Just over a year into the job as chairman and chief executive of independent financial adviser (IFA), Inter-Alliance, Keith Carby has made his mark by driving the organisation through massive restructuring and lining it up for further expansion.
Launched in 1994, Carby says Inter-Alliance spent four years developing a foundation before it exploded from around 30 advisers to over 1,300, between 1998 and today. It is now the largest IFA in the UK through these changes and Carby aims to make it the UK’s pre-eminent brand for financial advice.
However, its growth has not all been plain sailing and Carby says the structural change last year entailed some difficult decisions. Previously, it had been made up of almost 90 different companies operating under the group umbrella of Inter-Alliance. This caused problems in trying to generate economies of scale, standardising procedures, and establishing a hierarchy across the group. Carby explains: ‘The companies had nearly 30 different telecom suppliers. Each of those people [heading up] the limited companies were required to make decisions on how they would handle this or that, so how can you get the benefit of being a big company when you are not a big company, but a collection of smaller ones?’
Now all the advisers hold central contracts with Inter-Alliance plc and it is organised in a regional fashion, with a company-wide hierarchy.
Speaking of the problems Carby says: ‘If you have poured your heart and soul and put much of your finance into a business which, on its own, you think it could be successful, it is difficult to accept it is part of a flawed model. When you have to see it dismantled, it is a difficult thing emotionally ‘ it was a difficult phase and anybody would have to be out of their mind to attempt a restructuring unless it was absolutely necessary.’
The changes created upheaval, but Carby hopes it will prove to have been a case of one step back and two steps forward. ‘Any restructuring however well motivated or sensible is extremely disruptive. In our business, even though the majority of our IFAs were not directly involved, it created a degree of uncertainty and confusion, which cost us significantly because this business is still largely based on individuals. I know of no business where morale and performance are so closely linked as that of an IFA, because people go out and create the opportunities for themselves. Anything that distracts them from doing this has an immediate and significant impact on the business.’
Following the restructure, which was completed in October, Inter-Alliance has two driving goals: to improve the service it offers its IFAs, and establish itself in the position of industry consolidator. Carby says: ‘Inter-Alliance is trying to say to people ‘keep all your entrepreneurial endeavour’ which is brilliant. Be capable of shaping your own future, but do it as part of a big business and enjoy the best of both worlds.’
Although Carby has centralised the operation and is keen to take on ‘significant numbers’ of new advisers, he does not want to dampen down the quality of advice given. He wants to ensure specialist advice is available across the board and believes this approach will work well with the advisers currently operating in the market. Many IFAs are not especially keen to do mortgage work, while most mortgage brokers would like to stick to that in the main, and avoid having to pay the increased insurance premiums that come with a wider portfolio of advice.
Carby says: ‘I see absolutely nothing wrong with this at all and there is much to be gained from a mortgage broker sticking to things they do best. Of course the public should benefit from protection, but I do not think they should be penalised because a mortgage broker has to take on extra costs and extra undertakings associated with those costs, which are automatically passed onto the public.’
He continues: ‘Professional indemnity is a big call for the IFA sector. The sorts of increases in premium that people are seeing are adding to the death knell for the smaller IFA and it is one of many features that is actually causing the whole sector to restructure.’
At Inter-Alliance, Carby wants to be able to house all the financial expertise needed to serve clients, without having to rely on single advisers trying to be all things to all men.
He says: ‘Inside the company we like the idea that advisers work with colleagues and because we all work in the same house ‘ different expertise can be brought to bear. The IFA with the major relationship with the client stays and controls of that relationship, but they can call on different types of expertise.’
Carby hopes through in-house referral, Inter-Alliance will be able to provide for the majority of clients’ needs and they will have no reason to look outside the group. He also expects it will be a lot more productive, given that the old model of advice saw advisers selling an average of less than two products to each of their clients.
He accepts that advisers will continue to hold relationships outside the group, and is happy for them to continue. However, subtle in his salesmanship, he says he would always look to bring these advisers into the fold, and that for many looking to sell their business as retirement approaches, joining a large group could be the only way of ensuring there is a capital value in the operation being sold on.
Carby explains: ‘If you try to sell it on to an unrelated entity and you alone are the ‘spider in the web,’ what I would say if you were selling it to me, is when you disappear to southern Spain, Portugal or wherever, the relationships go with you. Now if you are part of a larger organisation, we have exit planning arrangements whereby you could say I want to leave in two or three years. We could get someone in working with you to get to know the clients and systems in place and the set up and in that way there is the possibility of the goodwill being properly assessed and passed on and therefore having a capital value.’
For those with a small advisory business, the fear of leaving no value in a business that has been nurtured over a lifelong career is stinging, and likely to entice many towards the likes of Inter-Alliance as market conditions tighten. In the short term there are also benefits of joining a larger business according to Carby.
With the establishment of a mortgage referral service and mortgage club for the use of Inter-Alliance advisers, Carby has put all the mechanics in place, and so now time will tell if the approach works, and attracts further advisers and business.
He says: ‘Most mortgage brokers will want to stick to their knitting and we are very happy with that. But we think it is crazy that they should not take advantage of the fact that merely by introducing to an adviser who has a different prospect for those clients, while fully retaining client ownership, they can add to their revenues considerably, without having to take on other types of business and the cost base that goes with it.’
Carby plans to turn Inter-Alliance into the country’s leading IFA brand, commenting: ‘I would continue to make the case that any organisation that gets to be a branded proposition in the minds of the mass affluent in the UK has the most fantastic future.’ However he is loath to set a timescale in stone understanding there may be hurdles to overcome on the way. What he is sure about is that the brand will be built by the intermediaries interacting with the clients on a daily basis.
He says: ‘In the service industry brand is the behaviour of the people who interface with the public. Inter-Alliance’s brand will be built up by the fact that when members of the public are advised by advisers from Inter-Alliance they find that a very valuable and efficient service, and it is something they are happy to recommend to friends and colleagues. So it is our advisers more than anything else that will build up the brand.
Carby is unable to give any guarantees over the future of Inter-Alliance as he says he is employed by the shareholders and there will is where the company will be lead. However, he would like to see it remain as an independent IFA and will fight that corner. He believes tied advice is not a viable long term option for the future of financial advice, and that clients want to have information from across the market when looking at the products available.
The restructuring at Inter-Alliance is complete, the mortgage division is in place, and Carby is confident about the company’s future. However, he does see one storm cloud on the horizon.
He says: ‘My biggest fear is that I always know the property market is going down when any member of my family buys a property and my daughter has just bought a property in London, so I would say the market is coming off seriously.’