The acquisition will allow Progeny to further expand its presence in the south of England and take its assets under management to nearly £7bn ($8.3bn, €8.1bn).

Established in 1990, Lewis Brownlee Financial Services has offices in Chichester, Midhurst and Whiteley. The firm is also a previous winner in International Adviser’s UK Best Practice Awards – including winning both excellence in client service and excellence in marketing in 2019.

Steve Burns, managing director of Lewis Brownlee Financial Services, said: “This is an exciting time for both us and our clients. Joining Progeny will allow us to continue to flourish while remaining loyal to our founding principles and the ethics and values we have worked hard to embed in the business.

“Becoming part of a multi-disciplinary professional services firm will also allow us to increase the range of services we offer, bringing a new scale and scope that will present fresh opportunities for our clients and our team members.”

Adding value

Progeny has been very active in the M&A market over the last year as it has acquired Edinburgh-based financial planning firm Balmoral Asset Management and international advice firm The Fry Group for an undisclosed sum.

Neil Moles, chief executive of Progeny, said: “Lewis Brownlee Financial Services has established themselves as a firm focused on building trusted relationships, driving up standards and providing meaningful financial planning and financial services for their clients.

“Their team members pride themselves on the highest levels of professionalism and integrity and so we are delighted that they will be joining us at Progeny.

“We are looking forward to welcoming them and to the value they will add to the business.”

As more fintech firms enter the space, advice businesses can look to exploit the technology at their disposal and move away from outsourcing investments.

Recently, software company Seccl and the Lang Cat surveyed 181 advisers and found 44% are considering investment platform ownership.

International Adviser spoke to different players in the advice sector to discuss if this is possible for many firms and what this means for the platform market.

Feasibility

The big players in the advice market, like Quilter, can afford to run their own investment platform but this may not be the same for every business.

Chris Page, Lewis Brownlee Financial Services director, said: “I think at the moment it will only be the larger firms which will operate their own platforms but as time goes on, with technological advances and improved regulatory guidance, it may be that it will become more accessible for those operating medium and eventually smaller firms.”

Sarah Lord, president of the PFS, said: “While the technology is evolving at a pace and we are seeing new entrants that enable firms to far more easily build their own technology stack and platform capabilities, I personally think that there is still some way to go for it to be a feasible option for many advice firms for the prime reason of affordability.

“Affordability of time, to have the time to be able to build their own platform capability using third parties, and affordability of cost, it is likely to require not only investment in technology and solutions such as the platform but also the investment in human capital to oversee and run the platform capability.”

Long term view

Trying to run your own investment platform is not easy. It takes a lot of time, money and patience. Platform owners have to deal with regulators, fund providers and fintech companies.

Page said: “There are many considerations when considering becoming a platform service provider, such as; will you need to apply for Financial Conduct Authority (FCA) permissions or become and appointed representative? Do you have the in-house expertise to carry out the research and due diligence?

“Most importantly, why are you looking to operate your own platform – is it going to be for a specific client type? What’s the purpose? After all, any recommendation to the new offering needs to be in the client’s best interests.”

Lord added: “Having in the past worked in businesses that do operate their own platform, my word of caution is that it is not for the feint hearted, there is a tremendous amount to consider before setting out on this road. First and foremost is considering what impact and benefit it will bring to not only the business but importantly the client journey and client experience.

“It is worth bearing in mind that this can be a double-edged sword, when it works well and there are no ‘hiccups’ with the technology or the platform capability then it can undoubtedly provide a strong brand and client experience for the client. Conversely, when the tech fails, which let’s be honest happens from time to time, it can have a negative impact on the client experience and the brand. So first and foremost, it is important to be clear on the value it brings to both the business and importantly the client.

“Importantly when selecting the platform provider it is imperative that there is alignment on the development roadmap – without clear alignment it is inevitable that over time frustrations will creep in and ultimately the client experience can be impacted so when selecting the provider at outset it is really important that the firm has a really clear vision of what the client journey should look like and what the platform capability needs to be to support this client journey.”

