Adviser Focus: Sheriar Bradbury

We are about to part ways when Sheriar says what's really been bugging him...

"There are advisers out there doing things incorrectly but with the best of intentions," he says. "They are the ones who will get caught.

"But there are other, sharp, clever advisers who will never be caught. They are smart, with clean audit trails, and the FSA seems to me to be completely oblivious to this fact."

Bradbury's frustration betrays his otherwise calm demeanour. He'd spent the previous 90 minutes, every one of them, talking glowingly about the RDR (note: not the FSA) and the future prospects for his own company, London-based Bradbury Hamilton.

"The FSA needs to improve its intelligence gathering," he adds. "They need to bring in ex-advisers who can help spot those who are just in this business for a quick buck."

Sheriar is founder and managing director of IFA consolidator Bradbury Hamilton. The company works out of swanky offices in the heart of the City, but it could easily have taken on a different guise.

First and foremost, Sheriar says he was motivated only by a challenge "to see if I could set up and run a successful business all by myself." He says he thought: ‘I'm 30 and it's time to do something with my life.'" But once set on a business plan - to buy the client banks of retiring IFAs - he says he knew he'd made a good, and potentially profitable, choice.

"I could see what was going to happen," he says. "I knew the average age of IFAs was growing and I just knew there was going to be more regulation. I even called the rise in minimum qualification requirements.

"The truth is there were a lot of advisers simply unwilling to do it all. That's how I saw the industry going and I thought buying up and servicing these firms' client banks was the way forward for Bradbury Hamilton."

The world of acquisitions has changed. Bradbury says open conversations with managing directors and chief executives about business models, trail commission and profit have been replaced by negotiations with administrators as more and more businesses fold.

"The latest buy [Caversham Buchanan] involved a liquidated company," Bradbury says. "It has its upside of course - the company is often available at a discount - but the truth is it can be very time consuming and, if you don't know what you're doing, very messy.

"Once a firm goes into liquidation, the clients get very worried so the transition must be smooth. Otherwise you have a potential haemorrhaging of clients. Yes you might get it at a discount, but you have to put up with a lot of problems.

"I have huge sympathy for some of the advisers out there. They have been in this business for 30 or 40 years and now they're being forced to do this and that. It's not nice for some of them."

Potentially nice for him though. Bradbury says he expects consolidation in the IFA space to "pick up" over the next three of four years, generating a number of leads for his business and offering an "out" to those principals seeking an exit.

He says business is down at Bradbury Hamilton "as it is for all firms", but announces it is not a problem.

"I'm not so bothered about short-term gains," he says. "I'm interested in long-term capital value only. If we're not making good money right now I really don't care as long as we're not losing too much. It's about the future."

Bradbury says the Retail Distribution Review, and in particular its push to remove upfront commission payments passing between provider and adviser, is a positive step for the industry. But he adds it has created a lot of problems for firms continuing to operate more traditional business models.

"I have never been a supporter of upfront commission but there are a lot of people out there who are," he says. "They don't keep adequate reserves and they treat the money that comes in as being safe when it isn't. When a downturn comes, clawbacks hit."

"I speak to a lot of advisers and they are just not ready for customer agreed remuneration. They still want upfront commissions and they are leaving it [making changes to their businesses] too late."

But Sheriar says the standard of advice today is stronger than it has ever been.

"The average client gets a very high standard of advice from the average IFA these days," he says. "It is true that 20 years ago there were enormous problems and I think something definitely needed to be done, but today things are not as bad for the consumer as some make out."

The one-year anniversary last week of the collapse of US investment bank Lehman Brothers, and its subsequent domino effect on global markets, has brought the issue of structured products bound by third party arrangements firmly under the spotlight.

Sheriar says the fallout of Lehmans' collapse on UK investors could have been avoided if the FSA invested in upfront product regulation rather than retrospective action, which he says often ends up at the feet of advisers.

"There should be more product regulation, no doubt about it," Bradbury says. "Some sort of approval process for the products would make it much better for consumers and would help avoid a lot of problems.

"We never got involved in precipice bonds, for example, but others did and got stung. My question is: why didn't the regulator properly look at the products beforehand? Is a drug tested before it's unleashed onto the market?"

Which brings Sheriar on to another issue he says is "deeply unfair" on financial advisers - the long-stop rule.

In last November's RDR Feedback Statement, the FSA said it did not believe there was enough evidence of the benefits of a 15-year long-stop, which is afforded to other professions, to justify re-introducing it.

The issue has angered advisers ever since, and in May their frustrations were even raised by the joint parliamentary committee on human rights, which called for a Government explanation as to why IFAs are not subject to the rule.

"I do not understand the FSA's long-stop stance," Bradbury says. "To hold people responsible for their whole lives - their whole lives - I mean, come on! It's deeply unfair and needs to be changed."

What does the future hold for Bradbury Hamilton, and for Sheriar Bradbury? "The truth is this is not a bad time for us," Bradbury says. "We are well capitalised and there is cash to spare should another downturn hit.

"As for me, I think I'm looking at another five years at least but it could be 10, could be more. We have a lot of options. I might sell the company, I might float it. I'm keeping my options open.

"But the truth is I can't really see there being a good market for selling the business for some time. Financial services is very volatile. You never know quite what's round the corner."

Sheriar Bradbury was talking to Scott Sinclair.

BUSINESS TIPS:

Get chartered: You want to be able to say to people: I'm a professional. It will make your life so much easier.

Watch your overheads: You're looking for a good, efficient system. If there are staff issues, sort them.

Assume nothing: Don't assume RDR will change or that a new Govt will change anything: Get the exams you need and any other requirements now.