Ian McKenna On The Podcast: What's The Future Of Financial Advice?

In this first episode of our Sense Of Identity Video Podcast, I chatted to Ian McKenna, founder of the Financial Technology Research Centre (FTRC) and Winner of UK Life Insurance Leader of the Year 2022.

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Ian talked about his illustrious past in the music industry, why technology is key to the future of financial advice, and the increasing importance of cyber security for financial advisers.

TRANSCRIPT (AUTO-GENERATED)

Paul: Ian, thank you very much for agreeing to be part of our blog.

We've been really keen to talk to the flamboyant and big personalities of the industry.

It's fair to say that you are definitely amongst those.

When I was trying to think of questions I wanted to ask you, I had more than I could possibly have rammed into a 20-30 minute blog, so I've picked out my favourites because I'm intrigued to get under the skin of some of the personalities in the industries we touch.

So, firstly when we chatted years ago, one of the things that really interested me was prior to your financial services career - I know you had a very colourful career in the music industry.

I wondered if you'd share a little bit more about that?

Ian: Yeah I suppose I have to fess up - yes I misspent much of my teenage years in parts of the East End and up and down the M1 with various bands. It's kind of one of those.

I was very fortunate to be around when certain quite special things happened, but of course the thing is about being there when history is made, you don't actually realise it.

You know, you're just in the studio.

Paul: Some of those names are extraordinary weren't they?

Give us a flavour of what you were doing then.

You were managing..?

Ian: Well I started off loading in gear into in and out of the back of vans, a roadie basically - moving three tons of gear every night with a couple of people.

Then we had one occasion when (you know, bands in the late seventies - everyone was trying to get record deals..), there was one occasion when a guy called Dave D came over who was then head of Warner, which made him one of the most important people in the industry and he wanted somebody to look after some things.

The job was make sure he gets what he wants when he wants it.

I kind of did that.

We met up the next day to go off and do the gig wherever and I was suddenly told no you're not picking up gear anymore.

Your job is just taking care of business -  personal management.

And then there were various things, for example, I was checking into a hotel in Huntington Beach California recently (this was just before COVID), and this particular place - one of the really nice things about it is they have a rack of vinyl.

The idea is you just pick up a couple of albums and take them with you for you to listen to, and at the very front, the first one in the pile was Joan Jett's first solo album which for me was like, "Oh wow that's a bit cool."

I sat in on hours and hours of the recording of that at the studio Ramport in Thessaly Road, Battersea - you know, with Cook and Jones from the Sex Pistols.

I suppose another one where I really was fortunate again was sitting in on hours and hours of a little song called Video Killed The Radio Star, which everyone knew was going to be huge.

There was never a question that it was going to be a hit. But the hours and hours and hours of recording that went into that...

Paul: And did I think you mentioned that you actually ended up in being involved with the management of talent at that time as well?

Ian: Ah it was more personal management.

Well, you know, I wasn't doing the deals.

It was really just making sure all the things were happening the right way at the right time - as best you could.

I remember vividly the point at which I decided to set up my first, we didn't call them IFAs in those days, but what people would now call an IFA.

It was very conscious in my mind that I was going to see the band that I used to work with, but I wasn't working.

I didn't have to worry about how the backline was working, or if all the sounds were right.

I just stood there and enjoyed the gig.

What's Your "Why"?

Paul: As I said at the beginning, you're a big personality in this industry, and it's fair to say you've never been afraid to say what you're thinking - which personally I think is a really good attribute.

So where does that resilience and confidence come from?

Do you reckon that's back to those days of music?

What's been the driving force there?

Ian: I honestly don't know the answer to that.

I mean to speculate, I think it perhaps comes down to something of the journalist in me.

I'm passionate about looking after people.

I'm passionate about making people's lives better.

I'm passionate about our industry doing what it should do - and it doesn't always.

I find that an enormous frustration.

I think a perfect example of that is claims - when I see situations, more often than I should, where our industry isn't doing what it's supposed to do when people need it the most.

And you know,  I get involved in situations more often than I should, where someone will ring me up and say "we've got a problem getting this claim paid" and I make a couple of phone calls (usually to the right people in the C-suite).

And actually - when you make them aware their processes aren't working properly, they're genuinely horrified.

