Big Interview: Richard Howells, Zurich UK Life

“I surprised myself. I told my son ‘you should think about becoming an IFA’.”

Consumers, so says Zurich’s IFA guy, do not realise what “proper” financial advice can do for them. “They do not understand the problem,” he says, “so they will not understand the solution – financial advice.”

But for Richard Howells, intermediary sales director at Zurich UK Life, the answer is simple.

“Financial education is not enough. We need to incentivise – maybe a tax break or something – and, if necessary, coerce. It should be seen as socially unacceptable for people not to take charge of their financial affairs. Then, and only then, will people value advice.”

On the road

Howells boasts pedigree in the financial arena. He started his career at NatWest but would later hold senior positions at IFAs Berkeley Berry Birch and Burns-Anderson.

Before joining Zurich in 2008, he was managing director of strategy and development at Bankhall, the directly-regulated service business last year acquired by network giant Sesame.

It’s a scarcely-known secret he also launched his own IFA, Manchester-based Rapport Financial Strategies, now run by his wife, Julie. “It’s no lie to say advisers understand what I am about and I understand what they are about,” he says. “I was one of their own, after all.”

Howells has just spent the best part of 18 months ‘on the road’, visiting advisers across the UK to find out what they think of product providers, their clients, the FSA and the RDR.

But while the regulator attempts to tackle what intermediaries must do better to engage consumers, Howells says the root cause of the problems lie elsewhere. “The industry as a whole must improve at tackling why consumers aren’t seeking financial advice. From the FSA to the Treasury, this must be addressed.

“Australia did this a few years ago. It told the nation exactly what the problem was: people had no retirement money, there was no state support. It told it like it is. Now these issues are ingrained in the public’s consciousness.

“We need to do the same. There should be a campaign similar to the one about wearing a seatbelt. We need to get it in the public’s consciousness that not taking ownership of one’s finances is socially unacceptable.”

It is a little-reported fact the FSA is happy with the adviser/client relationship once it is established. “Many investment advisers enjoy regular contact with, and the trust of, their clients,” it said in last December’s RDR paper, “but we must note that consumers who seek advice are currently in a minority.”

Howells takes this point up: “Evidence points to the fact consumers do not trust the adviser community, but those who have an adviser will trust him,” he says.

“They will say their adviser is the best in the world and that others are simply not good enough.

‘We have seen Rogue Traders’, they say, ‘maybe we are just lucky that we landed on the right adviser’.”

The RDR has been split in two. Later this month, the FSA will publish what it calls a Policy Statement – effectively its final rules – containing its finished handbook text on changes to investment advisers’ remuneration. In Q3, it will do the same on its proposals for qualification requirements and service labeling.

The business model

But while advisers are clear on the 2012 deadline for implementing the changes, Howells says firms are at vastly different stages of their preparation. Some, he says, are so focused on running their businesses and staying profitable, they feel unable to dedicate any time to examining their business model, or to deciding what to “label” themselves.

“There is such a wide range of adviser need,” Howells says. “Some have no idea what to do for the RDR and want my help, while others are fairly sure where they are headed but wouldn’t mind a bit of guidance.

“That covers just half of them. There is another group of advisers who know precisely what they are going to do to be RDR compliant and, if anything, want my opinion only.”

But Howells then talks of a fourth group: “Advisers in this group can not even think about the RDR,” he says. “They can’t. They do not think about where they want to be by 2012 because the truth is they are still unsure of where they are right now.

“Their thoughts and worries are focused on servicing their client base and staying in business. This is still a tough trading environment after all. Everything else – exams, labeling, adviser charging – is just ‘stuff for later’. Most advisers are in this last group.”

Howells describes running a business as “really quite a difficult thing to do”. “It is not enough just to be a good adviser,” he says. “You have to be a good business person too. Because that is what a company is – a business. The best thing I can do for the advisers I visit is relay what it is other firms are doing.”

The RDR proposes advisers wishing to attain or keep the ‘independent’ label will need to offer advice based on a ‘whole of market’ analysis. Those only able to access a limited part of the market must call themselves ‘restricted’ and make this clear to consumers.

But service labeling has been overstated as an issue, Howells argues, certainly for the advisers he has spoken with.

“Some advisers have said they are worried about the labeling, but the truth is there is hopefully going to be more than enough business to go around,” he says.

“If we engage the consumer, there will be too much demand and not enough supply. I hope we get a very strong restricted advice space.”

Detachment

The “detachment” some advisers now feel from insurers and providers is one of the key messages Howells says he has taken from his chats with advisers. According to him, some feel “let down” by the actions of companies with whom they have been placing business for 20 years.

“Advisers need to know and be reassured that we are there for them; that we support them. I think there are predatory forces at work in the market and it is difficult for advisers to tip-toe their way through it all and still make the right decisions.

“For example, companies will announce they are building a direct-to-market sales force. Or they will start contacting IFAs’ clients directly, behind their backs.

“Advisers ask ‘why are they doing this?’ ‘What have I done?’ ‘Don’t they want me around any more?’ I am there to reassure them that we are there for them and we will continue to be.”

HelpPoint

Part of the Zurich strategy in 2010, Howells says, will be the development of its HelpPoint proposition for advisers. The scheme is currently available for customers only and, essentially, pledges to “go the extra mile” to ensure queries are dealt with adequately and quickly.

“We are going to be spending money on HelpPoint”, Howells says. “It is the idea that we will help an adviser, with anything, should they really need it.

“If, for example, an adviser desperately needs something underwritten on the day, HelpPoint will be there to ensure that happens.”

Speculation of an exodus of financial advisers who have either been unable, or who have plain refused, to meet the RDR’s requirements continues. Guestimates beginning at 50% have since shrunk to around 30%, while J.P.Morgan recently declared as few as “one in seven” were headed for the exit.

But for Howells, this is not a time to be down on the future of financial advice, which he declares is “fantastic”.

“I was sat down with my son the other day and we were talking about careers. I said to him ‘do not dismiss financial advice’. I surprised myself but that is how good an industry, a profession, I think it could be.”