Dan Marsh, head of customer at Seccl, also spoke about the costs of running a platform and said that they “will naturally depend on the set-up that each firm chooses to pursue”.

“Under our model, they can typically expect to pay for the provision of custody and the administration of client money, charged as a percentage of each client’s portfolio, as well as for any client and adviser portals, charged on a per user basis,” he added. “In addition, there’ll be some variable transactional and administrative costs involved that will usually be passed on more or less at cost – for example direct debit charges, product and wrapper fees, transfer fees, trading costs and instrument charges.”

Attitudes

So, where have these attitudes to platform ownership come from?

The Seccl and Lang Cat survey also found that 62% of advice firms feel they have little to no control over the direction of their platform’s development, while over 40% say they often have to change the way they do business to fit around the processes of their platform.

Tim Sargisson, chief executive of Sandringham Partners, said: “As a former chief executive of James Hay Platform, I’m only too familiar with the notion of platforms trying to be all things to all people. This was usually driven by the sales team who would tell you how much business we would write if only our platform could accommodate this or include this fund.

“Therefore, many platforms became too wide and too shallow in terms of their offering. In other words, they lack real focus to support advisers who over the years have created a clear customer proposition.

Mark Sanderson, managing director of UK and international at Praemium, said: “If firms, having looked into every aspect of running their own platform, can still see a compelling case for why DIY will provide the best outcome for their clients and their business, then there are a couple of really good providers out there who will do a great job of setting them on that path. And from what I can see they are able to cater for firms of different sizes – as long as the firm has appropriate capital reserves and fit and proper people to hold the additional responsibilities.

“Having thoroughly researched the ins and outs of going it alone the firm will be keenly aware that running a platform compliantly is a huge commitment in terms of time, money, and on-going resource. If that initial and on-going outlay, plus the hoops needed to be jumped through to gain the appropriate permissions, will ultimately add value to that firm’s clients and enhance the advice process, then all power to them.

“If, however, this is a reaction to the frustration they feel with the service and proposition provided by existing platform providers, then I can see many will instead come to the conclusion that they are simply on the wrong existing platform.

“They will look to move to one that has proprietary technology and is able to respond to their evolving needs and feedback and can do so quickly. Or they may look to a platform that has open APIs, which will go a long way to address the justifiable rancour about the market’s general lack of integration and systems not talking to one another, plus all the re-keying and potential for error that entails.”

Current market

The rise in advisers wanting to run their own platform can only mean that there is something missing with providers currently in the market.

Fintech firms entering the market to provide the tech for firms to run their own platforms can surely be seen as a bad thing for the platforms.

Lewis Brownlee’s Page said: “I think competition is great for the sector and perhaps those business that have had it their way for a long time… might not do so in the near future.”

Mark Rendle, head of product AJ Bell Investcentre, said: “A healthy market provides a broad range of solutions to be meet the varied needs of advice businesses and their clients. This includes the ability for some firms to widen their scope and delivery through their own branding, where appropriate.

“We therefore welcome the variety of solutions currently available for advice firms and their clients, whilst reminding firms to ensure they have a detailed understanding of the impact of any change in platform strategy.”

Future

44% of advisers is not the whole market but it is a big chunk of it.

Platforms will not be going under with the change in adviser mentality, but they surely will be affected by this DIY attitude in the future.

Sandringham FP’s Sargisson said: “Seccl, Hubwise and Multrees are building things which work differently. That might be integrative open architecture platform or deep customisation like Fundment.

“We are going to see seeing these more specialist, smaller platforms starting to gain ground on the bigger players in a £60bn ($82bn, €70bn) market, so there is plenty to play for. These platforms have a genuine specialism and angle are really going to stand out. I believe it is too early to say if this will radically alter the market. The more removed a platform is from the needs of the business and the clients the more these disrupters will gain ground. Exciting times.”