You do get the occasional bit of feedback along the lines of, "why did you get him involved?" - to which I think the answer is, "we got it paid didn't we?"

If something isn't a valid claim, it ain't going to get paid, but by the same token, I couldn't count number of times I've had a claim myself in the industry, that gets declined in the first instance.

I'm not going to say which insurer it was but I had a travel claim, which they declined, and I spent Saturday morning (not really the best use of a Saturday morning to be honest) writing them a letter to explain how in declining my claim they'd breached six of the seven FCA TCF principles, which I was really annoyed about because I couldn't get them on the seventh!

It's fair to say that claim got paid very quickly, but you shouldn't have to do that.

Comparing The UK vs US

Paul: You describe yourself as a tech evangelist and I'd wholeheartedly agree with that.

You're also the only person I know that continually returns to the US to test and probe and look at the market and technology and compare the UK and the US.

What's the motive behind that and what would you say you've discovered through those visits in terms of the future of financial advice and tech over the next 12 months or so?

What's exciting, what's changing?

Ian: When it started out going back and forth between the UK and US, it was a little bit like getting into a short term TARDIS because it gave me a good indication of where we were going to be here in a couple of years time.

I could sit down and map it all out on a whiteboard.

I saw things happening in the US then about three years later they'd turn up over here.

I think we've seen some change of late, and I don't think they're three years ahead anymore, but still they're probably about 18 months ahead of us and other jurisdictions like Australia.

People frequently say that the US long term savings market is very different to the UK.

My view on that one is they haven't done their homework.

Actually, if you look at it, there are differences - you know, the average amount of client assets is higher for example - but when you look at it, the names of the actors may be different but the roles are essentially the same.

An IFA over here is an RIA over there, a broker-dealer over there looks incredibly like a network over here, and so on.

You can map it out.

There are subtle differences but one of the key things in all of this is what people want from their financial adviser or their financial planner is the same all over the world.

At the end of the day, what people want to do is protect their families and plan for their future.

And there are only so many variations on the tax breaks.

Again, if you look at the products, you either pay tax on the way in or it's tax exempt.

It's either taxed as it rolls up or not, or you pay tax on the way out.

And the overwhelming majority of financial products are a variation on that theme.

The Key Focus For FS

Paul: I was going to ask a question which is almost impossible to answer, but if you could just think of one thing the financial services sector needs to do in the next 12 months to help its customers, what would it be?

Is there anything you can lay your hands on?

Ian: Genuinely put yourselves in the customer's shoes.

We have the good fortune to work in an industry which is well remunerated.

You know, people work hard and people are passionate.

I'm not going to say we've got rid of all the cowboys in our industry, but over the last 30 years of being regulated, it's changed.

For the really bad people - there are just easier places to do it where there's less regulatory focus.

And at the same time, one thing I'm seeing, and I find it incredibly refreshing, is we're engaging with a new breed of financial adviser and protection adviser.

They see helping people and protecting families as a vocation.

They are not sales driven in the way that a lot of people were.

They use social media and they're far more direct than people would have been historically.

They will call out what families need to do to protect themselves and how they're not doing that if they choose satellite TV before spending money on life insurance, for example.

It's great to see so many of those young people with passion, but I think the manufacturing side of the industry needs to learn that producing products for that younger generation and their customers is not a matter of delivering what their parents want over a mobile device.

I see that far too often.

People have to stop living in an echo chamber where they're agreeing with themselves and get out and understand what it's like, especially as we're heading into really difficult times.

You know, Covid was bad but if you look at what's on the horizon now - it has the potential to be really uncomfortable.

Cybersecurity Is Key

Paul: This podcast is airing in October, and I was made aware by you guys that's Cyber Security Month in the US.

Tell us a little bit about the FTRC initiative and what you're doing around that topic, because I'm glad that it seems to be something that is flowing to the top of the pile a bit more these days.

Ian: We're actually going to have our own Cyber Security Month in the UK in October.

We've just written a best practice guide on cyber security for the Personal Finance Society and the Chartered Insurance Institute.

I'll be honest, it's the top thing that keeps me awake at night.

As a business, what one has to recognise is that there's one group of people that never scrimp on their technology - cyber criminals.

They have the absolute best toys and they'll spend money on them because they get it back, sadly, many times over.

You know, the ransomware, identity substitution, fraud - the list is endless.

