ADVISER KNOWHOW EPISODE 57 5 FEBRUARY 2014 HOW TO BUILD UP A NEW ADVICE FIRM

HOW TO BUILD UP A NEWADVICE FIRM

ADVISER KNOWHOW THE WEEKLY TV PROGRAMME FOR ADVISERS BY ADVISERS

Building up a new advice firm in an increasingly competitive sector is a heavy burden to take on but can end up being a rewarding one. Challenges that specifically affect the advice sector are how to find clients, and how to tackle funding. Firms also often outsource parts of the process, like marketing or paraplanning to help ease into launching the business.

1 How to get clients

2 How much investment is necessary?

3 Outsourcing

KEY POINTS

ADVISER KNOWHOW EPISODE 57 5 FEBRUARY 2014 HOW TO BUILD UP A NEW ADVICE FIRM

KEY POINTS

KEY POINTS FOR THIS WEEK’S ADVISER KNOWHOW FEATURING AN INTERVIEW WITH MARK STOKES, MANAGING DIRECTOR OF LEWIS CHAMBERS.

HOW TO GET CLIENTS

¬ Do effective due diligence if you are looking to buy a client bank

¬ Make sure that the previous firm’s culture fits into yours

¬ You will have to ‘kiss a lot of frogs’

¬ Bring clients through the door by making your firm known to professional introducers or set up referral schemes with local accountants, solicitors or mortgage advisers

¬ Network and market in your local community to get word of mouth going

OUTSOURCING

¬ Marketing and public relations: to create a brand that will help the firm stand out or help build outside relations

¬ Suitability reports: expensive but time saving

¬ Compliance

¬ Investment

HOW MUCH INVESTMENT IS NECESSARY?

¬ Extremely time consuming

¬ Be willing to tighten your own purse strings

¬ One example: 60 to 70 hours a week and £35,000 of own money

1 3

2

ADVISER KNOWHOW EPISODE 57 5 FEBRUARY 2014 HOW TO BUILD UP A NEW ADVICE FIRM

PROGRAMME TRANSCRIPT

“Walking out on a job which is well paid to be in a situation where you didn’t pay yourself for nearly 14 or 15 months is a frightening experience.”

Jillian Thomas, Future Life Wealth Management

Michelle Abrego, New Model Adviser®

This week we’ll be chatting about how to start a new advice business. Developing a business idea into a profitable reality can be a challenge for any business and advice terms are no exception. Today, we’ll touch on specific obstacles including funding, how to structure a plan and finding a client base. Let’s start by taking a look at what other financial advisers have to share about launching their advice firms.

When starting up, did you buy client banks or did you start from scratch?

Jillian Thomas, Future Life Wealth ManagementI bought some clients with me, but I didn’t buy a client bank, I wanted to organically grow and I wanted quality in the business. Now, my concern by buying a client bank was that I was in a situation where I didn’t know the quality of that.

Robert Caplan, First WealthI think the main way in which we’ve gone about getting new clients has been through professional introducers so, targeting accountants, solicitors, mortgage advisors, other companies who can introduce their client banks to us has been the main way in which we’ve gone about it.

Brian Benson, Crown Wealth ManagementWe made a conscious decision not to buy any client banks, and we’ve just

grown through organic growth.

Nicola Downs, Trentham InvestI started from scratch, I didn’t buy any client banks, I didn’t have any advisers that came to me, I started from scratch to get to know the local community and the people around there.

How much investment did you have to put in (both money and time)?

Jillian Thomas, Future Life Wealth ManagementIn the first couple of years I was probably touching 60 to 70 hours a week, I personally invested over £35,000 of my own money into the business to get it up and running. We had no debt in there whatsoever and walking out on a job which is well paid to be in a situation where you didn’t pay yourself for nearly 14 or 15 months is a frightening experience.

Robert Caplan, First WealthWe’ve been fortunate in that we haven’t had to put in too much investment in terms of money, in terms of time, significant.

Nicola Downs, Trentham InvestI put my own money in because it really focuses the mind and if you believe in that, then you should, I think, put your own money in.

Did you initially outsource any parts of the business?

