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What does it take to build a company like Selectapension?

ABR editor Rob Kingsbury talked to Andy McCabe, MD and chairman of SelectaPension, about ‘the 12 years of hard slog’ needed to get to the company to the position it is in now.

What does it take to set up a company like Selectapension? “Money and lots of it,” says Andy McCabe, MD and chairman, who founded the company in 2004.

And finding enough people with the requisite skills sets, knowledge and experience to provide the high level of service and support needed to run the retirement planning system, he adds.

The other thing you need is absolute conviction you will succeed. This wasn’t a development by a company with deep pockets. McCabe quit his salaried job at Legal and General, mortgaged his house and borrowed from the bank to set up Selectapension with a former colleague.

“It took a year to build the system and that ate up our entire budget,” McCabe says. To continue meant going out to the market and borrowing “a lot of money” from a private investor. However, that has been fully repaid and, following a management buy-out in July 2016, the company is now wholly in the hands of the founders again.

Which is good news and immaculate timing as Selectapension has been benefiting significantly from the changes brought in by the pensions freedoms, which has seen use of the service and new business rise.

“But it’s been 12 years of hard slog,” McCabe points out. “It took six years until we started to cover our costs and it wasn’t until 2015 that we fully repaid all our debt. It’s cost millions of pounds to build, support and maintain the system but we are through the hard times and we now have a fantastic system that is paying us dividends.”

What McCabe saw the market needed in 2004 was a means for financial advisers to cost-effectively research the entire market when creating retirement planning solutions for their clients’ individual circumstances.

“It had to have a competitive edge because there were other systems doing similar things out there at the time. That meant looking at not just the comparison system but also the service and the level of support from people with the requisite pensions knowledge and communication skills to deliver what advisers would need when using the service,” McCabe says. Another challenge given that the company is based in the relatively obscure town of Crowborough in East Sussex.

Starting with calculators around money purchase and final salary arrangements for transfer analysis, over the years the company has added a retirement planning tool, followed by a drawdown tool which allows advisers to compare drawdown products with personal pension contracts.

Then in 2010, the company went a stage further and added the Asset Reviewer, which allows advisers to compare new and existing investment products.

In addition the company offers fund research and QROPS tools.

“We are continuing to build tools as we speak,” McCabe says.

Pensions transfers

In 2015 Selectapension launched its Bureau Service, predominantly to provide analysis and advice on occupational money purchase and defined benefit transfers.

This service enables advisers to outsource the work to Selectapension, either for the suitability report writing or a complete financial advice service, where Selectapension takes responsibility for the advice given.

The benefit for the adviser is that they are not referring their client to a rival firm for this work, with the risk that the client then jumps ship.

This side of the business has grown exponentially McCabe says. “We started it with four people and we now have 16. We have dealt with well over 900 cases. It’s gone crazy.”

He believes the demand will continue to grow ever bigger. “Pensions freedoms have given people the flexibility they didn’t have before and drawdown isn’t as big as people thought it would be at this stage,” he says.

From case studies, McCabe says, “it is clear to see that people are viewing their pensions in a totally different way. They are using them to pay off debts, for example.

“The other issues are the new death benefits and the ability to pass on their pensions to their beneficiaries in a tax friendly way, and also the growing number of underfunded DB schemes.

“People are scared that should their scheme go into the Pension Protection Fund (PPF) they will be left with nothing. British Home Stores has been a wake up call for a lot of people to the fact that there are no guarantees and they need to make a decision about what they want to do with their pension.

“There are thousands of pensions schemes out there and I think we’ll see a lot more activity,” McCabe adds.

Pensions Monster

The most recent development for Selectapension was the launch in September 2016 of its Pension Monster website. This is designed to open people’s eyes to the need for proper pension and retirement planning. Some two years in the making from conception to release, while Pensions Monster is aimed at putting Selectapension firmly on the consumer map it does so as a channel that, McCabe says, is designed to drive business the way of financial advisers.

