Meet Ross Butters, Managing Director of Omnium Wealth Management as he explains how face-to-face personal financial advice is here to stay, despite the latest technologies and legislations.
Understanding how a team of financial planners work with their clients and feeling a sense of trust that you'll be receiving truly objective investment advice from them can be difficult. That's why we've asked Ross Butters some of the questions we think any new client would want to know. You can read here about his thoughts on the importance of face-to-face professional advice, how we work at Omnium Wealth and his expertise on the latest legislative changes.
Section 1: The role of face-to-face financial advice
- Do you believe personal advice appeals more to the older generation and, therefore, the era of people selling financial advice to other people is coming to an end?
It’s true that millennials are likely to be more inclined towards new technology, but not on something as important as financial planning. The vast majority are not going to rely on an algorithm, no matter how clever it is, because they want explanations before making important decisions.
At the moment, it is the so-called ‘baby-boomers’ who have all the money, but as today’s millennials go through life and start to realise the need to build up capital for their retirement they will arrive at the same destination. The difference is that this next generation will have the benefit, not just of technological change, but of more product choice, more investment avenues and more distribution channels. If anything, I believe there will be a greater need for face-to-face advice.
- Will technology, or robo advice as it’s known, replace face-to-face and be a threat to your business?
My own view is that robo advice and face-to-face contact can sit happily alongside each other. With something like a pension, for example, people need to talk to someone who they trust and who they regard as qualified – they need the interaction to convince them that they are doing the right thing.
That said, the industry needs new technology to help us with compliance as the rules and regulations constantly change. No one can afford to be complacent. We should embrace technology for the right reasons so that it becomes complementary rather than a substitute or threat.
- Has the internet made your life more difficult – everyone’s become an expert on everything?
Some clients have a very active interest in their investments and, because of the internet, they are able constantly to challenge us on the short-term value of their assets. For me, the better way is to relax and think longer term. However, our clients have access to an online platform that enables them to view their portfolios any time of the day or night, which is of great benefit to many
Section 2: How we work at Omnium
- Does Omnium Wealth Management aim at any particular type of customer?
The straight answer is ‘no’. We have clients who are retired City bankers and others who are country farmers – they come from all walks of life. It is not about occupation, age or geographic location, or even wealth, because there are common themes and requirements across all types. However, the reality is that people are unlikely to come to Omnium if they have an estate worth less than £100k because they would be unable to enjoy the main benefits of our full service. Most of our clients have estates worth in the region of £300k.
- What sets Omnium Wealth aside from its competitors?
There is no USP that I can put into a few words. Everything we do at Omnium starts with being client-centric – it is why client referrals are consistently the major source of new business. It explains why we have the quality of long-standing clients we do and also the quality of people we have servicing those clients. Many of our advisers have established bonds with their clients that are closer than they have with either their accountant and solicitor – we become key to their lives. However, we are not the cheapest in the market. Some people are focused on cost, while others – typically our clients – focus on the things that really matter, such as risk, objectives, goals and quality of service.
- Do clients judge you on the basis of the financial return on their investments, or on your personal service?
Some clients will judge us on our investment performance, but, where this occurs, I judge that as a failure on our part to get across the message about the value of good financial planning.
We are not pure investment managers and we should not be judged as such; we concentrate on objectives and goals to fit a person’s circumstances and aspirations. The media makes it relatively easy to compare investment performance, but Omnium’s typical clients also place a value on relationship and quality of service. For us and the majority of our clients, planning and meeting objectives works best.
- Why do clients stay with you?
Most clients stay with us because of personal relationship – they trust us implicitly and value our advice, knowing it’s based on a real understanding of them and their objectives.
- What makes a successful relationship between a client and wealth management firm?
Trust, which stems from clarity of service and charging. Quite simply, we agree with our clients what we’re going to do, then do it and let them know when its done!
- How does it work when a client comes on board with you?
