In the pensions advisory space, Isio is very much one of the new kids on the block. But this hasn’t proved to be a brake on its growth ambitions. The firm’s latest financial results showed that revenues were up by a third over the past year, with a similar uptick in earnings.
It is just three years since Isio was spun out of KPMG, after regulators raised concerns about potential conflicts of interest regarding the business’s auditing and advisory divisions.
Starting a new business can be challenging at the best of times, but Isio launched days before the UK economy came to an effective standstill in the first Covid lockdown.
Isio CEO and partner Andrew Coles says this certainly created a few additional, and unforeseen, hurdles. “We were in our new office for just 10 days before we were all working remotely. It was obviously a challenging time for businesses across the sector — and the wider economy. But as a new company we had to effectively build our business from behind a screen.”
Coles puts the success down to the team in place at launch and the talent they have subsequently brought in. “These results are a reflection of the quality of the people we have and the excellent work they do. We have managed to bring some great people into the business.”
Coles cites a number of recent appointments to Isio’s senior team, including Emily McGuire, who joined from Aon, and Ed Wilson from WTW, both of whom have joined the investment advisory team. Alongside this Isio has also recruited Nick Johnson from Clara and Steve Robinson from Scottish Widows. Coles says these particular appointments have been instrumental in helping the firm develop “a new approach to how pension trustees look at transactions with insurance markets”.
It isn’t just senior staff that are being recruited. Over the last year Isio has taken on 144 new employees including 50 graduates at the start of their careers.
In total when Isio first launched it had around 450 people working for it, the vast majority of whom had worked for KPMG — including Coles himself.
Isio is now in the process of acquiring Deloitte’s pension business, and when this completes there will be around 1,000 people on Isio’s payroll – a more than 50 per cent increase in the space of three years.
Coles says the other factor behind Isio’s growth is its “challenger mindset”. How has he managed to create this particularly as he readily admits, he held a KPMG business card for 25 years, and at one point assumed he’d still be carrying one at retirement.
Coles says: “It’s about a different way of thinking, about what we can offer as an independent business, how we can approach things slightly differently. This was something we thought about very carefully before launching Isio — what we wanted to achieve as a standalone business, what our ambitions were.
“We are constantly looking for better ways to do things, whether that’s through digital innovation or investing in newer technology and software. And I think it’s also about developing an entrepreneurial spirit, working closely with clients, understanding their problems, helping them fix them. I think this attitude has really chimed with clients. I think we are building a reputation for being innovative, delivering a more personalised service perhaps. This is helping us grow organically and also win new clients.”
Coles says that when Isio was spun out of KPMG it had three clear ambitions. “The first was to become a whole-of-market business. This wasn’t possible prior to this as we couldn’t advise KPMG audit clients, restricting our reach. But now a number of our clients use KPMG’s auditing services.”
The second ambition he says was to have access to capital to both invest in the business and fund acquisitions. “We have been able to do this through our private equity backers Exponent — the firm behind Trainline and Moonpig.” Alongside the acquisition of Deloitte’s pension business, Isio has bought a number of other companies, including Premier Pensions in January last year. This purchase has also helped Isio deliver on its third main ambition: to diversify the services it offers.
“The acquisition of Premier added an important string to our bow enabling us to offer a broad spectrum of pensions and financial advisory services to both companies and individuals.”
As a result of this acquisition Isio added employee benefits and wealth management services to its core business of pension administration, actuarial consulting and investment advisory services.
With the company now able to offer a broader range of services Coles says this has helped it grow organically, by increasing the business from existing clients. “People might have trusted us to look after their defined benefits pension scheme and are now asking us to look at their DC arrangements, or flexible benefits arrangements. This type of thing is very much built on trust.” He adds that Isio has a high client retention rate, further evidence, he says, that the company is helping clients solve problems and deliver improved services to members.
Is the company looking at future acquisitions? Most definitely says Coles, although he caveats this by pointing out that it has to be right target. “We will continue to look at further acquisitions. We are very choosy about the types of organisations we want to buy. We are not looking at growth for growth’s sake, that’s not our model. It has to be an attractive proposition, and a good fit, in terms of our people, our clients and our investors. We want to find complementary businesses that will being new skills, talent or services to our business.”
And what sort of areas is Isio looking to develop at the moment? Coles says there is definitely a focus on growing the wealth advisory business. This he says is a ‘reasonably-sized business’ generating around £8m to £9m of revenue but he says there is scope for this to expand further.
Looking at the wider industry Coles says that advisory firms need to be flexible to ensure their pension and benefit offering remains relevant in a what is a rapidly changing environment.
As he points out, regulation and technology are evolving — with developments like the pensions dashboard coming in. At the same time clients are looking for benefit solutions that help them meet growing recruitment and retention challenges, while also helping the deliver on diversity and inclusion and ESG requirements.
