Mercer + Jelf: Planning for the future

Grant Hughes And Richard Wilson, photographed at Mercer, Tower Place, London, August 23, 2016. This image is supplied for ONE TIME use in Corporate Adviser Magazine ONLY. Syndication or transfer to other publications is not permitted.

A three-pronged strategy for expanding financial planning operations – through acquisition, organically and via technology – is the way to tackle the UK’s chronic retirement funding and knowledge gap. Mercer Jelf’s Richard Wilson and Grant Hughes tell John Greenwood how they intend to get there

Just a few years ago many EBCs’ approach to retirement planning was a select face-to-face advice proposition for those with big enough pots to merit it and an approved annuity supermarket bolted on for the rest. Today, pension freedoms, the Retail Distribution Review and exponentially bigger DC pots mean consultancies are expanding their expertise in the financial advice space.

Boasting a direct relationship with more than a million employees, Mercer’s response to the shifting sands of the workplace pensions market functions on three fronts: buying in adviser expertise in the shape of Jelf Financial Planning; expanding organically through the launch of an academy and potentially even importing Australian advisers; and developing robo capabilities to deliver advice and guidance.

Mercer regards as a priority area the trend of governments, both in the UK and overseas, passing responsibility for retirement from the state to the individual. To meet demand it has created a consumer division, with Richard Wilson as its UK leader.

“Within that consumer division the financial advice segment forms a very important part,” says Wilson, who has been with Mercer for 12 years. “So we have bought Jelf’s financial planning arm, combined it with Mercer’s own advice business and brought in Grant Hughes to head it up.”

Hughes joined the team in June from Barclays Corporate & Employer Solutions, where he led teams of both regulated and non-regulated advisers, and is tasked with overseeing the advice proposition and aligning it with the Harmonise platform.

The new Mercer Jelf Financial Planning business brings together around 20 advisers from the Jelf side and seven from the Mercer team, making the firm one of the largest chartered financial planners in the country. The ‘Jelf’ brand stays – for the moment at least.

“It is important that it stays for now,” says Wilson. “There is a lot of value in the business and the brand. Chris Jelf remains within the business. He is still a hugely productive and successful financial planner; that is what he loves doing. And when you speak to the employees and clients of Jelf, you realise there is a strong affiliation with that brand.”

Wilson says demand from employers was one of the key drivers of the acquisition.

“When we looked at this new direction in 2014 and 2015, we did quite a lot of research with employers and employees. What came back was that, from an employee’s perspective, there is a lot of noise to manage, a lot of confusing and difficult decisions to make, from both a health and a wealth perspective,” says Wilson.

“That noise impacts on individuals’ productivity, creates stress and makes them less protective at work. But the bottom line is employers want to pass more responsibility to employees but they want to be seen to be helping them to make the right decisions in their lives, not just dumping these problems on them and walking away.”

In the post-RDR era it is a lot harder to make money while servicing the mass market, so how can organisations such as Mercer Jelf make this work now given that the market is one they typically shied away from in the past?

Hughes believes that, in the long term, this can be done through technology, with robo inevitably playing a role. At present, Harmonise aggregates the data from other providers, but will we one day see it aggregating actual funds into one pot, even through execution-only transfers or robo advice?

Hughes regards this as a possibility. He says: “I think the sky is the limit when it comes to technology. If you go back to the first time a computer beat Garry Kasparov at chess, it shows you can’t really put a cap on what you can achieve with robo advice. It’s about getting to a point where we are not talking about ‘robo advice or face-to-face advice?’ but a seamless proposition for the client. There was a time when people thought iPads wouldn’t take off. They were proven wrong and I think robo advice will be the same – but it will take a time to get there.

“If we can build the right digital model, there is no reason why we can’t go to advice on that basis, with the right algorithms, programs and structures in that space.

“We shouldn’t be putting a cap on what technology can do. Whether it is execution-only or advice, we should set the bar as high as we can for clients to gain access to what they need.