It has been made available to the company’s 5,000 users and is, if you like, Selectapension’s robo-guidance platform, allowing consumers to assess their retirement position and options but channeling them to seek advice and transact through a financial adviser. “It’s intended to help the consumer and the IFA,” McCabe says.

How does Selectapension benefit advisers?

The fundamental principle for the system was its ability to save the adviser time in their business, McCabe says. For example, I can put a client on the system today and it might tell the adviser the client is better staying where they are rather than transfer. But in a year’s time the transfer value may be completely different. The information is stored and all the adviser has to do in this example is rekey the transfer or fund value to see whether the client should stay where they are, move provider, or just change the funds within the product.

“The beauty of system is that it is easy to use and time efficient.”

McCabe reiterates how important is the service and support side of running the business to the company’s success. In particular, having knowledgeable, experienced technical people on board.

“We all think we know everything about pensions but we don’t,” he says. “The industry has changed a lot of the last 20-30 years and there are pensions with all sorts of nuances developed over the years. Some of those pensions are still out there, so you need people with knowledge across all sorts of pensions. Then, when someone rings in with a question you can help them. Even advisers who have a good handle on the market occasionally want something double-checked, he adds.

“There are 50 people in this organisation now and we have five G60 people within the business, so if one person doesn’t know the answer straight away, another one will. That’s a major benefit for financial advisers and paraplanners.”

In terms of the system, McCabe says what has been key since the beginning is to make the user journey as simple and intuitive as possible. “We’re always looking at our software and upgrading it to add new features to the system, to make everything easier from a user perspective.

“There are thousands of funds in the market and for someone to be able to filter down to find the ones with the lowest AMC and so on, you want people to be able to do that in easy steps.”

Knowing the market

A business like Selectapension also has to be fully aware of not just what its customers want but what is happening in the industry and what technology can be brought in to benefit the system and service.

“We have people like Peter Bradshaw, with a lot of experience of the market going out and talking to providers, talking to the networks and advisers, as well as going out on roadshows.

“Over 12 years we’ve gained a lot of knowledge about what our market wants.”

What a business has to be wary of, McCabe points out, is focusing too much on new business at the expense of its loyal clients. “It’s not just about getting new customers, although we are, it’s about looking after the ones you have. Which is why when we go out and about or people ring us up, we’re listening to what they are saying about the system and the new things they would like to see introduced. That feedback is invaluable.”

A key development for the company is its integrations with back-office systems. “We are doing as many integrations as we can because what advisers, paraplanners and administrators don’t want to do as a user of any system is to key in the information into one system, get the results from that then have to key in the information all over again into the next system. That’s how mistakes are made and problems occur. If you are using Selectapension, as far as possible we want it to be seamless.

“So you would key in your information into Selectapension, and it would then produce the quote and application, which could be stored straight into a back-office system without any rekeying at any stage. That’s our optimum scenario that we are working towards.”

To this end, McCabe says the company has been actively involved with Origo, the not-for-profit Fintech company, helping to formulate and build the Integration Hub (recently announced as live) that will allow us to link in to all the other providers and pass all that data seamlessly between us. To get everyone on board could be two years down the line but in the meantime those of us that have been involved are going to benefit, as will our users.

“In those Origo meetings you have 20+ other providers in the room all looking to do the same thing. That’s all for the IFA, not the providers. Integrations are not five-minute jobs, neither are they cheap to do. If you had to integrate with each of the 20 providers by the time you got to the end you’d be 10 years down the line. Ultimately our goal is to have the integration and to be able to provide everything in a nice clean easy-to-use package.

What goes on behind the scenes is a lot of planning in order to find solutions to the obstacles and hurdles that are in the market. ”

After 12 years, McCabe feels the company is in a good place to develop and grow. “We have over 5,000 users and new business is growing. The management buy-out and our recent move to larger premises are the start of a new direction and new momentum for the business. There’s money in the bank that we can use to develop the system and the service, taking the end-user experience forward. And Pensions Monster is bringing a new dimension to the company and added value to our users. I couldn’t be happier.”

Visit the Selectapension website






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