Wealth manager welcomes industry shake-up

A WEALTH management company that launched a year ago has been forced to alter its growth strategy because of upcoming regulatory changes in the industry.

Steven Martin set up Altrincham-based Smart Financial Planning a year ago with £10m assets under management. Today, he manages more than £15m for his clients and plans to grow that figure to £25m by the end of his second year.

But the introduction of the Retail Distribution Review in 2012 mean the company’s plans to grow through acquisition have had to be reassessed.

The changes mean financial advisers and planners will no longer be able to use a commission based model, and instead will have to switch to charging upfront fees for their services.

“Previously the industry gave some services for nothing on the back of getting commissions back. You can still use the fee structure but clients will sign up in advance, regardless of whether or not they take the product. It will be a problem for the industry.

“Last year, I was talking to older guys who were looking to retire but with these changes and their client’s expectation it just wouldn’t work. I’d need to have tiered staff in my business to provide a less sophisticated service for these people. I don’t want that business; I want wealthy people with complex problems.”

Mr Martin, who is to take over as chairman of the Manchester branch of the Institute of Financial Planning from January 2010, thinks the changes will raise the value and quality of wealth management advice, but admits a degree of education is needed as the public is used to getting basic product advice for free.

“I think it’s a fantastic step for the industry. Things have to go that way -where you are selling advice not products,” he said.

Mr Martin now plans to grow Smart Financial Planning organically through existing clients and by raising the company’s profile.

He is particularly targeting managing directors and owner managers at the moment as he said there are ways they can improve the cash flow of their business with financial planning.

He said: “Many aren’t aware they can borrow money from their own pension scheme for example. Where a director has built up say £20,000 pension fund they can lend that money to the business, for up to half the value of the pension assets.  It does need to be secured, but that can be against all sorts – premises, machinery, a director’s house.

“A combination of personal life and business life is often unavoidable for these directors.”