Obviously if you can make it scalable, it brings down the cost of advice.”

This sort of robo development is some way off for Mercer – 2017 at the earliest – but it is definitely on the agenda, not least because employers expect it.

“There is a responsibility to look after the mass market. We can’t be seen to go in and cherrypick the affluent and wealthy from our clients; we need to help all of our clients’ workforce,” says Wilson.

“So that means we need to think differently about how we deliver advice services. We still expect a small proportion of employees, high earners, to want to go face-to-face, particularly the more complex cases. That service is changing towards more use of video technology; we are already using Skype, Facetime and Zoom capabilities to enable us to have meetings with clients that are just as effective.

“But also, when we look at the chain, we need to make sure all of the workforce is covered. That is why we are developing our Harmonise digital platform. It can deliver a base level of education for making sure that everybody understands the issues they face. It also offers guidance, through modelling capabilities, to help employees make decisions,” says Wilson.

The next big milestone for Mercer Harmonise will be in Q4 this year when it starts using the technology to target those with a pressing need for financial advice. Then next year it will start to roll out robo technology in an as-yet undetermined fashion.

“The technology also helps to identify where people need advice,” says Wilson. “The market today needs individuals to put their hands up and say ‘I need help’. And that relies on them being able to realise that they do need help. But that is not always easy. So what we want to use the digital technology for is to identify those people in danger of, for example, breaching allowances.”

Aggregation is a key part of understanding whether individuals are on the cusp of breaching allowances. Where people have entered the details of products with other providers, employers and schemes, they and Mercer will have a better view of their actual tax position, making the targeting of advice more effective.

“Later we will be developing robo-advice elements. Robo advice can mean a multitude of things but it will be the gradual development of a capability that starts to understand all of an individual’s circumstances and makes the right advice delivery,” says Wilson, who accepts the launch will not happen overnight.

“This robo project will develop over the next few years. In Q4 2016 we will launch a base model, which will be that greater ability to identify the people who need help. We won’t have any robo-advice elements in at that stage. But from there we will start to build out algorithms and competences behind the digital capability. A lot of it will develop across 2017 but it will be a job that is never finished,” he says.

Bigblue, the aggregation solution of one of Mercer’s biggest rivals, Aon, has received a lot of plaudits. So is that a barrier for Harmonise?

Wilson says: “When we talk to our clients the system they tend to compare us with at the moment is Bigblue. That is what we see most often. So Aon got first-mover advantage here. And lots of the wealth management aspects of Harmonise will be comparable with Bigblue.

“Where we are going further and offering more to clients is with the ability to also manage health through the Harmonise platform.”

Mercer is also developing a career element to Harmonise that will help individuals to think about where their career is going and to manage it.

“These areas – health, wealth and career – are the three key parts of people’s lives. So in time Harmonise will be much deeper and much wider than Bigblue,” says Wilson.

Mercer regards Harmonise as a key nudger of behaviour across these three areas, educating and encouraging people to take small steps towards improving their life prospects.

As to Mercer Jelf Financial Planning’s own prospects, Wilson thinks new recruits are needed.

“The financial planning market is one where we do not have a lot of young blood coming in, and that is an issue we need to address. So we will create an academy to bring new people into the industry. This is critical, not just because we need new blood but also because young entrepreneurs may not want to deal with a 50-something grey-haired guy. They may want to engage more with younger people who can relate to them. We have got a responsibility to drive that new blood into the industry

“This new academy won’t necessarily be looking just at graduates; there are plenty of bright kids coming out of school as well. It’s more about an individual’s capability and character than having a university degree. So we will be looking at all possibilities. The first intake will take place in 2017.”

Hughes envisages potential organic growth from Down Under too. He says: “We have got a financial planning building in Australia and we are talking to them about how we can develop our people in the UK, and even looking at whether some of their people may want to move to the UK to try out the UK market. We are exploring a number of options with a view to creating a career development programme for new blood.”