Praemium’s Sanderson said: “I do not expect to see a wholesale move across to DIY platforms, I suspect that the majority of firms, having given it careful consideration, will opt instead to see what else the market has to offer them.”

AJ Bell’s Rendle added: “Owning and operating a platform remains a costly and complex undertaking requiring scale and a range of support services beyond those normally seen in most advice businesses.

“These businesses continue to focus on driving efficiencies and improving client service; for some this may mean an increased involvement in the delivery of platform services, others will continue to focus on their core provision, of quality financial planning, and find an external platform to help them deliver this.”

PFS’ Lord said: “As technology continues to evolve, I do think we will start to see more advice firms owning the platform they use to deliver to the client, however, in my view this is likely to be a slow evolution rather than a mass migration to this way of operation.”

This will help companies bring in young people to their workplace and has been well-received by the financial advice industry.

Ben Griffiths, financial planner at Lewis Brownlee, said: “Any initiative that actively encourages people to find out about and enter the profession can only be a good thing.

“The easier it is financially, to explore and enter the profession, the greater the awareness of the industry will be. As advisers, we believe we should welcome any measure that lends itself to this.”

Helen Blackmore, group human resources director at Succession, said: “Rishi Sunak’s changes will certainly act as an incentive for financial advice companies to consider including more apprenticeships as part of their talent strategies and add to their pipeline of existing talent.”

Usefulness

But apprenticeship schemes are not applicable in every sector.

Sometimes business models are not set up to bring in apprentices; and, where companies can use these schemes, it isn’t always easy to place people in roles of which require a degree of technical ability.

Tim Sargisson, chief executive of Sandringham Financial Partners, said: “We believe it is absolutely vital that, in an industry frequently described as at risk of future skills shortages, we support and encourage new talent into the financial services sector.

“This is particularly the case when we find ourselves at a time where the value of financial advice has never been more apparent. Our strong links with local colleges also offers us a unique opportunity to demonstrate what an excellent career path financial services can provide.”

Nicki Williams, head of employee recruitment and early careers at St James’s Place, added: “There are some excellent apprenticeship frameworks which lend themselves to the advice sector and provide a comprehensive career pathway to becoming an adviser or paraplanner, giving the next generation of advisers an alternative to university as the next step following their A-levels.”

Griffiths added: “The beauty of apprenticeships is that they give on-the-ground, real-time experience of what the job entails. While much can be learnt through the traditional ‘theory-based’ methods, witnessing the job first-hand will invariably give young advisers the added advantage that only work-based training can give.”

Usage

Advice companies should see the benefits of what apprenticeship schemes can bring and set up operations.

Sandringham Financial Partners launched an apprenticeship scheme midway through 2020, and the firm continues to look to attract fresh talent into the financial advice sector this year with its third apprenticeship appointment.

Sargisson added: “Since its implementation, we have seen a significant increase in qualifications across the firm.

“We have tried apprenticeships externally in the past, but it seemed like a natural progression to put in place a more structured apprenticeship route, in order to fully utilise the learning structure already in place.”

David Lawrence, UK chief executive at Kingswood, said: “We don’t take apprentices at the moment, but it’s one of the things we are looking to implement.

“Across our business we have advisory roles, but also functions such as finance, risk and HR. All of these are points where you can start your career, and I think an apprenticeship, in the way that government has constructed now, is a great way to do that.

“Of course, there’s a little bit of an incentive to the employer, but that’s not the reason to do it. I joined Lloyds Banking Group when I was 18 years old on a management training scheme, which was not dissimilar to what you find in today’s apprenticeship schemes in this sector and it really served me well.”

Front vs back office

The big question for apprenticeship schemes in the advice industry is whether they work to bring financial advisers into the sector.

Financial services academies can provide a steady stream of young advisers, which leaves apprenticeship schemes to bolster the number of back office workers.

But, is this really the case?

Lewis Bronwlee’s Griffiths said: “We don’t see any reason why apprenticeships couldn’t be used to help the depleting adviser talent pool. Allowing people the opportunity to experience a profession in real-time can only be a good thing for encouraging people to see whether it is something for them.

