Openwork has, to use an overworked phrase, been ‘on a journey’. As recently as five years ago, the adviser network was losing in the region of £1m a month and found itself both the subject of a section 166 ‘skilled person’ report and on the FCA’s watch list.
From this less than auspicious position, however, it has steadily rebuilt its relationship with the regulator, its advisers’ qualifications and its reputation.
“I like to think we have achieved a lot over the last five years,” says Openwork’s chief executive officer Mark Duckworth, who joined the group as commercial development director in late 2010, during this bleaker chapter in its history.
“What we were losing a month, we are now broadly making every month and, from a regulatory perspective, we have turned a corner. All our back-books are now clean. There are no RMPs [risk mitigation programmes] or 166s. We have a great relationship with the regulator and we have just been removed from its watch list.”
From here, the group has ambitious plans for the future, including targeting £80m of profit by 2018. To that end, it has initiated a separation of the business into its constituent parts, now running a mortgage channel and a wealth channel as well as the ‘Owl’ – short for Openwork Ltd – protection business it acquired from Metlife in 2014. Along the way, it has attracted some high-profile recruits, including John Cupis, formerly of Sesame, to oversee the mortgage channel.
Duckworth, whose thoughts on the industry issues and trends that are influencing his and Openwork’s thinking on the future you can read here, has also sought to introduce greater clarity around the way the group’s wealth channel operates.
At present, Openwork has its wealth business and its Omnis fund management company. Next will come discretionary permissions, says Duckworth, and after that should be platform permissions. For its part, in just two years, the Owl protection business has nearly doubled the number of lives it insures per annum.
Alongside this restructuring, Duckworth has been equally focused on ensuring Openwork advisers have everything they need to run their own firms more effectively. “In the mortgage business, adding lenders and adding to the sales proposition has been important,” he says as an example.
“Overall, service and proposition have been fundamental to us – and this approach seems to have worked. If you look at the mortgage business, we were roughly lending £7bn two years ago but we would expect the forecast to break £10bn this year. That sort of growth is far in excess of the market.”
Adviser engagement
Openwork has also shifted the way it engages with its advisers. In addition to a ‘shareholding council’ that deals with shareholder matters, it operates separate advisory groups for the mortgage and wealth channels, with meetings held every couple of months. In addition, there are some 500 advisers currently attached to peer groups, which are also represented on the advisory groups.
“Everything from the meetings is cascaded back so it is a very different way of communicating compared with other firms,” says Duckworth. “Ultimately it is a legacy of the old Allied Dunbar branch structure. We have tried to maintain that connectivity to our advisers as we have transitioned into a different model without the branches.”
As partners, Openwork advisers currently own a 67.5% share of the business. The group is now working on a ‘change of control’ clause – enigmatically titled ‘Project Chess’ – that will increase that share to 90%. As part of the project, which also sees Zurich selling its 25% stake in the network, Openwork has agreed to maintain a commercial relationship with the insurer over the next five years with regard to protection and its platform.
“Once we pay back a loan that was granted by Zurich in 2010 – and we have a timeframe for that, which is through to 2020 – Zurich will pay down the debt that currently exists on our balance sheet,” says Duckworth. “It will then transfer its shareholding to the partners and the employee benefit trust, pari passu, which gives 90% to the partners and 10% to the employee benefit trust.
“Zurich will then retire itself from our board and remove all of its reserve powers. What that means for Openwork is a clean balance sheet, independence in its choices and control of its own destiny. That will be the first time the business will have had all that.”
The next generation
It should also help realise the value in the network and, in a similar vein, Duckworth points out how the increasing value of advice businesses in general is not going unnoticed by the next generation. A growing number of the group’s underlying franchise businesses have, he says, been attracting interest from younger advisers – not least from children in their parents’ firms.
“An adviser who is maybe 55 today with a child who is, say, 25 could be looking at their client base and wondering who will look after it,” he elaborates. “The client base is active and probably five to 10 years younger – and it will be sustainable for a long time. Just look at the pension freedoms – advisers now have clients for life, rather than just up to the point at which they buy an annuity.”
Turning to a different aspect of the future, Duckworth believes adviser businesses will have to evolve in the way they offer advice – particularly in the ‘robo’ era. “Clearly, most businesses are still heavily dominated by face-to-face advice,” he says. “Currently, only Hargreaves Lansdown is really sitting outside that model but, going forward, I believe a blend is going to be the way distributors work. Nobody is going to be able to rely solely on just one approach.”
With few in the advice sector able to claim real brand strength, Duckworth is also thinking hard about how the business can build better brand awareness. “Openwork, historically, has been a ‘B2B’ brand,” he says. “But, as you look at what the market currently values in distributors – the recent Mortgage Advice Bureau and Towry deals are good examples – the emphasis is on the consumer seeing a consistent brand. So it is clearly important.”
As it is for all advice firms, managing regulatory risk is a crucial consideration. If a member of Openwork gives poor advice, it is the group that takes responsibility. As such, it is striving to ensure that, across the network, advice is consistent, that risk is managed effectively and that outcomes are controlled. “We are better able to control the customer outcome because it is starting from a central point,” says Duckworth.
With an abundance of potential clients and a dearth of advisers combining to offer what he calls “a golden moment for the advice sector”, Duckworth is nevertheless keenly aware of potential threats to that rosy outlook, such as robo-advice or the re-emergence of the banks.
“I may see the glass as half-full at the moment, but I’m very realistic on how it could empty,” he says. “I aim to guide Openwork towards thinking in the same way and – to guard against the glass emptying – towards focusing on the kind of experience we need to deliver to clients over the next five or 10 years so it matches their expectations.”
Read the first part of our interview with Mark Duckworth here
CV: Mark Duckworth
Mark Duckworth joined Openwork as commercial development director in late 2010, gaining promotion to managing director of distribution and marketing in July 2011. He was appointed Openwork chief executive officer in March 2015.
Duckworth joined Openwork from Living Time, where he was distribution and partnerships director responsible for all sales distribution, strategy and key deals in the UK. He has also worked for Prudential, where he was distribution director, responsible for distribution throughout Europe and the Middle East; AXA, where he was national sales manager; and Scottish Amicable, where he was regional sales manager.
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