There is a phrase in the cyber security world: there are two types of businesses, those that know they've been hacked, and the rest.

You just constantly have to be on your toes, updating what you're doing, so in October we'll be putting out a series of articles on advisersoftware.com looking at different elements of how firms can help protect themselves and their clients.

Going back to the question about differences between US and UK - I do see US advisers being rather more focused on this, but I think UK advisers are catching up.

No one wants to have to ring a client and say, "look I'm terribly sorry, your account has been hacked, your money's gone."

The extent of Friday afternoon fraud in the legal industry is well known.

You know - on the completion of a property transaction, somehow the criminals will send an email to the client and say, "oh by the way, slight change internally, send the money to this account not that account".

The amount of that that goes on, in the legal sector, and yet we never hear about it in the savings and investment world (or if we do, we hear about it in dark corners and no one talks about it publicly).

I have a lot more people tell me about how they've stopped cyber fraud in our industry.

Never have anyone actually saying it happened.

I mean, occasionally you'll be having an off the record conversation with a platform and yeah they'll cite cases.

These organisations put good processes in place, which may be inconvenient, but which is more inconvenient - having to, for example, on certain changes of information (bank account, address) confirm that you've actually spoken to a client, or telling your client you've lost their money?

Why Security Matters

Ian: One example I'm aware of was where an adviser was asked if they actually had spoken to client, they confirmed they had, and the platform was very vigilant and went back to the adviser and said, "are you really sure you've done this because we're seeing things that have got all the classic hallmarks of a hack?"

At that point, the adviser fessed up - "oh actually I didn't really."

I think we need to be upfront and direct with clients and convey to them that sometimes we may have to do things in ways that are less than ideally convenient, but we do that to protect their money.

There's nothing more important.

So yeah, you cannot be over-vigilant.

What we're trying to do is inform people.

Within a business, everybody needs to be involved with cyber security - every last person.

But you've also got to have somebody that takes ownership.

You can't have a situation where people think, "oh they're responsible for that, not me."

Someone's gotta own it.

And the last thing to lay on top of that is cyber security isn't just digital, it's physical.

Things like, for example, are you operating a clean desk policy?

There are two stories that spring to mind on that one.

I talked to an adviser who went into their office one evening and they found their cleaner reading some files.

Said cleaner was not someone for which English was their first language.

The excuse given was that they were trying to improve their English (while having a good read through a client fact find).

And remember, a client fact find contains everything you need to commit wholesale identity substitution fraud.

Who's interested in going after the banks when you can go after what someone's got on their platform?

The other example - I'm not going to say which life office it was but there was one CEO who, one evening, went round his entire building picking up every laptop that had been left on the desk.

Staff got in in the morning and found a little note saying from the CEO saying "I found your laptop on your desk, wanted to put it away for safekeeping. Come and collect it from me in my office."

These are things, let's face it, we probably don't think about as much as we should do.

You and I, last night, were at the National Cyber Security Awards and there was no password on the Wi-Fi, which beggars belief.

It was full of police and people from the MOD and GCHQ.

Looking Back For Insight

Paul: Just drawing back to you, Ian, what would be the one piece of advice that you would give to your younger self?

Ian: Don't sweat the things you can't change.

Focus on the things that you can.

I think if you're dedicated, if you're passionate, you can change a lot.

But recognise what the stuff is that you can't change and don't waste energy in that way.

Tell Us Your Secrets...

Paul: And finally, if I may, are you willing to tell us something that not everyone will know about you (keep it clean)?

Ian: I'm a bit of a geek when it comes to transport.

I'm fascinated by the way cities evolve.

There are some great tours that the London Transport Museum do of both disused tube stations and disused bits of tube stations, and it can be quite fascinating wandering around tunnels that people have not regularly used on a daily basis for 30-40 years.

So yeah I'm a little bit of a geek about going around derelict tube stations and the like.

Closing Remarks

Paul: The other one I was given a little sneaky bit of information about is a particular your favourite West End show. I think was someone mentioned was something  about..

Ian: My favourite West End show is Rent. I've seen it on three continents. Yeah, whenever there is a production around, I'll find my way there (even if it's across the Atlantic).

Paul: You're a lucky man to be able to do it. Ian, thanks so much, I really really appreciate it.

Ian: Paul, it's been a pleasure. Cheers mate.