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Adviser Profile: Richard Lord of Bartholomew Hawkins

Adviser Profile: Richard Lord of Bartholomew Hawkins

Richard Lord is moving Bartholomew Hawkins upmarket after a two-year journey that has transformed the business model.

Richard Lord is not a man to shrink from a challenge. As a business owner, he has endured a steeper learning curve than most advisers, taking over Cardiff-based Bartholomew Hawkins just months before the retail distribution review (RDR). Two years on, he is preparing to launch a discretionary fund management business.

Bartholomew Hawkins was set up via a merger between Dino Bartholomew and Leighton Hawkins in 2005. Lord joined in May 2009 and became a director in January 2010.

Lord says when he joined the firm it was ‘an old-school IFA firm; a group of people sharing costs under a limited company structure’. He initially worked with Bartholomew and Hawkins to build up numbers of self-employed advisers.

Then in 2012, he had to react quickly when the founders both decided to leave in the run-up to the RDR. They sold Lord the firm and left him in full control. Lord recruited director Ian Davies in the same year. Davies and his wife Nicola bought 40% of the company, and Lord kept 60%.

Sweeping restructure

Lord and Davies soon realised an employed model would work better for them after the RDR came into force. So in July 2012, Lord kicked off a sweeping restructure of the firm, starting with the removal of four self-employed advisers who had only recently been recruited.

He says it was a ‘committed’ move but was not as brutal as it sounds. ‘One of the advisers was ill and retired; one we tried to retain but they did not want to become employed. Another left anyway and the final one we didn’t want to keep. [We were] trying to do what was right for the business and clients. You have to take hard decisions,’ he says.

It was a sharp turnaround. ‘You strategise with the people you are with at the time,’ says Lord. ‘As you become more experienced, you question whether the model is right. The change of heart was probably from inexperience at the outset through to understanding how the business model should work.’

Rebuilding the firm

Lord and Davies then set about building a support and management team, and took on four diploma-qualified paraplanners, a chartered marketing manager and a business finance manager. They then rebuilt adviser numbers to seven, including themselves.

‘Ian and I wanted to run it as a true business,’ says Lord. ‘We set our drawings per month, [reinvested] the profits and focused on bringing in the right staff. The result was contracting back from a £1.1 million a year income to under £700,000, then building it back up. It was a brave move just before RDR.’

Food and wine lover Lord thinks having too many self-employed advisers can spoil the broth as it leads to inconsistency and therefore business risk. ‘Self-employed individuals do their own research and reports,’ he says. ‘They tend to be cost driven, seeking the best pay away, which means they get less of a service delivered from the firm.

‘I don’t think a businessperson would reinvest retained profits in services to deliver to advisers if those advisers could leave at any time. Now we, as business owners, can put in more controls and we are more motivated to reinvest in our staff.

‘Putting in the right controls that everyone adheres to leads to the best advice,’ he says. ‘The post-RDR service is costly to deliver. Ian and I injected £118,000 into the business between the two of us and we got grants from the Welsh Assembly. Why would we scale up that service and marketing [only] for self-employed advisers who want to pocket 70% of the profit? Those who go for the self-employed model can’t afford to make the change.’

Although he has made radical changes, none of the decisions has been ‘a knee-jerk reaction’, says Lord. The firm has used business consultants, including Michelle Hoskin of Standards International and Steve Bowden of AXA Wealth. Lord also talks often to other IFAs in the area who he holds in high regard. They are making similar decisions, for example, about switching to employed advisers, he says.

The right image

Lord says the most important lesson he learned from hiring consultants was: ‘You get what you market for. If you set your stall out for high-end clients, they will come to you. The brand and image are key but you have to back that up with substance.’

For that reason, the company has also invested heavily in brand and marketing and in ensuring a high-quality client ‘journey’, says Lord. He credits Hoskin for helping to build the journey concept, which involves a wide range of contact and service points from the moment clients first encounter the company.

The company hired a client manager to take responsibility for this journey for each client, and it is evident in many little touches, such as a drinks menu given to each guest at reception.