“While apprenticeships may start out overseeing back-office roles, progression should always be an option for those who want, and have the desire to, further their career.”

SJP’s Williams said: “Apprenticeships can absolutely provide the necessary foundation and stepping stones for a very successful career as an adviser and we have excellent examples where this is happening.”

Succession’s Blackmore added: “They could help and given the appropriate level of business support, would be an invaluable way of ensuring that a company’s talent pool is ever growing and being nurtured to meet future business growth and needs.

“The skill is in the deployment of the apprenticeship schemes, ensuring that the company focuses on building the environment, desire and capability individuals require to perform in their role and progress successfully through the apprenticeship.”

Encouragement

The recent government changes to apprenticeship schemes are positive, but more can be done, especially in an industry with depleting numbers of advisers.

Griffiths said: “Encourage firms to have their own academies of advisers, where experienced advisers train up the next generation of the firms advisers.”

Williams said: “Taking on an apprentice, especially for smaller business, is a significant commitment both in terms of time, with support and on the job training, and financially.

“The incentive grants go some way to helping businesses bridge that gap but often the grants are eaten up through initial set-up costs of providing technology and equipment and a longer, more sustained contribution towards the salary of apprentices would be a worthwhile consideration.”

Blackmore added: “A stigma still exists that apprenticeships hold a lesser value than traditional academic routes; changing this mindset is difficult and more could be done to remove this stigma and promote the benefits of apprenticeships in all sectors.

“Some flexibility around the requirement for 20% off the job training could also be beneficial as many companies find that they are unable to absorb this loss of productivity unless they are over resourced which reduces their capacity to absorb apprenticeship schemes.”

In November 2020, the Bank of England kept its base rate at 0.1% for the eighth consecutive month and opted for a quantitative easing strategy, pumping £150bn ($198bn, €167bn) into the economy ahead of the second lockdown.

The UK has never entered negative interest rate territory before, but it remains a tool at the BoE’s disposal.

Neil Jones, technical director at Canada Life, said: “The idea behind negative interest rates is like that of quantitative easing in that it is a mechanism to encourage wealth to flow through the economy.

“If the BoE charges high street banks for holding deposits, their margins could be squeezed further as they lose returns, or even face negative returns for individuals and corporates holding cash deposits.

“This in theory would encourage people to spend money and if negative rate loans are available, even borrow, pumping more money around the economy.”

Client panic?

Given it is not something they have faced before, negative interest rates will inevitably spark panic for clients.

So, does the age-old advice of sitting tight and thinking of the long-term apply in this case? Or should investors be looking to make changes to their portfolios?

Steve Burns, managing director at Lewis Brownlee, said: “We don’t think this will make much impact at all. Negative interest rates are quite a headline moment for the press but not that impactful. It is similar to Y2K and whether computer systems could cope, but it isn’t going to impact invested clients much.”

Hannah Owen, financial adviser at Quilter Private Client Advisers, added: “Clients should see what the impact will be for them before making changes based on speculation.

“If negative interest rates are put in place, it would impact banks and they would decide whether they would need to pass this across to customers, likely in the form of fees for their bank accounts.”

Adviser action

A big part of a financial adviser’s role is to settle the nerves of their clients.

They can be a vital barrier to stop Brits from making knee-jerk mistakes or taking on unnecessary risks after being inundated with scary headlines.

Owen added: “Advisers should keep a close eye on what happens to mortgages, as this might drive mortgage demand. Negative interest rates will make it a good market for those who wish to borrow, rather than those who wish to save, and advisers can play a role in educating their clients on what their best course of action is, based on market forces.

“It provides a good opportunity to discuss cash risk, especially as some clients hold a lot in cash that is losing value in real terms due to inflation.

“It is also important to ensure clients still have an appropriate emergency fund but due to the pandemic more people are hoarding cash which is understandable but may not be the best course of action. Once an emergency fund is built up, it may be better to invest cash in other ways particularly if there are negative interest rates.”

