Independent advice from a big business

Bates Investment Services is a research-led independent financial advice firm. Based in Leeds, it has grown into a national firm with advisers working across Britain. Since September 2003, Bates has been the advisory arm of The Money Portal – a financial services group that manages assets approaching £1.5bn for 140,000 clients throughout the UK.

Q: Has becoming part of The Money Portal changed the way that Bates operates?

A: Although I joined after the acquisition of Bates, I don’t think there have been any significant changes. Bates is the only advisory business in the Money Portal group, so it doesn’t have to be brought into line with anything – the other businesses are execution-only discount businesses. But there are benefits to being part of a bigger group.

Q: Who is Bates’s typical client?

A: We have a wide range of clients in terms of wealth, but a common thread is that they appreciate our research capability to identify the most appropriate fund. Trying to simplify that is all very well, but people want value advice and guidance.

Q: Will you be staying whole-of-market after depolarisation?

A: Yes we will. There was never any other option. Our whole proposition to clients is based on our ability to identify the best investments from the whole of the market. To narrow it down would destroy everything that underpins the business.

Q: How will the advent of multi-tie change the market?

A: Particularly over the last five years, more and more people have come to understand the difference between an independent financial adviser and a tied agent. Going back to the early 1990s you really had to explain it to them, but now more and more have heard of IFAs. Because there is this heightened awareness of independence, a number of people will still insist on that.

To me it was obvious that the banks, as mass-market distributors of financial products, would dominate the multi-tie arena. The independent advice market will continue to attract the more discerning customer. There are great opportunities, but independent advisers need to be aware that the value they add is in the advice they give. If they focus too much on distributing product, the distinction will narrow, and the banks’ offering – with internally and externally managed funds as well as multi-manager – will start to look more like the IFAs’ offering.

The key differentiator for independent advisers is the ability to give advice. But the important thing is that these intermediaries mustn’t get complacent, as the banks’ offering will look fairly attractive to consumers.

Q: How do you generate business?

A: We have built up a good clientele at Bates and a large amount of our business is repeat business from them. Our main source of new business is a seminar programme we run across the country for people at or near retirement or who have inherited wealth. We also work with a number of large organisations in the public and private sector to offer things like pre-retirement counselling.

We see our existing clients on a regular basis and communicate with them through our newsletter. Although we have a good research function, funds do fall off in performance and when that happens we will put out a note to investors.

Q: Do you recommend multi-manager products?

A: Yes we do. They appeal to different people, depending on the level of active involvement they want. Some clients want to take an active interest and will want to pick funds from different managers. Multi-manager is a process with particular benefits for less active investors: it gives an overlay of continually monitoring managers and has a robust process for doing that.

It’s hard to say if multi-manager is a growing area of our business. Bates was one of the pioneers of multi-manager investment and we have been using it for more than two years as part of the core of what we do. I would guess that multi-manager funds are taking a bigger and bigger proportion of the market: now virtually every fund group has its own version. Our advisers are happy with the concept and use it regularly, so it’s not growing as such because we are already there.

Our research team has been very active in its selection of favoured multi-managers. We’re quite capable of really interrogating the multi-managers about the processes and value they offer. We see a broad range of abilities in the market, but it is an interesting part of our proposition for clients.

Q: Does your Leeds base give you a regional focus?

A: Because the roots of the business were planted in Leeds, we have a big Yorkshire and Lancashire client base, but we have advisers all over the country. We have another office in Milton Keynes as well as people in the Midlands, the South and so on. Leeds is the head office but we have a network of advisers across the UK.

One of the benefits of being part of The Money Portal is that it extends our reach. Its expansion plans will enable us to go further.

Q: What are your plans for growing the business?

A: It’s our ambition to acquire more businesses and by next spring to have gone from 40 to 100 registered individuals within Bates. There will be some organic growth too. People come and go from time to time, so organic growth will mainly be in strategic areas where we feel we have gaps. We are not yet at saturation point in Leeds but I can particularly see us having more people in the South. Acquisition is definitely part of the game plan, and that’s where being part of a group like The Money Portal helps, by allowing us access to resources we wouldn’t otherwise have.

Q: Are investors coming back to equity investment?

A: We are seeing a number of developments. Investors are more confident of investing in equities now. We have also noticed that our seasonal sales are up on last year. This is a very busy time of year for The Money Portal, particularly for our direct businesses, with people using their Isa allowances.

Q: What sort of Isa season did you have this year?

A: Our Isa season sales are up about 30% on last year. What is interesting is that you would expect end-of-year tax planning to mean massive increases in business, but as we have grown we have found that there are not as many peaks and troughs. The major benefit of the upsurge in sales for us is not the extra revenue but the fact it is a good indicator that confidence is returning to investors.

We deal with a broad range of investors, so funds are spread very wide; however, UK income funds have been particularly popular this year. We believe this is a sign of growing confidence in the market, but also a more pragmatic approach by investors. Rather than looking for equity investments that will “shoot the lights out”, typified by the rush to technology funds in the late 1990s bull market, we believe investors are attracted by the value that reinvested dividend income can bring to total returns.