Change is of course rife in our profession. Whether it’s consolidation, regulation or technology disruption.
With this in mind, I dropped in to see Mark Polson of the Lang Cat a few weeks ago to talk about our plans for the future, our approach to cash interest... and why it’s ok to be ‘boring’ if you’re serious about success.
You can listen to the full interview here, or read on for a summary of some of the key points we covered.
Scale is critical to our success
One of the main topics of our conversation was the huge amount of change in the industry. Mark alluded to the fact that for a while, things have been a little ‘dull’ (heaven forbid!) now there are multiple new entrants all offering different ways to solve advisers’ problems.
Some take greatly different standpoints to us on what makes the best model for success.
But we’re confident that our way is the right way forward. Over the last few years, we’ve scaled up our business to become one of the UK’s largest adviser platform groups. And we see this increased scale as critical to our success; it creates the profit that helps drive us forward to invest more in price, product and service.
That’s ultimately what we’re about.
Our purpose is to work with advisers to help make retirement more rewarding for their clients. So while we’ll continue to develop and innovate, we’d always advocate that to be successful, we also need to be ‘boringly reliable’. That means focusing on delivery and ensuring we provide the best possible support throughout every interaction advisers have with us.
What about the ‘adviser as platform’ model?
There’s much discussion around what consolidators and advisory businesses are trying to achieve with the ‘adviser as a platform’ model. We think it’s mainly about control, branding and sometimes the pressure from private equity backers around profit.
But we believe our scale gives us the flexibility to help solve these requirements in different ways than this, which may be a lot easier for advisers and planners in the long term.
This means that there are exciting new opportunities for us in this space – I’m not ruling anything out, but we’re now in a position to be very creative and reactive in how we can keep supporting advisers as their needs change.
So what’s happening with our platforms?
Nucleus Wrap and James Hay Online are still operating on different technologies, and while our long-term goal is to move to just one, we have no plans to rush something so fundamental to the operations of our users (back to that boring and reliable point again).
As we build a sustainable, long-term business, we’re working closely with FNZ to develop our platform methodically, carefully and with input from advisers.
We’re open about the fact this whole process will take several years to complete.
So in the meantime, we’re also investing in our current platforms, making sure they still give users the best possible experience to help deliver great outcomes for their clients. Recently we’ve invested several millions in improvements such as a new app so customers can keep track of their portfolios, a new flexi ISA product, and better integrations with practice management systems, as well as our first cut in price. Even more changes are in development…
Cash margins
Another area of discussion that’s generated a lot of debate in the press is the subject of interest on cash. We’ve changed our approach to this, to one that we believe results in a better deal for customers.
Back in 2021, James Hay Online didn’t pay any interest – but had a lower platform fee. Meanwhile, Nucleus Wrap paid all its interest to the customers – but the amount was tiny as the business didn’t actively manage cash returns with the banks.
Neither approach was ideal. And, while the Nucleus Wrap approach sounded like a good deal for customers in theory, it proved to be less so in reality. They weren’t actually benefiting as much as they should as interest rates started to rise.
We believe the right approach has been to invest in a treasury function and work with a greater number of A-rated banks. We now have nine rigorously assessed and managed banking partners, significantly increasing the Financial Services Compensation Scheme protection available, and have gone from paying 1 basis point to 212 basis points back to customers. And we layer in our money carefully so that if interest rates do decrease, the rates we pay will hold up compared to those platforms that do not.
It's transparency that’s key.
The last point I would make is we're going to be middle of the pack in this, which is where I want to be. I don't think it's right for us to be paying an extraordinary interest rate on what are short-term savings accounts. Our SIPP and investment accounts are there for the long term and we feel customers are best served with equity investments not sitting in cash for long periods of time. That’s how we’ll help make retirement more rewarding for them.
Consumer Duty is genuinely positive
Finally, another area of interest we were only too happy to talk about was Consumer Duty.
As we approach the 31 July deadline, we can feel the air of fatigue tinged with cynicism around this in the sector. However, we strongly believe it’s a real positive as, if nothing else, it’s a reminder for the whole profession about the importance of putting the customer first.
At its heart, the focus is on improving outcomes for customers. And who can possibly argue with that?
Thanks again to the Lang Cat for the chance to talk through some of these important topics. Take a look at the full interview here for more, including the importance of our private equity shareholders and our thoughts on pricing.