Burns said: “I don’t think that advisers should make any major changes. Perception could be an issue with clients, investors typically think in nominal values, so while they may have been experiencing negative interest rates without realising it, a negative headline rate might have a physiological impact.”

Impact on pensions and investments

Negative interest rates will undoubtedly have an impact on mortgages.

But it could also influence the pensions and investments market.

Canada Life’s Jones said: “Inflation risk is always an issue and, as the cost of living is still increasing, if the value of cash deposits in real terms are not growing, or even going backwards, the value of those savings will depreciate and be worth less in the future.

“There is a danger that individuals and companies will not want to spend money and could withdraw cash deposits and keep it under their mattresses. This could be harmful to banks’ liquidity.

“Investors may seek non-UK deposit takers in order to seek out positive interest rates. These accounts could be held directly but could also be positive for offshore bond providers who can allow access to multiple deposit takers under a single tax wrapper.

“As company earnings and the dividends they pay will become more valuable to those seeking an income or a positive return, the price could be driven up, having a positive impact on stock markets.

“As a negative rate would have an impact on gilt yields, we would also see this impact pensions. Annuities are largely priced based on gilt yields and so we could see a dip in annuity rates. Large pension schemes will also have to be careful as many use gilts and a way of hedging against stock market volatility.

“This could be disastrous for final salary pension schemes as companies may not be able to afford to make the contributions necessary to secure the income for the scheme members.”

Short- or long-term problem?

The Financial Conduct Authority (FCA) has reportedly issued a survey for advisers on how prepared they are for negative rates.

Does this mean the regulator believes dipping into negative territory could pose a long-term problem for the advice sector?

Quilter’s Owen said: “This is hard to know; we are in very uncertain times. If we look to other countries, Japan went into negative interest rates in Jan 2016 and is still in negative territory so it could be a long road ahead.

“However, recent positive news may change sentiment and the outlook for the future meaning that we avoid negative interest rates altogether.”

Lewis Bronwlee’s Burns added: “Just because the Bank of England base rate goes negative doesn’t mean that rates charged to clients will follow. From a technical perspective, the base rate can only influence one part of the yield curve, with the market and sometimes bank buying bonds settling the rest.

“If the stock market is enthusiastic about the policy reflating the economy yields could rise at the longer end of the curve – having the opposite effect in some places.”

The first lockdown took a great toll on people’s mental and physical health, as well as businesses up and down the country.

But can financial advisers be more prepared for it this time around.

International Adviser spoke to the industry about differences from the first lockdown, finances and technology in surrounding the reported second lockdown.

Lessons learned from lockdown one

The first priority for advisers is to learn from the first lockdown several months ago.

Chris Page, director at Lewis Brownlee, said: “Don’t make assumptions. For us I have been very surprised in the take up of video calling, especially from our elderly clients. Had we adopted this way of working sooner I believe we would have been able to ‘check-in’ with clients on a more regular basis.”

David Barton, chief executive of IWP’s north west hub Prosper, said: “It’s very important to remain engaged with clients. Keeping them up to date with all the latest economic and market development through e-communications and hardcopy newsletters helps us do this.”

Tim Sargisson, chief executive of Sandringham Financial Partners, added: “The mental health and welfare of staff will require care. Attention and support from employers if this drags on indefinitely with no clear end in sight.”

Preparing for second lockdown

There may not be much to do differently, in terms of business organisation, for advisers, as most would have set up appropriately before.

Sargisson added: “Thankfully, the government seem to be doing everything to avoid a second full lockdown.

“However, having said that we haven’t made any significant changes in working practices since we went into full lockdown in March.

“While we reopened the office in August, we still operate flexible working and recognise we have a clear split between staff who want to work from home and those that prefer to be office based.”

Kay Ingram, public policy and communications director at LEBC Group, spoke about what providers need to do differently if a second lockdown takes place.