Coles says he is supportive of the dashboards initiative. “I would say the theory behind it, being able to access all your retirement savings through one route is a brilliant idea which we wholeheartedly support.
“But it is going to be a huge challenge to deliver this. The practical implementation is not straightforward when it comes to the quality of data and consistency of data format. It is a huge undertaking for the industry and one of the reasons why we have seen delays in the delivery of this initiative.”
Coles says Isio is unlikely to develop its own dashboard. But he adds: “I can see us working with industry and technology partners. It isn’t going to be simple to consolidate different pension benefits, when you consider some will go back 30, 40 or 50 years. But the industry has to find a way through this and obviously a way to link in the state benefit too which is an important part of an individual’s overall retirement planning.”
Elsewhere Coles says he see a number of trends affecting the industry at present. “If we look at the defined benefit sector, we see that the vast majority of schemes in the private sector are now closed to accrual. So we are looking at a different approach to risk management that might include insurance transactions and settlements.
“We are also seeing a trend which places much more emphasis on the member experience, and ensuring this is a really good experience. This might include good quality pensions administration, real-time access to employee information or access to guidance at retirement so people can understand the options they have and make the right decisions.”
As Coles points out there will be a lot of technological innovations that will help solve some of these problems.
“When it comes to defined contribution and flexible benefits I think the challenges are around providing more choice for the employee and ensuring they understand and can engage with the benefits offered.
“Different people have different needs, and the same person had different needs at different stages of their life. This needs to be reflected in a rewards and benefits package, so individuals can make the choice that is right for them. I can see there being less prescription in employee benefits offering and more choice, when it comes to a range of products, be it private medical insurance, increased pension contributions, insurance or a higher salary instead.”
Coles says he has seen an increased paternalism, particularly post Covid, with employers looking to provide for staff, particularly in relation to health and wellbeing. “But it’s also about the individual trusting their employer, seeing the workplace as being a good place to access these services, whether it’s products like insurance or elements like financial coaching and wellbeing.”
It isn’t just Covid that is driving this trend he says, but the cost-of-living crisis. “Financial wellbeing is undoubtedly one of our biggest growth areas, whether that’s large scale financial coaching projects, or simply offering cost-of-living seminars that help employees to manage their money better, with practical hints and tips on making their money go further.”
At-retirement help – be it guidance or full advice – is also of growing importance. This is where diversification of service can help Coles says, with services like Isio’s wealth advisory arm. “Not everyone will want to be referred to full advice. For some people all they need is access to real time information to help them make a decision. For others it is financial coaching: information on how things work, what their options are to help them make good decisions. Increasingly we’re seeing pension trustees think it’s a critical part of their role to make sure people have got access to some financial coaching. And the third level of this, and this will typically be the individual’s choice and at their cost, is to move to full advice. Having this referral option is definitely an attractive part of our overall proposition.”
The other seismic change to have occurred in recent years has been the adoption of ESG considerations, particularly in the pensions landscape. Coles says: “This is now a significant issue at trustees meeting and defined contribution governance meetings. I think as a business we are thinking about ESG through two different lenses. There’s the advice we provide and looking at the ESG credentials of any underlying investment in pension schemes. We can help with that and the plethora of regulation that exists when it comes to auditing and measuring this.
“But then there is the second bit – what are we as a business able to do to improve our own carbon footprint and encourage sustainable working practices.
“As an advisory business we tread lightly but there are always things we can do, minimising car mileage for example.” He adds that there has been a marked decrease in flights from Scotland for example and an increase in the numbers using the rail sleeper service.
Despite Isio splitting from KPMG, Coles says the businesses remain “on friendly terms”. “You don’t work for the same organisation for 25 years without making close long-standing friends. And we retain a good business relationship with them too. KPMG have been the advisor on the acquisitions we have made, for example.”
He says he doesn’t foresee other companies in the market having to undergo similar action. “I think the situation KPMG and Deloitte was in was fairly unique in that we had long-term relationships with our pension clients which was becoming inconsistent with potentially being the company’s auditors. I think these are very specific circumstances that mean it was right for Isio to become independent. I don’t see this happening elsewhere although obviously we have had the Competitions Market Authority looking at the fiduciary market and that is perhaps prompting people to ask more questions about inherent conflicts of interest there.”
Coles also expands on where the ‘Isio’ brand comes from. “At the outset we were using a lot of words to try and describe the new business. Three words came up fairly regularly: vision, decision and precision. Ihe letters of Isio are in the middle of each of those – so that’s where it came from.
“We are in a market where a lot of our competitors have been around for a long time — Hymans Robertson for example has recently celebrated its centenary. But I think being a new name can give us an advantage. People want to see what we’re about and what we can do. Hopefully the latest results demonstrate that they like what they see.”