youtu.be/JfIKzReNDF4?si=IHztYyxIcwAsNJeR) was held to be documentary rather than fiction when we saw it). With hindsight it’s easy to see that it was a business model that, like it’s black ash and chrome décor, had outstayed it’s welcome. A vestige of the defunct MI Group, CFPL was rooted in the light touch (non-existent) regulation of the 80s, a sales culture based on a four-weekly accumulation of “PIPs”, based on the amount of commission generated, which were displayed with Lego-like bricks on one wall of the floor with competition between individuals, teams, floors and offices. All this was part of the last throes of the high-volume pure sales culture pursued by most Life Assurers and Banks in the last third of the 20th Century with Government/regulators trying to reduce the charges on financial products and remove the incentives that had contributed to mis-selling in the past. The natural progression of further changes over the intervening years to Fees being agreed upfront with a client has made the industry, with some notable exceptions, far more transparent.

That high volume culture of “throwing enough against the wall and some of it will stick” was also prevalent in the recruitment and training process as after two weeks in the office, I along with twenty-odd other fresh recruits were sent to the New Connaught Rooms (not the high-end venue it is today, rather a drab remnant from the sixties/seventies at that point) for a two-week course. The first week was technical training ending with the Financial Planning Certificate 1 (FPC1) exam, while the second week consisted of sales training at the end of which we got our exam result. A pass meant that we could sit in front of clients, which is terrifying with the benefit of hindsight. While regulation had been brought in following the various mis-selling scandals of the late eighties/early nineties, it would be fair to say that the Personal Investment Authority which later morphed into the Financial Services Authority and now the Financial Conduct Authority was still very much in its infancy. The biggest single change in the industry specifically over the last two decades has been the steady upward requirement for qualifications so that advisers today need to have at least QCF Level 4 (A levels are QCF Level 3) to proffer advice, while many are Chartered or Certified (QCF Level 6). This together with a more robust Continuing Professional Development (CPD) regime should mean that clients can be more assured that any adviser they see is at least technically competent, that being said just because I have a list of qualifications doesn’t necessarily mean I can apply them practically…

When we went back to the office following the course, technically, we were operating under supervision of our Managers, practically we were operating independently dispensing advice as best as we understood it to clients who had barely less knowledge than us (back to financial education again) with few checks and balances. In addition we were all self-employed contractors who earnt only the commission that came via selling financial products. That might have been okay if there hadn’t been a massive bias in the commission payable on various products, ISAs which had replaced the PEPs and TESSAs I’d been examined on, paid the least 3% of the annual premium, while Whole of Life products paid 110% of the annual premium, savings plans/endowments and pensions falling between these extremes. Given that the average life span of a policy was circa seven years of which the first four years went purely to pay the Provider and Adviser it’s not a huge surprise that “Client Outcomes”, which are now the key focus, were not always optimum.

The other major change, though not industry specific, has been technology. Having used computers at school (though not Sixth Form College) and extensively at University, it was something of a shock that a floor with 60-80 people working on it had only a dozen computers between them and this was a team trialling more use of IT! While we were able to type up our “Reasons Why Letters” on a PC shared between by around thirty advisers, other teams were still handwriting theirs. The transition since then has been somewhat double-edged, if you’re handwriting a document you’ll be sticking to the essential points, a single side was usual, whereas if copy and paste is available vast tranches of boiler plate text can be added without significant effort. Add in our more litigious culture and today even the simplest report for a client or Annual Statement from a provider will run to ten to fifteen pages which most clients simply don’t have the time or inclination to read. Executive summaries do offset this somewhat, but the provision of too much information in the name of transparency can be just as much of an issue as too little. Now that documentation is electronic there’s not even the cost of printing to restrain matters, this will continue to be a challenge for the industry.

All things come to an end, the regulatory pressure to reduce the commission payable meant that across the sector Life Assurance Companies, like Lincoln Financial the ultimate owner of CFPL decided that “Direct Sales Forces” were not the future. Therefore, less than eighteen months after joining we were summoned to Wembley Conference Centre to be informed that we were to be transferred to Inter-Alliance (IA), an Independent Financial Adviser that was growing quickly and seen as a coming force. With Prudential abandoning its “Man from the Pru” model a year later and banks following suit soon afterwards, the training and introduction of new advisers almost ceased. Though it's great from a business point of view if your competition is dying off, it certain hasn’t helped the “advice gap” that I’ve generally found myself to be one of the youngest advisers in any given room over most of this century to date. That has started to change with the launch of various academies and apprenticeship programmes, so some progress does seem to being made. It’s also interesting that over the last few years we’ve seen Providers once again move into the Advisory space building up captive advice capacity to help them get their products to market.

As a Financial Adviser who had passed FPC 1, 2 & 3 with over a year’s experience (those with less had to give up their clients to become para-planners), I was suddenly an Independent Financial Adviser following the tumult that came with the change. It would be fair to say that IA wasn’t ready to quadruple (or even quintuple) it’s adviser numbers, though the Inter-Alliance Practitioner System (IAPS) designed by its captive IT company, Intelliflo, would become the industry standard Intelligent Office. My belief is IA never fully “digested” the acquisition and it led directly to the collapse of the company. Like a domino, the remnants were taken on by Millfield that suffered the same fate, before moving onto Honister Capital/Money Portal who went the same way. It was during this time that I, together with two former CFPL managers setup our own company, as an Appointed Representative initially of Inter-Alliance Group Practices and later Sage Financial Services, we were insulated from the worst of the upheavals. I note that growth via acquisition model is the flavour du jour once more, I hope that acquirers have learnt the lessons provided by history.

As I look forward to the next few years in the industry, though not likely another 25(!), I wonder what further changes will come along with the usual booms/busts and legislative shenanigans I attempt to guide my clients through, some of whom have been with me since the beginning.