It also brought in marketing manager Tracey Morris from outside the profession. She has revamped the brand and website, and has been given a £6,000-a-month budget for marketing activities. The firm spent £68,000 on refurbishing its office in Cardiff Gate Business Park with purple branded décor, and £60,000 on other rebranding activities.

‘It is important, if you are bringing in wealthy clients, that you have the right brand, from décor to stationery and beyond,’ says Lord. ‘Business cards cost £350 per adviser, but the feel of it is important for me.’

Among its marketing activities, the company has sponsored a race at Chepstow, and plans to sponsor a Cardiff Blues rugby match later in the year.

It is also investing £12,000 in a bespoke workflow system to ensure service points are always met. ‘That’s because back office systems do not fit into your process and ensure consistency of delivery,’ says Lord. ‘The team are testing a prototype at the moment.’

Richard Lord CV

CAREER

  • 2009-present Bartholomew Hawkins, managing director
  • 2001-2009 Clerical Medical, senior account manager
  • 2000-2001 Dealwise, PEP and ISA trader
  • 1998-2000 Halifax Sharedealing, dealing team

PROFESSIONAL MEMBERSHIPS/QUALIFICATIONS

  • Cert CII
  • Dip CII
  • PFS Advanced Diploma in Financial Planning
  • Certificate in Investment Management

Aiming upmarket

Another part of Bartholomew Hawkins’ strategy for attracting high-net-worth clients is to invest in its own discretionary fund manager (DFM) arm, which is set to launch in the autumn.

‘In future, we see our bread and butter as £250,000 and upwards,’ says Lord. ‘But with the DFM, we are also hoping to attract more £1 million-plus clients.’

He plans to adjust the higher level service proposition to provide more wealth-friendly services, such as will writing, lasting power of attorney, cashflow modelling and retirement analysis.

Over the next 12 months, Bartholomew Hawkins anticipates taking on seven more staff, including at least one investment manager and more support staff. Two advisers have already signed contracts and are set to join in October.

‘They have been a coup as they were recruited from the ultra-high-net-worth division of a bank and will potentially bring between £75 million and £90 million in assets with them, says Lord.

Revamped service will offer active and passive strategies

Lord is shaking up Bartholomew Hawkins’ investment proposition. The new plan is for the firm to provide both passive and active investment solutions, and the planned DFM service is expected to receive discretionary permissions from the Financial Conduct Authority (FCA) in September.

Clients with between £25,000 and £100,000 will either be invested into a blend of Vanguard LifeStrategy funds or a blend of active multi-asset funds, such as Jupiter Distribution, managed by Citywire A-rated Alastair Gunn and Rhys Petheram, and Henderson Cautious Managed, managed by Citywire A-rated Christopher Burvill, Jenna Barnard and John Pattullo. Those with more than £100,000 will either be invested in one of the firm’s in-house model portfolios, which contain up to 20 funds, or will be handled by the DFM service.

For both the passive and active strategies, the investment committee sets asset allocation using eValue. It selects funds for the active portfolios according to criteria such as consistency of risk-adjusted returns, alpha, inflows and total expense ratios.

  • ACTIVE FUNDS: 85%
  • PASSIVE FUNDS: 15%

Changing asset allocation

In its portfolios, the firm has replaced Jupiter European with BlackRock Continental European Income, and Newton Higher Income with Old Mutual Global Equity.

BlackRock Continental European Income is run by Citywire AA-rated Alice Gaskell and Andreas Zollinger, who Citywire Discovery rates first out of 88 for three-year, risk-adjusted returns in the Equity – Europe excluding UK sector.

Old Mutual Global Equity is managed by Citywire AA-rated Ian Heslop, Amadeo Alentorn and Mike Servent. According to Citywire Discovery, the three managers are ranked fifth out of 307 on three-year, risk-adjusted returns in the Equity – Global Equities sector.

‘We removed both [the Jupiter and Newton funds] because they failed on criteria such as consistency of returns and information ratio,’ says Lord.

DFM strategy

Lord is aware of the potential conflicts of interest in launching a DFM, so has set it up as a separate company.

