DBS Management runs a nationwide network of nearly 1,000 separate firms of advisers from its base in Huddersfield. Its members trade under their own names, many of the 1,300 advisers working from home - one reason for DBS's negligible profile.
The group's total commission income has grown to about pounds 35m a year. DBS itself made pre-tax profits of nearly pounds 1.5m in the year to March 1992, and another pounds 1m in the first half of the financial year just ended. The company's shares can be traded under the Stock Exchange's matched bargain rule and Ken Davy, its chairman, is considering a full flotation eventually.
The rapid growth of DBS over the past five years is part of a steady consolidation in the fragmented market for financial advice.
According to the Office of Fair Trading, independent financial advisers account for about 30 per cent of life insurance and pension sales, which last year amounted to pounds 3bn of regular premiums and pounds 13.5bn of lump-sum investments. But the commission on these sums is shared between numerous banks, building societies, accountants and solicitors, as well as the 6,100 mostly small firms of life insurance specialists regulated by Fimbra.
However, about 12 per cent of the 20,700 individual advisers registered with Fimbra now belong to just three networks - DBS, Countrywide and Burns-Anderson. With numerous smaller, regional organisations, networks cover about 25 per cent of all firms offering independent advice.
DBS and the others rarely own the member firms that deal with customers. But they can still use their size to secure better commission terms from the life insurance companies.
They also use their greater resources and actuarial help to draw up the shortlists of good companies with which member firms must place most of their business. They offer training and business development advice.
And, crucially, they will also make sure the firms meet the requirements of financial services regulation. This help with the compliance burden has made networks attractive to Fimbra's many small members, 95 per cent of which employ six advisers or fewer.
Burns-Anderson, with 140 firms and 419 advisers, is the best-known of the networks, largely due to the past involvement of Sir John Harvey-Jones, the former ICI boss with the collection of kipper ties. Burns-Anderson was part of a listed company of the same name until last year, when the group fell into receivership, brought down by its acquisition of recruitment agencies and the accompanying earn-out deals. The financial advice arm survives, having been bought out of receivership by member firms.
Countrywide, which has 330 firms with 761 advisers, has the strongest financial backing of the three big networks. Since last year it has been wholly-owned by Misys, the listed computer services company.
Countrywide has more in common with Burns-Anderson than with DBS, its members being typically larger firms, the vast majority of them working from commercial premises. Countrywide has considered buying Burns- Anderson, but talks broke down.
The growth of DBS was not attended by the fanfares and publicity that greeted Burns-Anderson in 1987. Ken Davy set up DBS in 1979 as Director Benefit Services, advising small firms on pension schemes.
Mr Davy says he saw the way the market would move in 1983, as Professor Jim Gower completed the report that was the basis for the present system of investor protection. He created an initial network of a dozen firms, which quickly grew to about 20 members. Rapid expansion took off after 1986, when DBS became a plc.
The company's income comes from its share of its member firms' commission. Charging a minimum of pounds 175 a quarter, DBS takes 12.5 per cent of commission earned by members, though this falls to 7 and eventually 4 per cent for the bigger producers.
DBS has concentrated on small outfits, mostly no larger than three- or four-man firms. Mr Davy does not believe it is possible for large firms properly to control their salespeople.
The group has had its share of bad apples. A handful of firms have had their authorisation for investment business suspended by Fimbra. DBS is also being sued for about pounds 300,000 by 27 clients who suffered after they remortgaged their homes, on the advice of a DBS member, to release money for investment. Further developments on this case are expected shortly.
Mr Davy says most of DBS's suspended firms were identified by its own procedures rather than by Fimbra. The company carries out 100- 150 compliance visits a month, far more than Fimbra would be able to make. Mr Davy says his company has a good relationship with its regulator.
Jim Gaskin, Fimbra's membership and enforcement director, agrees that the close working relationship with DBS (and other networks) works very well. However, he points out that Fimbra receives information from the Bank of England, the Department of Trade and Industry and other sources that is not available to private companies seeking to keep out the crooks.
DBS does have its own small financial advice business in Sheffield, which it uses to try out new ideas.
If the networks are to take on the big boys of the financial services world they know they must move towards establishing their own brands. But since they do not own their members, they must proceed cautiously.
Alastair Whitehead, Countrywide's marketing director, says his group's members are increasingly keen to promote their association with Countrywide through use of its logo and consistency of promotional literature.
Mr Davy says he thinks a lot about introducing a common branding for DBS members, to help raise the organisation's profile. But he remains wary. 'Our members are providing a very direct and personal service in each locality,' he says. 'In the long term, one can see where branding of one sort or another would be beneficial. But it's something for the future.'
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