Profile: Ken Davy: If I had my time again, I wouldn’t create the network concept

If SimplyBiz chairman Ken Davy had not swapped a career in professional photography for financial services just over 50 years ago, there might well have been no IFA networks. Let us dwell on the implications of that. No Openwork, Quilter, Tenet and the like. No arguments between advisers about St James’s Place, as even that would probably not exist.

It is a strange thought – but not as unnerving as the revelation that Davy, who pioneered the advice network when he founded DBS in 1983, would not do it again with the benefit of hindsight. “If I had my time again, I wouldn’t create the network concept,” he says.

The advice network was devised by Davy as a way of enabling appointed representatives to advise clients within a framework of compliance oversight and he acknowledges that he has “benefited significantly” over the years from it.

“However, what I naively assumed was that every adviser would have the same integrity and care for their clients as I always have,” he says. “Of course, what happened — and to a certain extent still happens but much less so — is that it enabled a small number of reckless advisers and an even smaller number of criminal advisers to do ill for clients, then hide under the umbrella of a network. But that problem wasn’t unique to networks.”

When Davy talks about it being difficult for DBS to know what kind of advice was being given at 10pm in the evening around different parts of the UK, it gives some insight into the mammoth task the FCA faces day in, day out, particularly now, in the 24/7 digital age.

Davy points out that, back in the day, advisers could be monitored afterwards and an on-site compliance visit could be arranged. But there are always firms that totally disregard the rules.

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“I remember that, relatively recently, the regulator had an issue with a firm doing defined benefit pension transfers,” he says. “It visited the firm and the firm voluntarily agreed not to do any more transfers, but then blatantly ignored the instructions of the regulator and continued to give advice on them — recklessly at the very least. It did over 70 transfers when it shouldn’t have been doing any.”

All of that said, we are doing a great disservice to Davy and to today’s advice networks if we throw the baby out with the bathwater and ignore the positives.

“The vast majority of advisers who are network members do a good job for their clients. You only have to look at the tiny number of complaints against advisers,” says Davy.

Data released by the Financial Ombudsman Service last summer showed that in 2019/20, there were 1,635 complaints against advisers, while the uphold rate for successful claims was 35 per cent.

“The likelihood of an adviser having a complaint against them upheld is very low. And that is why it is grotesquely unfair that financial advisers who have the least chance of having an impact on the Financial Services Compensation Scheme coffers are the ones who pick up the tab,” says Davy.

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Past and future

Interviews with Davy always reflect on his past — how he left school at 15 with no academic qualifications; how he built a successful photography business before becoming an IFA; the foundation of the DBS network which made his name; how he launched compliance and support services firm SimplyBiz in 2002, just a year after selling DBS to Misys. That past is well charted territory — but what next?

What we do know is that Davy is stepping down as SimplyBiz chairman later this year to swap jobs with deputy chairman Gary Hughes. But his plans further down the line may not be common knowledge. When he reaches the age of 100, Davy intends to start a new business.

“I don’t know what it will be; I’ll think of it at the time,” he says. “I’ve nothing to prove. I’ve helped thousands of businesses operate and serve their clients more efficiently, and I get great satisfaction from that.”

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Davy has experienced the odd crisis or two during his long career in financial services. He witnessed the UK’s worst stockmarket crash between 1972 and 1974, when the markets fell by 75 per cent and the top rate of tax on investment income reached 98 per cent. But he notes how quickly people forget such things.

Perhaps fewer people will have forgotten the relatively recent financial crisis of 2008. Davy regards this as the worst financial crisis because it caused people to question whether their money was safe in the bank. So how does the current crisis, the Covid-19 pandemic, compare?

Change in behaviour

“It has been incredibly profound, more so than anything else I’ve been through before. The difference is in the way it is has created behavioural change in society as a whole,” says Davy. “I’m part of a social club in Huddersfield where people are mostly older than 50 or 60. Many of us are not technologically literate and yet within a week we were talking to each other on Zoom. Nothing can replace face-to-face interaction, but technology gets us 80 or 90 per cent down the road.”

As awful as the pandemic is, the change it has brought about does signal hope for a brighter future. “It has meant it is now the norm to communicate via technology. And if we get back to some kind of normality by Easter, we will need to consider the impact of this in the long term,” says Davy.

He estimates that the average adviser looks after around 150-200 clients. Through technology, Davy believes that number could easily double or increase even further.