It is days before Chase de Vere’s annual conference when its chief executive Stephen Kavanagh speaks to us.
The event will see Kavanagh address his firm’s employees on his 54th birthday, almost 20 years after he first joined what was then Thomson’s Financial Planning.
It is a long way from his time at the Bank of Scotland, where he began his career behind a branch counter counting loose change.
Kavanagh admits he quickly got fed up with it and took the first opportunity he could to move into the bank’s private client division in 1985.
“I was the fifth in a team of four, making the tea and doing all that stuff, but it was great,” he says.
He remained there for seven years before moving to what was then known as TSB Scotland, and then on again to Allied Irish Bank. The latter move was Kavanagh’s first introduction to independent financial advice and saw him join a team of just 14.
“They gave us pretty good training because there were so few of us and we were servicing the bank’s customers so there was a ready-made stream of people who needed advice. That went on for five or six years but then the bank decided to go tied and sell its own products. By that time I was starting to appreciate that independence meant something,” he says.
And so it was that Kavanagh took up an offer from Thomson’s Financial Planning’s chief executive Douglas Gardner to help start the advice firm’s Scottish operation.
Fast forward to 2006 and Kavanagh was promoted to sales director of a business that was now known as AWD Chase de Vere following Thomson’s 2004 acquisition by the German finance group and a merger with fellow purchase Chase.
Kavanagh recalls being offered the job. “Instantly, your ego grows. You feel you can make a difference and you are definitely the man for the job. However, if I knew back in 2006 what was soon to become apparent I would have never taken it.”
Indeed, just two years later, the FSA hit the firm with a £1.12m fine for misselling, demanding Chase also compensate customers for losses.
The regulator found the firm missold some pension transfers and pension annuities by recommending products to customers who already had adequate existing pension provisions or whose attitude to risk did not match the products recommended to them. Up to 800 customers may have received unsuitable advice in relation to 1,200 sales between February 2006 and October 2007. The net commission generated from the sales of such products during the period was £8.6m.
The FSA said the firm sometimes failed to properly disclose the risks and costs of the products it recommended, and was also unable to demonstrate the suitability of its advice from its own records in 39 per cent of the transactions reviewed.
Based on a sample of recommendations, the FSA found 28 per cent of transactions resulted in misselling.
“We were in a bad way and there seemed to be lots of skeletons in our cupboard,” Kavanagh admits.
“I just thought ‘Sod this. Why did I sign up for this?’”
So he may have felt like history was repeating itself when three years later the boss of a new parent, in this case Swiss Life, again asked him to take on an expanded role.
“By October 2009 we were turning the corner, and my boss to this day [Swiss Life international chief executive] Nils Frowein asked me if I wanted to be chief executive.
“I told him to bugger off. I said I made that mistake back in 2006 and I wasn’t going to make it again, especially as I knew the Keydata stuff was there and it was pretty horrid.
“But, again, your ego thinks maybe you can make a difference and, having been an adviser, our advisers thought it would be one of their own getting the job. They were saying ‘take the job, Kav!’”
The saga over Chase’s involvement in Keydata life settlement products finally began to draw to a close in 2014, when the FCA issued another misselling fine, this time for £560,000 for sales between 2005 and 2009.
Kavanagh says: “It could have sunk us but we had a really supportive parent. Swiss Life was fantastic and without it and Nils, my gaffer… well, that’s what got us through. Now we’re in the best place we’ve been, and it feels good as well.”
Kavanagh spoke ahead of revealing yearly profits of £5.8m, up from £3.1m, and he says the firm’s Zurich-based parent is loosely setting a target of £10m as its next milestone.
He says the plan involves some parts of the business performing more effectively. He admits the firm’s corporate business, which relaunches this week, “looked a little bit outdated” and says it has been “pedestrian” on auto-enrolment. He is also optimistic Chase can secure new affinity deals.
Meanwhile, as the FCA and the Government mull a return of commission in simple accumulation products and lower qualification requirements for some advice, the Chase boss says his own firm’s experience leaves him “horrified” at the potential changes.
“We were flogging products many years ago for high-end commission and we got into trouble for it. And rightly so. We did a really poor job in doing that.
“I would not want to have something even as part of our proposition that says there is a gap we need to service, with a bit of commission coming in for life cover and pensions, and that those guys do not have to be as smart as the guys in the rest of the business at level four or level six: all that horrible stuff that we were associated with in the early 2000s. I certainly would not want to go back to that,” he says.
What’s the best advice you’ve received?
When being promoted to my current role: “All you need to do is use the enthusiasm you had as an adviser and take that forward. Be who you are and you will be successful”.
What has had the most significant impact on financial advice in the last year?
The Conservative majority at the election. Since then we have had announcements on pensions, inheritance tax, tax on dividends and buy-to-lets. There is likely to be more to come.
What keeps you awake at night?
My wife’s snoring.
If I was in charge of the FCA for a day, I would…
Introduce measures to help people easily understand the difference between independent and restricted advisers, and between advice and execution-only.
Any advice for new advisers?
Treat every client and every referral as if it is your last.
2010-present: Chief executive, Chase de Vere
2006-2010: National sales director, Chase de Vere
2004-2006: Regional sales director, Chase de Vere
1997-2004: Independent financial adviser, Chase de Vere (then Thomson’s Financial Planning)
1992-1997: IFA, Allied Irish Bank
1985-1992: Private client portfolio manager, Bank of Scotland