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Aiming at £1billion AUA by 2020

ABR editor Rob Kingsbury spoke to David Thomas, joint managing partner of Chadney Bulgin, about the firm’s ambitions to reach £1bn AUA, it’s structure, fees, software and services

Hampshire-based Chadney Bulgin is aiming to have £1billion of assets under advice by 2020. Currently at around £700m, delivering a turnover of £6m, as well as looking to grow assets organically, it is likely the firm will go on the acquisition trail to achieve that ambition, says managing partner, David Thomas.

The first step in its push to increase assets was to rebrand from the firm from IFA to Chartered Financial Planners. “We’re still an independent financial advice firm but I’m not sure that the public understand what that is. They hear the word independent and probably think that’s good but they don’t know why.

“Whereas we think they will understand the word Chartered a lot more because they know other Chartered bodies; they know there is a professional body behind you and an ethics code,” Thomas explains. “So now we describe ourselves as a regional firm of chartered financial planners.”

When the firm goes on the acquisition trail, it will be for smaller firms, Thomas says. “Our past experience has shown it is easier to bring on a small firm of maybe one to three RIs.”

Past experience has also shown, he adds, that the acquired firm has to be the right fit. “There are a lot of frogs and egos out there and we are quite cautious in our approach. Our brand is important to us – we want to do a good job and to be seen as a market leader. So, we take our time with acquisitions. We want efficient and profitable businesses, without any skeletons in the cupboard.

“Also, the people have got to have the same philosophy as us, which is to put the client first. We want people we like and will want to work with. They have got to be aligned with us.”

What’s also important, he adds, is the way the acquisition is communicated to the firm’s clients. “It’s important that you look after the clients in an acquisition because the last thing you want to do is lose anyone.”

The same applies when the clients are onboarded to Chadney Bulgin. As an example, he says that while the firm generally uses two platforms – Standard Life and Cofunds – currently it has clients spread across with 12 platforms.

“We won’t move the client just to make our lives easier. There has to be a beneficial reason for the client to make the change. It’s a cost and a risk to the business and we do review the situation with each client on a regular basis, but we are client centric and very conscious that without our clients we wouldn’t be here, so everything we do has to be in the client’s best interests.”

Structure and fees

Chadney Bulgin is limited liability partnership of 25 partners, with four partners owning 60% of the business. The firm is led by two managing partners Martyn Griggs and David Thomas, with operations team heads in Administration, Accounts, Paraplanning, Compliance, HR marketing and IT. There are 30 advisers and 45 support staff. The operations team meets fortnightly, as does the firm’s investment committee.

As well as wealth management the firm has a mortgage arm, which it is building up, not only as a profitable business but also as a successful referral channel for the financial advice side of the business. [See Should your business be offering mortgage advice?]

One of the best decisions that the firm has made, Thomas says, is to create a dedicated paraplanning team. Initially it was for wealth management advisers but recently it created paraplanning roles in the mortgage side of the business.

“Maximising advisers’ time with clients is key – it’s what advisers do and enjoy best, its what clients want, and so it’s good for the business. We enable that by having specialists in the other areas who do the research and produce all the paperwork and reports,” Thomas says.

The firm offers three propositions for its wealth clients, primarily dependent on the level of wealth and complexity of the client’s needs. These are: Wealth Planning, which includes cashflow forecasting; Advisory; and what the firm terms Classic, which is more transactional with regular valuations and e-shots.

The first half an hour meeting with the client is at the firm’s expense – “it’s where we ascertain whether the client is a match for us and whether we can work with them,” Thomas says.

From the first meeting a report is produced, for which there is a fixed fee and if the client wishes to move ahead, a fee for any implementation. “The client always knows how much they will pay for our services in advance of us delivering them,” Thomas says.

The ongoing advice fee structure is a percentage of the assets being managed by the firm. It works on a sliding scale, so set levels of assets see the fee reduce. Thomas explains: “If someone came to us with £500,000 and wanted the top service the first £250,000 would be at 1%, the second £ 250,000 would be at 0.75% and the more that comes on board, the more the fee level drops.

“I’ve studied the arguments around whether fees should be charged at a percentage or a fixed fee and we’ve come up with a hybrid really, so the more people invest with us the less they pay.”

Outsourcing, software and client relations

Although the firm has its own compliance department, it also uses a third party compliance company. “We like to have an external view as well,” Thomas says. This takes the form of four visits a year. “They look at our processes and do some random audits for me,” Thomas says. “It is reassuring when their outputs and notes suggest we are on the right track and doing what we’re meant to be doing.”

For cashflow modelling, the firm was one of the very first users of Truth from Prestwood Software and still uses it to this day. “Some people say it’s clunky but it’s an amazing tool. You need to be using it all the time so you get to know it inside out to get the real benefit from it. If an adviser tried to dip in and out once every few months they would struggle, but if you are using it day-to-day then it’s very good.”

The firm changed its risk profiling tool two years ago to Finametrica,Thomas says. “We were particularly focused on capacity for loss and we felt more comfortable with the Finametrica outputs because the software raised more questions than it provided answers. We felt that was more realistic and the output could then be discussed with the client so we could get a real feeling around their capacity for loss and risk.”

In order for the business to progress and attain its ambition, Thomas says, client feedback on the firm’s service is paramount. The firm has an ongoing client satisfaction process, which, until recently, meant that every time the firm undertook a piece of business a questionnaire was sent to the client asking them to mark the service received on a score basis of 1-6. However, Thomas explains, that has now been stripped down to just three questions, aimed at getting at the heart of how the client feels about the firm.

“As part of my year as president of the Personal Finance Society, I was invited to the Million Dollar Roundtable conference in New Orleans. There was a lot of content on client feedback. There were three questions that came up which we have adopted. They are:

1. What did you like about us?

2. What didn’t you like about us?

3. What do you tell your friends and colleagues about us?”

Those questions, Thomas says, will be far more valuable to the firm as a whole.

“I want to know what our clients really think about us as a business because it will drive what we do over the next four to five years as we look to grow towards our target of £1 billion.”

Visit the Chadney Bulgin website

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