Jillian Thomas, Future Life Wealth ManagementI outsourced marketing and PR and very quickly identified that to create a brand was actually very, very important because we were the new kids on the block, we had to be in the mix very quickly.

Robert Caplan, First WealthWe outsourced a few different areas I suppose originally it was to do with the size of the business and the constraints that we had within the business, that we weren’t able to do everything ourselves. So, one of the examples of that was suitability reports. So, we used to outsource that, we found it to be quite expensive, albeit that it did save us a lot of time, but as the company has grown, we’ve managed to bring most of the things back in house.

Brian Benson, Crown Wealth ManagementWhen we started the business, we made a conscious decision to outsource as much as we can, we outsourced our compliance to SimplyBiz, we outsourced our investment process to Cormorant Capital Strategies and we also used a marketing company to help us prepare seminars to attract professional connections.

Michelle Abrego, New Model Adviser®

Sitting with me now is Mark Stokes of Lewis Chambers to talk a bit more about how you launched your first advice firm.

ADVISER KNOWHOW EPISODE 57 5 FEBRUARY 2014 HOW TO BUILD UP A NEW ADVICE FIRM

So, Mark what were the drivers in launching your own firm?

Mark Stokes, Lewis ChambersWell, we’d been working as part of a mortgage brokerage business for an estate agency firm that I co-owned and I have to say, the original motivation was that we’d had a fallout and I decided to take the financial services business and he continued with the estate agency business.

Robert from First Wealth mentioned that it was first a lot of investment of time and Jill actually mentioned it was more she took a pay cut for a bit to make the firm what it is now?

I’ve never taken a pay cut and I’ve got no intention of taking one any time soon. For me, I only want to be in a business that (a) I understand, (b) that’s fun, (c) that adds value and (d) that derives value for me. So, I think there was a huge investment of time and a huge investment of money, but the business has really been running for 25 years now and we are just about to launch another incarnation of it which is Lewis Chambers Wealth Management.

So, in this new incarnation of Lewis Chambers, do you expect it to be more of an investment of time or money since you’ve been through it once?

I think it will be a mixture of both time and money, but we are also quite consummate outsourcers.

What type of outsourcing do you think you’ll be using initially?

We outsource our compliance, a large proportion of our investment, philosophy using Dimensional. We’re also looking very closely at a new marketing strategy which we will again, outsource and to be honest, we’re also hoping to create a peer to peer administration business that will allow us to outsource to our own admin firm, but potentially share the costs and the synergy savings with other firms that have a like-minded strategy.

Most of the advisers referenced to were not wanting to buy a client bank because they were scared of the cost of it, and then also any liability that might be hidden?

They are very right, I mean, you have to kiss a lot of frogs. We’ve looked at 20 firms over the last 10 years, but we’ve only bought three. If you do your due diligence properly then they are a massive opportunity for growing your business quickly. So, for example, Hallam Smith, which we bought on the market nearly three years ago, we had £30 million under management, that’s now £40 million, it was originally at 50 basis points, that’s now 100. So, we’ve taken their annual recurring trail income from £150,000 to in excess of £400,000 ongoing adviser charging. That’s quite considerable growth and it’s difficult to do that organically.

Michelle Abrego, New Model Adviser®

Thank you very much for coming in Mark.

You’re welcome Michelle, thank you for having me.

You can download the cribsheet for this week’s edition at citywire.co.uk/adviserknowhow or bnymelonam.co.uk/adviserknowhow or you can find the link and add your views @adviserknowhow on Twitter

“I put my own money in because it really focuses the mind.”

Nicola Downs, Trentham Invest

ADVISER KNOWHOW EPISODE 57 5 FEBRUARY 2014 HOW TO BUILD UP A NEW ADVICE FIRM

Produced in association with BNY Mellon, Adviser KnowHow is a new groundbreaking programme, created specifically to help you and your business. Every week we speak directly to your peers in the industry to understand how they have addressed some of the key issues that advisers face every day of their working lives.

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ADVISER KNOWHOW EPISODE 57 5 FEBRUARY 2014 HOW TO BUILD UP A NEW ADVICE FIRM

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