St James’s Place (SJP) and Towry may be the bêtes noires of many new model advisers, but to Nigel Speirs, chief executive of Sanlam Private Wealth, they are trailblazers.
Speirs (pictured) has ambitious growth targets for Sanlam and he views the model adopted by SJP and Towry, which combines restricted advice with in-house products, as his best means of achieving it.
Sanlam’s distribution arm has 100 advisers, including 55 who were part of English Mutual that Sanlam acquired in 2012, and £2 billion in assets under management. It is aiming to triple these figures and get 300 advisers and £6 billion in assets by 2017.
Vertically integrated structure
Speirs believes advice alone will not provide this level of growth and profitability, and is instead planning to ape the success of vertically integrated firms like Towry and SJP to get there.
‘Advice per se isn’t profitable enough, you have to have control over the total supply,’ he said. ‘We can advise, manage and administer people’s money. It was fairly clear our friends at St James’s Place and Towry were winning and getting away from the noise around it and just building great businesses. We knew we could build something that was similar.’
Where SJP has a range of mandated funds and Towry has its independent investment management service, Sanlam has a range of risk-rated model portfolios made up of Sanlam funds and a discretionary fund management service.
While Speirs is clearly a fan of the vertically integrated model, the Financial Services Authority (FSA) is less keen. In December 2012 the regulator launched a review into how vertically integrated firms calculate advice costs, amid concerns that businesses that provided both products and advice may subsidise the cost of advice with profits made in other areas.
Speirs said Sanlam was very conscious of the cross-subsidy issue but believed it was compliant.
‘We fully agree with the FSA that you should not artificially set your advice costs low, and the client must understand exactly what each part of the advice process costs,’ he said.
‘We run each operation in the UK as a separate legal entity. Each entity is budgeted to deliver profit to the group. Naturally the shareholder will invest in the underlying companies for growth purposes. Sanlam UK as the owner of Sanlam Private Wealth will fund the growth ambitions of Sanlam Private Wealth, which we believe to be acceptable.’
Championing the restricted model
While Sanlam may be playing catch-up to the likes of SJP and Towry, Speirs was adamant it had been ahead of the pack in terms of transitioning itself for the retail distribution review (RDR), particularly in moving to become restricted.
‘We’ve benefited because we were well-placed ahead of the RDR and moved to a restricted model in 2011,’ he said. ‘I was amazed at how many advisers waited and only started thinking about [the independence versus restricted debate] in December 2012.
‘I don’t think the rest of the market has really tested what restricted means. We worked out very quickly it means telling the client exactly what you’re going to do for them and not pretending you’re going to research the whole of the market every time.’
Speirs said although his firm’s advice was defined as ‘restricted’ under the FSA definition, this ignored the fact that clients would go whole of market where it was more suitable. Sanlam’s products would be the first option, but they would not be the only option, he said.
‘You have to make sure you’re not shoehorning people [into an unsuitable product]. It’s an understandable criticism, but it’s not the reality for us. With new clients, we don’t move their holdings into Sanlam and we leave them where they are if that’s the best place,’ he said.
‘We made an [investment] offering, so if someone wants active, passive and socially responsible [investments] or a full discretionary [service], we can deliver. We have developed our solution to meet a lot of people’s needs, so people may say the majority of our clients will go to Sanlam, but we have designed it and priced it so it’s appropriate for many people.’
What’s in your DVD player?
The Iron Lady
What’s in your garage?
What’s on your bookshelf?
The Lion and the Unicorn: Gladstone vs Disraeli by Richard Aldous
What’s on your iPod/stereo?
What’s your plan for the weekend?
My grandson was born last week, so he will be visiting this weekend
Nigel Speirs Curriculum Vitae
2010-present Sanlam UK, head of distribution
2008-present Sanlam Private Wealth, chief executive
1990-2008 Buckles, chief executive
1987-1990 GKB Financial Services, chief executive
1974-1987 Abbey National, area manager for North Wales