The growing number of problem cases emerging in the self-invested personal pension (Sipp) market could be a “game changer” for the whole industry, according to the group managing director at Mattioli Woods.
The comments come after the Financial Conduct Authority (FCA) revealed that just a quarter of people going into Sipps take regulated advice while the Financial Ombudsman Service (FOS) said it received 1,029 enquiries about Sipps between October and December in 2018.
Mattioli Woods’ Murray Smith told International Adviser: “There have been a number of court cases in the Sipp market.
“That could be a game changer, not just for the Sipp market but the whole industry. At the heart of this is that a provider of financial service products has got a responsibility to ensure what happens with a client is in the best interests of that client.
“Even if that financial service provider is not providing the advice, it is still going to be responsible for it.
“If that direction of travel continues, it is going to be a game changer in the marketplace particularly around businesses that provide more execution offerings like platforms, where clients choose what they want to invest in – the online provider used is going to be responsible for that.
“The FCA oversees client care at the moment, but whether there is a body that could be within the FCA or externally that has a bit more of a focus on that specific market- you could argue for that. At the minute it sits with the FCA, and it has tried to tackle that Sipp market.”
The Sipp market was not the only prominent sector in wealth management industry that Smith spoke about.
He also discussed Mattioli Woods’ position in the UK M&A merry go round.
The wealth manager recently purchased Northern Ireland-based pension advice firm SSAS Solutions (UK) for around £4m ($5.2m, €4.7m).
Smith said: “Acquisitions have supplemented growth. We have done that in two ways – firstly, acquisitions which we describe as overlay.
“This means merging with businesses that are doing similar things to what we are doing. It is a more of the same approach.
“But we have also done deals that have brought skill-sets into the group that we either didn’t have or hadn’t quite grown.
“Examples in the past include buying employee benefit businesses and asset managers, which have brought new skills into the group helping us become more of a multi-faceted firm.”
Smith admitted that the firm is currently looking at UK wealth management businesses, especially “ones that need us to get to another level”.
He said that the firm is looking to bolster its regional presence in London and Edinburgh.
The next generation
The managing director of the Leicester-based firm also said that while acquisitions are part of the firm’s long-term strategy, it was still “very healthy to grow business effectively on its own merit”.
T this end the company does have a training programme, and is looking to utilise this in order to bolster its operations in the UK.
“We have built out our adviser consultancy team,” said Smith. “We have taken on school leavers and graduates to give them work experience and trained them ourselves to become high quality advisers.
“That creates capacity to be able to grow – those people go out into the marketplace with the support of the business to build clients that way.
“If you look at our industry, trying to find good quality people is very difficult. The best people are in the top positions, in businesses of their own or in positions that they are comfortable with.
“Recruiting has been very difficult. Growing our own school has given us the capacity to grow organically. That is the root of it all.”
Where it all began
Smith was part of the origins of the firm’s training scheme, and he told IA about how it has developed since then.
“Training schools are the one single thing that is driven the growth in our business,” Smith added. “As an example, I have been in our business for 25 years – I was taken in as a graduate.
“I was mentored and took exams at Mattioli Woods, and that was the beginnings of our training structure.
“Now, there is a real programme to take people through the business either as a school leaver to look at different departments in the business, and then you go into the formal adviser training programme.
“We have got relationships with schools and universities. We put a lot of effort in building relationships on that.
“With our academy, training people is something we will always invest in. It is something that really underlines the business model, which is sustainable in the long term.”
Investing in tech
Training schools for advisers are not the only are of investment for Mattioli Woods. It is also looking to spend a “seven figure sum” on creating technological infrastructures for the firm – for both the front and back office.
“Technology is going to do two things for us. Tech will never be a revolutionary thing, but we have committed to spending on technology, “Smith added. “This will be used to create capacity in the business, we do have an awful lot of administration.
“We can use tech to create operational facilities, take away some of the information a human would have to do and then automate some of the processes, which can create capacity in the firm.
“An individual dealing without client administration will be able to deal with a lot more clients if the tech can do it.
“If we have got the need for less people, and this is not about reducing the workforce, it creates a cost saving if you do not need as many people in some areas.
“As a business then, we have to think do we keep that margin for our shareholders, or do we pass it on to clients.
“Tech is a key driver in the industry as a cost perspective and a capacity perspective.
“For us, it is about how you communicate with your clients. We have a changing demographic, before it was face-to-face and now people always want to interact.
“We are putting a lot of effort at the moment with a client portal, which is a communication tool.”