We regard the first meeting as exploratory; does the client fit with the way Omnium works with its clients, do they understand the value of setting objectives and of establishing a risk profile? At this stage a prospective client merely needs to present themselves at the meeting because it is all about them.
We would ask that the client fills in a risk questionnaire and provides us with a summary of assets/liabilities and income/outgoings. We would also ask routine questions relating to the existence of any Will, details of family solicitors and accountants and whether there are any existing powers of attorney. We would typically follow this first meeting with a proposal setting out what we think we can do and what it will cost. We will charge a fee for preparing an initial report and agree further meetings, according to the complexity of the client’s financial affairs. Clients are made fully aware of charges at every stage
Section 3: Impact of new legislation
- What difference has the introduction of the Retail Distribution Review (RDR) made to Omnium, with the new rules on financial advice?
RDR has been both evolutionary and revolutionary. Its introduction has driven greater transparency throughout the industry and, as a result, clients are better informed about what they are paying in terms of costs.
The compulsory training of advisers to minimum standards has been another benefit because those who were in the industry just to make a fast buck, and who were not prepared to work towards higher standards, have been forced out of the business. As a result, the number of advisers has roughly halved and there is no doubt that Omnium has benefited because we were already compliant before RDR.
However, I would argue that one possible downside has been the complete replacement of commission with fees because it has made the route to financial products less obvious for a lot of consumers. People understood commission, but now they want an explanation as to why they should pay a fee – even though they are now better informed and more fairly treated, some remain unconvinced
- Do you think regulation is the answer to stamping out bad practice?
There needs to be regulation, but it is how it is implemented that is the issue. With the introduction of MiFID II, the Insurance Distribution Directive and Senior Management Rules, the industry is massively over-regulated.
However, despite all the time and money spent on drafting these regulations, it doesn’t seem to be solving the problem of ordinary people continuing to receive bad advice on products like Defined Benefits Pensions.
Industry levies to support the Financial Services Compensation Scheme (FSCS) and Financial Ombudsman Service (FOS) are continually rising so that the good advisers, who make up the majority of the industry, are being penalised for the actions of a few unscrupulous operators. The Regulator needs to do more about the people acting badly, and to take action sooner
- Do you think the High Street banks have a role to play in giving genuine, objective financial advice?
RDR effectively killed off the High Street banks as providers of financial advice – it all became too expensive to operate. Similarly, there was a time when some life assurance offices ran huge, sales-orientated teams. These were not perfect models, and this type of approach did need cleaning up but, they did get people into the habit of saving regularly. For this reason and, as I said earlier, I would like to see the return of commission-paying products, but on a regulated and controlled basis. Banks do, however, have a role to play at the lower end of the market.
- Will the EU directive and MiFID II affect Omnium Wealth and will the effects be positive or negative?
The Markets in Financial Instruments Directive II (MiFID II), came into force in January and is a completely new and comprehensive set of EU regulations designed to strengthen investor protection and bring greater transparency to the area of management costs and charges.
I don’t believe MiFID II will have a massive impact on our business – clients have always known what they have been charged. I believe pressure has shifted to the fund managers who are currently facing some awkward questions about their charges and how they justify them, particularly during times when their performance is below par.
- Will new asset classes (e.g. P2P loans) create problems for professional advisers, particularly with the advent of Innovative Finance ISAs versus traditional deposit accounts?
No, I don’t foresee any problems. Some money may move away from bank and building society deposit accounts, but I don’t think there will be an overall shift away from mainstream investments.
As a firm, we are not really involved at the moment – the new products that have been introduced are not in the spirit of what we have to offer. The bottom line is that we are looking for investments that are easy to understand and where the risks are clear. We are under no real pressure from clients to change our stance and I think where money is being held deliberately as a cash reserve it should stay on deposit. Where I do see a possible application is with corporate money which is expected to earn a commercial return. We are currently exploring P2P loans to establish whether they are suitable.