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Our rebrand, fee structure and business model: Sovereign IFA

As Sovereign IFA approaches its 25th anniversary, director Mark Hibbitt talks to Adviser Business Review about bringing in new clients, the decision to rebrand and the key to building a successful business model 

Adviser Business Review: Which segment of the market does Sovereign IFA target?

Mark Hibbitt: We target two segments of the market; business owners and those approaching or at retirement. Our business owner clients tend to be over the age of 45 and entrepreneurial. By their very nature, they understand the value of paying for a service and they see the value in the advice we offer. We find their mindset is akin to ours so the relationship works well. A business owner is fortunate in that there are so many options available to them, whether they’re looking to grow their business or plan their exit strategy.

Of course, the pre/at retirement market is also key for us, simply because the pension freedoms have created much greater scope and there’s a growing need for sound financial advice.

We have never operated a minimum wealth level; our target market means the majority of our clients have decent investable assets, but ultimately we are clear on our fees and if individuals are willing to pay those then that is their choice.

ABR: How did you set your fee structure?

MH: When deciding upon our fees, we looked carefully at our overheads and the number of cases we had and established what was a feasible amount to charge to ensure we wouldn’t be operating at a loss. The structure has three parts; the initial advice fee, implementation costs and then review. Our initial advice fee typically ranges between £747 and £2,997, depending on the complexity of the work and this fee is offset against any implementation costs. Implementation costs are charged on a reducing scale, starting at 3% for the first £100,000 invested, decreasing to 1% for investments over £300,000. Ongoing service depends on the level of service required, but the annual fee sits between 0.5% and 1% of assets under management. Our assets under management are currently at the £35 million mark.

ABR: How do you attract new clients?

MH: We have four advisers, so for us it’s not about quantity but quality. We currently have just shy of 1,000 clients, of which just over 200 are active so we are only really looking to add between 50 and 60 clients each over the next three years. Typically, we have relied upon recommendations, referrals and approaches, however we are now looking at new marketing methods.

The business will celebrate its 25th anniversary next year, so we feel we need to have a fresh approach to bringing in new business. In recent years we have been quite inward looking, following the departure of one of the co-founders, with the focus upon transitioning his clients, but now it’s time to be more outward looking.

We rebranded the company last year, with the help of a local branding consultant, to give Sovereign a new image and strapline – “Let your future grow”. Our message as a business and the imagery we use across the company is about growth; I think the key to marketing is to be on-point across all the channels you use.

This year, we’ve worked very closely with consultant Steve Billingham, who has helped us to review our client base and work out a strategy going forwards. We write for the Bristol Business Post, run ads in the local gazette and we will soon start doing e-shots to local businesses to make them aware of our new auto-enrolment proposition. We also use social media, not as a direct means of attracting new clients but rather a way of raising our profile. If someone hears about us, the first thing they will do is Google us and it helps if they can see we’re active and modern.

ABR: What do you see as the biggest challenge for a firm of your size?

MH: There are challenges, but not huge threats. Certainly regulatory costs are an issue and if the current upward trend of the FSCS continues it will be problematic for many. However, we are lucky to own our building, so we don’t have rental costs, and we have a steady recurring income stream of around £265,000 a year so we feel relatively secure.

I would say the biggest threat to the industry as a whole – although unlikely – would be the return of banks to advice. They have never got it right, always being sales driven, but if a leading bank were to get their proposition right, I imagine they would wield a great deal of power.

ABR: Can size be a barrier to success?

MH: No, I’ve never seen the size of our firm as an issue at all. It’s a very trust-based industry and if anything, I think the opposite – clients appreciate that personal touch. As long as they can see you’re a decent, trustworthy firm I think you shouldn’t have any problems.

In my opinion, the best way to grow your business and ensure your advisers are working together to enhance the firm, is to ensure all your advisers are employed rather than self-employed. You need to make them part of the team, provide them with what they need and in return they will feel much more loyal. From a risk management and cultural perspective, I think that’s crucial to creating a successful business model.

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