Interview: David Ferguson, Mission to turn around a 'bad industry'

Published on Tuesday 17 March 2009 20:07

DAVID Ferguson has a hard job ahead of him –but one that he maintains has been helped by the global financial turmoil. His ambition is to initiate a radical change in the independent financial adviser (IFA) market, which he has branded "a very bad industry".

So the major shake-up of financial services that we have witnessed over the past year was just what he needed.

Ferguson's company, Nucleus, runs a "wrap" platform, enabling IFAs – who pay a fee to Nucleus – to view all their clients' investments in one online account. Wraps are a niche in the financial services market – one that seems to be attractive to the more forward-thinking type of financial adviser.

Ferguson passionately believes that there is a severe lack of "good IFAs" in the market. He claims that just a fifth of the 25,000 advisers working the UK deserve that description.

A growing number of IFAs are looking to improve their service to clients, – boosting Nucleus's member headcount by almost 100 per cent over the past year to the current 60.

Set up to "initiate a sea change" in the IFA industry, the company was launched two and a half years ago – but the true shift in the financial industry only became apparent 18 months or so into the firm's existence.

And for the "good IFAs" keen to stand out from the bad in a market that Ferguson believes will lose up to half of its practitioners in the next few years, Nucleus is a shining beacon of respectability.

Ferguson says: "We wanted to change what we believe was a very bad industry. In a downturn, you see niche providers and more focused business models emerging.

"People are looking at themselves in the mirror and saying 'I can't afford to retire any more'. There are huge opportunities for IFAs. We are one of the few undersold sectors in the UK."

He points to a damning speech made in 2006 by former head of the Financial Services Authority Callum McCarthy, architect of the Retail Distribution Review, which addresses financial advice and how financial products are sold.

Ferguson muses: "For a regulator to stand up and say 'this is a crap industry' was quite impressive. It should be a profession and a great career to have, but in the UK, it's been more of a sales-led job."

Ferguson believes that only about half a million people in the UK have access to a good IFA. He explains: "People are looking for more accountability and transparency at the moment. We feel we're in a sweet spot in the sector and can take advantage of what is happening."

Ferguson is keen to stress that the credit crunch has prompted him to reassess spending – a move that he says he wants to continue even once the climate improves.

"We are keeping a closer eye on our capital and are operating as tight a ship as we can, but, as a two-and-a-half-year-old company, we would be doing that ourselves anyway.

"You don't ever get all of the decisions right at the start and this has given us a chance to make sure we keep a check on things."

Not that Nucleus has made any job cuts. In fact, the firm, which has a 15 per cent share of the UK wrap market – a figure it wants to increase to about 20 per cent by the end of this year – has taken on extra staff to increase its workforce to 24.

Each member firm is a shareholder, which has to put a substantial amount of cash into the business. A stake of 51 per cent of the company is owned by its member IFAs, while the remaining 49 per cent belongs to the management team and the company's institutional backer – Sanlam, a South African financial group.

The company tries to filter out Ferguson's hated "bad IFAs" from the start. Nucleus's website has a mini quiz, which asks a series of carefully worded questions such as "My clients are most comfortable when I recommend household names" – with answers from "strongly agree" to "strongly disagree".

He explains: "It gives us a chance to see what their values are and if it's worth us even having a conversation.

He muses: "The 'grey' people in this industry say that financial services have to be sold and not bought, but people are much more savvy now.

"Twenty-year-olds coming out of uni are not now going to ask no questions. They're going to get on the internet and compare mortgage deals or whatever.

"The whole type of conversation in the industry has completely changed and it isn't going back."

And from the look of it, Ferguson is going to be leading that conversation.

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