“What we would like to be different is for some providers to be more agile in their response,” Ingram said. “While some have adapted well and shown flexibility, accepting digital signatures for example, others have disappointed in their rigidity and slow response times.”

Financially set up

One of the biggest problems of the covid-19 crisis and lockdown has been the financial toll on business.

Some three quarters of advisers have seen gross revenues fall due to covid-19, with a fifth forecasting a decline of at least 20% per cent, research has shown.

The 2020 Financial Advice Business Benchmarks from the Personal Finance Society and NextWealth found smaller firms, with only two-to-five employees, had been hit the hardest, with 83% reporting a drop in revenue.

So, what can firms do to keep going?

Lewis Brownlee’s Page said: “For me, it all comes down to cash-flow. We don’t know how long this thing is going to last so I think following Amazon’s value of frugality would be a good first step.”

Sargisson added: “There is no doubt that some firms have been hit hard. Looking at ways to improve efficiencies in your business is essential to deliver what is demanded and expected from us by clients and the regulator.

“The aim to achieve better customer engagement and improved customer outcomes.”

IWP’s Barton said: “Housekeeping around cost management has never been more important.

“We have identified significant savings across software licensing, various insurances, including indemnity insurance, and renegotiation on advertising costs.”

Can firms survive another hit?

It may be easy to suggest that firms can move finances around in a bid to survive.

But a look of firms streamlined dramatically by trimming the fat of their business. So, can advice companies survive another financial-hit from lockdown?

Sandrigham’s Sargisson said: “Those firms with weak balance sheets and a high proportion of fixed costs maybe tipped over the edge by this crisis.

“Those firms who fail to communicate with clients, who haven’t previously invested in robust technology will also struggle. In the end, it will be about a determined adherence to sound business fundamentals over recent years that will separate the winners from the losers.”

LEBC’s Ingram said: “Many smaller firms are finding it tough; increasing professional indemnity insurance and regulatory costs, largely beyond their control, do not help, but the key determinant for survival in a prolonged lockdown will be whether the firm has the technology to communicate with clients.”

New clients

One of the biggest tasks for the financial advice industry is continuing to bring in new business.

But this is rather hard without a face-to-face business approach, unless you have turned to digital marketing.

Adam Benskin, chief executive at Strabens Hall, said: “The area that is affecting us is the fact that you can’t do face-to-face marketing.

“This time of year normally we would be doing business and meeting people but that isn’t happening, so what we’re doing as a business is developing a PR campaign because we can’t access our markets in the normal way.

“The other aspect is digital marketing. And I think some firms perhaps in the last lockdown believed that this was going to be a temporary issue, and are now realising that this is going to be possibly a much longer-term way of working and therefore business needs to adapt.

“I think digital marketing will have an important role to play in that.”

Barton said “We continue to push forward our profile within local community magazines as potential clients still retire and inherit in a pandemic or a lockdown. It is more important than ever that we maintain our presence and reinforce that its business as usual ‘ish’.”

But Ingram says that LEBC “enjoyed a high level of client referrals” throughout the pandemic, as “clients recognise that we have not let covid-19 get in the way of delivering a good service”.

Technology survival

As much as it paramount to have a tight grip on finances at a time like this, it is as important for firms to have technology at the heart of their business.

Next Wealth’s report found that 58% of sole traders spend up to just £5,000 ($6,500, €5,524) on tech.

Some 28% of firms with six-to-10 employees only spend between £25,000 and £50,000.

Over half say the lack of time to learn and implement new technology is the biggest barrier to changing tech provider, and 53% agree that a lack of tech integration is their biggest challenge.

Sargisson said: “The signs aren’t promising. Covid demands you embrace technology.

“However, technology and IFAs do not make good bedfellows across thousands of advice firms because there’s much more to it than ‘plug and play’ and simply flicking a switch.”

Barton added: “As an industry we may have been behind the curve on technology, but the good firms will have already embraced tech in their businesses.

“The shift we are seeing is with clients themselves being more comfortable with remote meetings and reviews rather than a new wave of technological development for a second lockdown.”