Playing the long game

THE FRIDAY INTERVIEW: MARK BOURKEchief executive, IFG

“PEOPLE WERE ill-served by the industry,” says Mark Bourke of the financial services sector, in which his company is a player.

Now a provider of fee-based financial advice in Britain and Ireland, and trustee corporate services in several other European locations, IFG was founded in Dublin in 1989, before we had ever seen a Celtic Tiger.

The company was listed on the Irish Stock Exchange in 1996, and Bourke joined as financial director in 2000, the same year the company listed in London. He moved into the chief executive’s seat in 2006.

“It was about the manufacturers of products, not the clients,” he says of the madness that overtook his industry, though not IFG during the boom.

“Advisers, or what was put out there as advisers, were simply selling products – property, hedge funds – high commission products. There was nothing about what was appropriate for the individual.

“People have been wiped out by enormously risky products which weren’t understood,” says Bourke of the last years of the Tiger.

Though just 21 years old, IFG comes off as the sage that kept its head when all about it were losing theirs. Iseq-listed financial shares such as Bank of Ireland, Irish Life and Permanent and AIB have all slashed dividends while, in IFG’s interim results this year, Bourke was increasing dividends to €1.35 per share compared to €1.27 per share in the first half of 2009.

Although the company showed a slight fall in pretax profits to €10.5 million, compared with €11 million a year earlier, revenue grew by 16 per cent to €57.4 million and the group reported it had reduced its net debt by more than half to €21 million.

Profits are expected to be “neutral” this year, Bourke says, and profit growth is expected to return in 2011.

Bourke has admitted that, in the first few years of his tenure, IFG had been over-geared but the engineer-turned-tax-adviser got under the bonnet to restructure the group’s portfolio, to deleverage and make things simpler.

“For 20 years, property prices went up,” he says. “To have your asset exposure to a class that was fundamentally illiquid and geographically confined, everything was wrong with it . . . There were tax breaks that I think were absolutely bonkers. They weren’t needed . . . but we all did stupid things.”

By 2008, the Irish property business – which had delivered €5 million in annual profits – “essentially imploded”, leaving 60 per cent of profits coming from corporate advisory and 40 per cent from UK pensions.

While the company’s Irish mortgage broking wing “collapsed” in 2008 and 2009, IFG had already started to turn its ship away from such giddy transactional business. “We had been moving away from that since 2003. We’ve invested about a hundred million in other businesses.”

The company’s One Network of brokers in Ireland still exists but it is now a channel for selling pensions, not mortgages. He says IFG will further streamline by pulling out of the title insurance business. “It all fits together now as a UK and Ireland pensions administration and pensions advisory business. It’s about a longer-term relationship with the client, much more about fees over 20 years, than a single transaction.”

It would seem that IFG’s moment in the sun has come. If property prices were the dinner party “topic du jour” of the last decade, the more prosaic subject of pensions is now on the menu for many.

Though unpalatable to the French, Sarkozy’s decision to raise the minimum retirement age from 60 to 62 lest his pensions system run up annual deficits of €50 billion by 2020, makes sense for Bourke.

“People live longer. Instead of dying between 65 and 70, as you probably did in the 1960s on an actuarial level, 82 and 84 are the respective life expectancies now for men and women,” says Bourke. “It’s inevitable that worklife gets extended. It also makes no sense that someone at 65 has to retire.”

He is less enamoured with our own Government’s plans to tinker with tax relief on pensions in the budget. “If you basically pilfer, if you neglect pensions savings issues, all you are doing is pushing it out. If you’re getting just 20 per cent tax relief on your pension contribution, that’s effectively a loss of liquidity until you’re 65, and then you pay tax on it. As an adviser, I’m going to say to you it’s not really worth it.”

Spending up to three days a week in London, where 60 per cent of the company’s business is done, Bourke speaks from experience. “They did this in the UK and it immediately impacted on savings above a certain level. Advisers stopped advising people to use pensions as a basic investment vehicle. If you don’t encourage people to save for retirement, you end up reaping the rewards of that down the road.”

For a man who makes his money from giving pensions advice, surely any proposal that might curtail pension investment was never going to be welcomed?

“Of course, if people are going to contribute less . . . there’s no doubt it would hit us from a selfish company point of view but I’m not after a slice of the contribution. I’m after advising on the total portfolio and pension is a big part of that.”

In a feverish housing market, many eschewed slow and steady pension contributions in favour of bricks and mortar. Does Bourke find it heartening that, suffering a property hangover, we may be switching our affections from the fast-talking estate agent to the sober-suited pensions adviser?

“‘Heartening’ would be the wrong word, but I think there is a space to be heard if you have a proposition which is effectively honest and sound. As people hit their 40s and 50s, they start thinking ‘My work life is not the interminable drudge I thought it was going to be, it’s actually coming to an end fairly quickly’.”

In relation to pension contributions, Bourke says there is awareness of the need to contribute, but levels of ability to pay are depressed “more so here than in the UK”.

“Across the UK and here, anyone who can pay AVCs [additional voluntary contributions] does . . . People are more aware of their long-term needs. There’s more awareness of job security – even lawyers in firms like Clifford Chance or partners are being walked to the exit – even if it wasn’t you, it gives you a jolt.”

Of the UK pensions climate, he says, “In the past two years, our clients have invested less but that was overlaid by the government’s change to pension rules. Now they are changing them back again, so we think there will be much higher pension contributions in the next 12 months.”

Bourke is not a fan of governmental flip-flopping on pension rules – and for an industry that loves nothing better than a good plan, he’s calling for consistency from the Irish Government’s pension policy.

“The really important thing is consistency, not to move the goal posts.”

With its €42.7 million purchase of pensions company James Hay from Santander in March, IFG is now the largest pensions provider in the UK.

Bourke has his engineer’s hat on again: “We’ve got to take a business that has essentially been sitting in a bank and been ignored and got fat, and we have to unplug it from the bank and restructure it.”

His plan has already seen over 100 jobs cut at James Hay.

But the Mayo man is setting his sights on the next move. “There’s likely to be further consolidation in the pensions market and if you’re the biggest, you’re the ideal partner for someone who wants to get out.”

With IFG predicting 12 per cent market growth in the UK, from where most of its profit now comes, and the company on track to meet its earnings target of 18-20 cent per share, Bourke, unlike many, can look forward to facing his shareholders.

On the Record

Age: 44

Background and family: From Castlebar, Co Mayo, but lives in Dublin with his wife Antoinette and daughter Georgia, who is five.

Career: Graduated with an engineering degree from UCD and, in 1988, was one of just two in the class not to emigrate. Joined PwC where he became a tax partner and moved to California. He returned to Ireland in 2000 as finance director of the IFG Group, became deputy chief executive in 2004 and chief executive in 2006.

Hobbies: "I'm pretty bog standard – golf, watching rugby."

Something you might expect:Works in the UK for two to three days every week, "but I try to avoid the 6.30am Monday flight; everyone looks pretty miserable on those flights".

Something that might surprise:"I spend as much time on Achill Island with my family as I can."