Paul Bradshaw recounts the frustrations and the good times leading up to his immersion in the offshore market. Sarah Godfrey discovers how he sees the years ahead
The past few months have been a frustrating time for those involved in the offshore investment business. Since the pre-Budget report and its proposed - but still unconfirmed - changes to the capital gains tax regime, no-one who provides, distributes or advises on offshore investments has been able to say with absolute clarity that such products will continue to be the best solution for their clients. So it should be comforting to know that one of the founding fathers of the offshore life industry finds the current position just as frustrating.
"I have never seen such a muddle," says Paul Bradshaw, chairman of Nucleus Financial Group and a man whose pedigree in insurance and investments stretches back 36 years. "The whole world is confused by what the rules on tax are. It is putting advisers in a position where they can't advise today as the rules might change tomorrow. It's very poor government. The pre-Budget report was a mess, and that has been widely acknowledged."
The past 36 years have arguably seen many episodes of poor government, and countless changes to the tax system. They have also seen the financial services landscape change beyond recognition.
The early days
"I left university in 1971 and four months later I had a job as a trainee actuary. It was a different world then - I drifted into it, whereas people take it very seriously now," says Bradshaw. "In 1971, it was a case of who would be lucky enough to employ you."
The lucky company was Pearl, then a ubiquitous presence in the country's living rooms thanks to its 5,000-strong field salesforce. Bradshaw qualified as an actuary, a job he admits to having found mundane but which was tempered by working with some bright sales and marketing people. In 1978 "a conversation in a pub" sowed the seeds of what was to become Skandia Life, which Bradshaw joined as appointed actuary.
After the death of one of the founders in 1981, Bradshaw took over running the business, later selling the management stake back to Skandia Life's parent - the only business decision he regrets. Immediately after this came his first incursion into the non-UK life market, when his employer bought the firm that would become Royal Skandia.
Bradshaw left Skandia after three years of 'golden handcuffs' and became involved in the genesis of Dublin as an offshore centre, forming the first insurance company in the International Financial Services Centre (IFSC). "I've always been fascinated by the offshore market - it's harder than it looks," he says.
The nucleus of wraps
After "various adventures in Germany and Italy", and a spell on the board of Scottish Amicable, Bradshaw joined wrap provider Nucleus in 2006. Nucleus differs from other wrap services because the advisers who use it own a stake in the business - something Bradshaw feels strongly is the right thing to do.
"It is a real privilege to be the chairman of Nucleus," he says. "It is a young business in a changing world. Thirty years ago we did that with Skandia and it is great to see (chief executive) David (Ferguson) coming through with a passion to make the world better. It's a very exciting business because almost all the stakeholders can see it is a better customer proposition than has existed in the past. We are making it happen and the future direction of the business is exciting partly because it is not clear."
Bradshaw sees wrap in the context of the evolution of the financial services market from a place in which consumers bought what paternalistic insurance firms told them was good for them, to a 'market of one', where each customer's needs can be met in a different way.
"Wrap is a facilitator," he says. "If you accept the premise that the adviser's primary job is to advise the client, part of that is to minimise costs. We accept that advisers are buying services from fund managers and so on. Wrap is a piece of technology that facilitates them to do that.
"Having bits and pieces of policies and share dividends and the like in a shoebox to help them fill in their tax return is how most people exist, partly because this market evolved from people being sold this product and that product. That is all nonsense: you should be able to sign on to a PC and see the whole thing. It's not rocket science, though some people like to pretend it is. Wrap is cheap, commodity administration. The skill is in personal consultation and, if appropriate, investment management."
Ever since the first UK fund supermarket opened its virtual doors in 2000, the idea of wrap as a completely one-stop financial solution has been dangled in front of advisers and investors, yet there is still no such service available.
"The technology to do that doesn't work yet and I'm not sure it ever will," says Bradshaw. "The obvious gaps are twofold. I'm not aware of any platform that provides an analysis either of debt (such as mortgages) or of legacy assets - I'm not sure anyone will ever be bothered to build a system to try to get more things out of the shoebox. But it is possible to get almost all the things on which an adviser might advise on to one platform."
One of the key issues wrap needs to address, says Bradshaw, is the lamentable level of information on financial issues in the UK - "we are still writing letters for information, and we don't live in that world any more".
Bradshaw has watched the evolution of financial services both onshore and offshore from a number of angles, but he feels the key trend is the transfer of value from life companies to advisers. Gone are the days when paternalistic insurance companies sold the people one-size-fits-all policies. "Life companies have built this huge edifice out of administering stuff - in the modern world you just don't get it," Bradshaw says. "I sometimes think about travel agents. In my childhood there were high-street travel agents who sold you a package out of a brochure. Now it's all on the internet. There are still successful travel agents that are built on advice: they will build you a package to view lions in South Africa or whatever, but that is advice, not distribution. If you want a routine investment, buy it online. If you need advice, that is what IFAs are there for."
However, to make the most of this brave new world of professionalism, Bradshaw says IFAs need to challenge their traditional relationships with institutions. "Institutions have made life very comfy for advisers: they take them on holiday, go to conventions, pay them commission - that's the dynamic," he says. "It's about the advice community growing up. It's fun being an adolescent, living at home and screaming about how much you hate your parents, but then you have to leave home and grow up and recognise that you are responsible for the client and for providing services to them, not selling them things on behalf of the institutions. It's painful growing up; leaving home seems very romantic until you realise you have to pay the rent and rates. But the way the market will emerge is that IFAs will be more self-standing and less reliant on institutional support."
Bradshaw freely admits that wrap has been the next big thing for at least the last five years, but he has a good feeling about the coming year. "Economically it will be a tough year," he says. "But I think it will be the year in which wrap platforms really begin to take off - it has been a lot slower than anyone would have thought but there is a bit of a snowball effect building now. Next year will probably be the first year since 2003 when every market doesn't put on 20%; that will put more focus on asset allocation, which you can only do with the appropriate technology. Advisers will have to work harder: if the FTSE 100 falls 500 points in a day - which I believe it will in 2008 - that's when people ring up to ask about their financial position, and there's no point saying 'I'll write to Norwich Union and get back to you in three weeks'."
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