When Steve Patterson set up Intelligent Pensions in Glasgow in 1997, he had spotted the opportunity to create a niche business around the demographic goldmine that is retirement planning.

When Steve Patterson set up Intelligent Pensions in Glasgow in 1997, he had spotted the opportunity to create a niche business around the demographic goldmine that is retirement planning.

"When we set up we thought we had two or three years at best before others came in," he admits. "But nobody has." Almost all of IP's business comes in referrals from other IFAs.

"Income drawdown at retirement and post-retirement is rightly considered to be quite a complex area of advice ... but something we could not have foreseen at the outset is the number of advisers who give us regular business who are actually qualified to do it themselves."

The explosion of self-invested personal pensions (Sipps), an ideal vehicle for managing income drawdown, has helped Patterson to treble the number of clients to 1500 and double profits to £500,000 in four years. He now has a four-strong office in London, and believes he can grow the business from £350m under management to £1bn, ready for a market flotation in three to five years.

The dedicated financial modelling software and systems on which the business was founded are still, he says, "pretty unique", and they are now underpinning a brand new business, CFG Wealth Management, which he launched last month.

The spotlight returned to income drawdown two years ago when the government performed a spectacular u-turn over the taxation of pension funds not converted into an annuity by age 75. According to the 2006 Finance Act, such funds should be treated as part of an estate and taxed at the 40% inheritance tax rate.

Patterson recalls: "Almost before the ink was dry, Mr Ed Balls said we are going to take further action because this change in legislation was only intended for certain religious groups such as the Plymouth Brethren - this was ludicrous." The effective 82% tax rate imposed was "a sledgehammer to crack a nut" and might well invite a legal challenge in the future, Patterson says.

The effect, he adds, has been to prompt some disgruntled investors to "aggressively withdraw as much as possible" from their fund, rather than give it to insurers or the Treasury. "I think it has created a distortion in the market - people are trying to get their money out of pensions when in many cases they shouldn't. The government's mishandling of the annuity issue has prompted this reaction in a significant minority."

It has been a long and patient journey for Patterson, who set up his advisory business Carruth Financial Group in 1984 at the age of 27.

It was Tory chancellor Kenneth Clarke's 1995 budget, which created income drawdown as a 10-year alternative to buying an annuity at 65, that sparked the idea of raising funds for a new specialist venture.

Patterson approached 40 existing clients for backing, half of whom put up £500,000 in ordinary and preference shares. They were prepared to wait nine years for the business to redeem the preference shares, and they still own 55% of the equity with Patterson holding the balance. He says now: "That turned out to be quite important because it took a lot longer to get to critical mass than we thought."

The structure had tax advantages for the backers, and gave Patterson time to build his balance sheet. "That has allowed us to move the business forward, and we are now making substantial profits and paying dividends."

At a time when the Financial Services Authority is trying to create clear blue water between truly independent advisers and sales agents, many of Scotland's leading IFAs are being snapped up by acquisitive southern groups.

Patterson's solely fee-based business now employing 26 looks to be on solid ground. "Making acquisitions is not an option, but we are probably not a particularly good target for any other IFA," he says.

He believes the FSA has been wise to take a step back from its original proposal of limiting the "independent adviser" marque to those with certain qualifications. "That would have constrained the supply of independent advice to the market at a lower level.

"Our view is that simply having qualifications doesn't actually make you a good adviser."

Nevertheless, IP has put its top advisers through the external ISO22222 standard, which he says compares favourably with the "certified" or "chartered" financial planner status awarded by the industry's rival professional institutes.

Patterson supports the FSA's core reform of "customer agreed remuneration" replacing commission payments, but warns that creating a category of "non-advised" product sales could open up a legal minefield over what is and is not advice.

In the Sipps market, the FSA is currently investigating whether the boom in "advised" Sipps has sucked in investors who are paying high charges for a souped-up pension they do not need.

Patterson observes that it was Gordon Brown's short-lived love affair with Sipps and residential property that attracted so much attention to the product. "On the back of that a lot of people have been attracted to Sipps, but in many instances it may be that the extra facilities available are not actually needed."

He welcomes the competition now being created in the market as fund managers jostle for places on popular Sipps platforms, but says performance will always be the big differentiator.

The new wealth management offshoot is founded on the complexities of inheritance tax, notwithstanding the government's politically-pressured easing of the rules last autumn on transferring the nil-rate band threshold between spouses.

Patterson says: "In spite of the credit crunch there is still an enormous amount of equity wealth in residential property - the growth of property value over the past 20 years is far greater than the recent downturn, and a lot of couples are still going to get caught."

Launching into London and the south-east is the key to future growth, he says. "The downturn in the markets has an impact on slowing up business, but as we come through this period we see the south-east accelerating quite quickly."

The new advisers on the ground need 18 months to two years to reach full fee-earning power, but Patterson is targeting a doubling of profit to £1m over three years, and says: "Ultimately our intention is to go for an AIM listing. Timing is not right now, obviously, we would want to catch the upturn and then look to show at least three years' growth in profits."