‘We have to justify to clients whether it should be our DFM [they choose] or another,’ he says. ‘There will be a big cost advantage. If you go direct to another DFM, they tend to charge 1% plus VAT without any planning, but we discount back 0.5% to existing clients, so we will charge 1.1% (including VAT) for the DFM service with financial planning included.

‘The investment managers we are recruiting are excited as they like the idea of a new DFM. That’s because some existing DFMs carry a lot of limiting legacy systems and issues. Starting from scratch, the functionality and performance we can deliver and the processes we can put in place will be head and shoulders above them.

‘For example, the DFM’s platform will be Credo, which is a stock exchange member, so you get almost instant trading and you can trade on more asset classes. It will be able to monitor portfolio drift, which is a big thing for us; and Credo’s functionality was a complete eye opener for us. A few of the life office platforms are waking up to not having the correct functionality but they are a long way behind the likes of Credo.’

Finding performers

Bartholomew Hawkins’ Capital Growth portfolio has performed well against its IMA benchmark. However, it has underperformed in the year to date. ‘That is because it has been a flat market,’ says Lord.

‘To get outperformance when there is less volatility and less happening is not easy. Outperformance in previous years has been down to the depth of our asset allocation and fund selection process. Plus we get all the investment house representatives to critique our process.

‘I don’t know many local peers who go into the detail that we do in the process. For example, for returns, alpha and information ratios, we look at the last nine four-quarter periods and identify how many have been positive. This really helps us find consistent performers.’

Attracting talent

How did he manage to tempt the bank advisers to join a firm with much lower asset levels?

‘Last year, we brought in £28 million of assets – just me, Ian and one other,’ says Lord. ‘[The new signings] know the journey we have been on. They like the proposition, the process, our marketing budget, and they and their clients like our brand. Many firms do part of what we do, but not all.’

Bartholomew Hawkins has spent about £40,000 a year on recruitment agency fees since 2012. Though costly, it has been well worth it to bring in the right talent, says Lord.

He plans to take a break from recruitment for a while. ‘We have spent two years reshaping and reinventing the business,’ he says. ‘We need to consolidate, so that next year our recurring income will cover our overheads. That takes away a lot of business risk.’

Beyond that, he wants to reach £100 million with 10 advisers, he says.

FAST-GROWING FIRM: (L-R) back row – Adam Fox, business and finance manager; Craig Bates, pensions specialist; David Roden, tax and trust specialist; Tracey Morris, marketing manager; Ian Law-Smith, financial planner; Ian Davies, director; front row – Adam Fox, business and finance manager; Nuala Sutton, client relationship co-ordinator; Richard Lord, managing director; Kathryn Tomlinson, client relationship co-ordinator; Leigh Coates-Jennings, client relationship co-ordinator; Deborah Richardson, mortgage and protection specialist.

Big changes

Lord has been preparing for his wedding to Carlene Taylor and their honeymoon in Mauritius. Even without the wedding plans, life has been hectic managing the huge transformation projects at Bartholomew Hawkins in such a short time.

Lord says he is possibly a workaholic and a perfectionist, too. ‘Witness the bags under my eyes,’ he jokes.

However, things are improving now he has a management structure in place, allowing more time to indulge in fine dining. He does so much strategising in the day, he likes to be free of decision making at home, he says.

Reflecting on the progress made at the firm, he believes the marketing initiatives have revolutionised business. ‘Being in the eye of the transformation storm is very stressful. The biggest thing is managing cashflow,’ he says. ‘That only went away last year.

‘I never thought we would be sponsoring the last race at Chepstow, and I would be presenting the trophy to the winner. I took two good clients and my fiancée that day. She said: "This is amazing, well done." It was quite emotional.’

Five top tips

  1. Recruit the best employees you can. Do not try to cut costs by bringing in cheap staff – they are usually cheap for a reason.
  2. Look after your staff by rewarding them and keeping them involved in the development of your business.
  3. Focus your proposition on your clients so everything you do has them in mind. Reputation is part of your brand and image.
  4. Invest in your brand and image. Do not cut costs for your literature, website or marketing.
  5. Find good IFAs and wealth managers who have similar business models with whom to share best ideas.

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