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When you lose 80% of your primary revenue what do you do next?

When 80% of your primary revenue stream disappears almost overnight what do you do? You change tack and manage your way back to success. Rob Kingsbury talks to Chadney Bulgin’s joint managing partner David Thomas about how the company switched from an 80% mortgage driven business to an 80% wealth management firm that went on the acquisition trail.

In 2007 Chadney Bulgin, a financial advice firm based on the Hampshire/Surrey borders, was heavily into the mortgage market. It was turning around some 300 mortgages a month. Then the Financial Crisis occurred and that figure dropped to 60 mortgages a month.

“That hurt,” says joint managing partner David Thomas. “At our height in 2007 we were handling between £700m and £750m of mortgages, equal to the 14th largest building society at the time. We had 38 advisers and 25 support staff.

“Then 2007 happened and we dropped to 60 mortgages a month. We had to let go 25 advisers and that was a painful time.”

The firm’s revenue streams were roughly 80% mortgage based and 20% wealth management based but with a decimated mortgage market, the firm had no choice but to shift its focus and strategy into building up the wealth management side of the business.

“We had started building a wealth planning division but because of the boom in the mortgage market that side of the business hadn’t grown as quickly as we first intended,” explains Thomas.

In 2005, the majority shareholder, Tom Chadney, had sold his 60% stake to nine people in the business, including Thomas. At that point, says Thomas, “we decided we would convert the wealth side of the business from commission to fee. RDR hadn’t even been dreamed of at that point but we decided that in order to build value into the business, and the wealth side only being about 20% of the business at that time, we could make the change and the mortgage side of the business would subsidise it.”

At the same time they pushed their advisers up the qualification tree “because we always felt that knowledge gives confidence and confidence builds advisers ability to give advice and drives sales,” Thomas says. “So when RDR was announced we were already on the qualification trail, with many advisers already at Level 4 and we were already charging fees.”

What the firm also did was start to build a team to conduct the research and prepare the client reports (paraplanners) allowing their advisers the time to focus on seeing clients. “We found that advisers are good at talking to people and generally not very good at paper work. So as part of our thrust into the wealth management space, we saw the opportunity to bring an extra layer into the business to do the research and report writing but work very closely with the advisers. This was our fledgling paraplanning team,” Thomas says.

“Martin Green was our first official paraplanner and since then he has built the paraplanning department into a team of nine, serving 19 wealth management advisers. We try to create space and maximise the time the adviser is able to spend with their clients. That has really helped us build the business and it was one of the best decisions we ever made.”

Acquisition trail

With this foundation work already in place, what Chadney Bulgin needed to do to move into the wealth space was to find more business. “With mortgages it’s relatively easy, you find a few estate agents and almost overnight you can switch a tap on. In the wealth space that’s not the case – you can develop your connections with solicitors and accountants and we did that, but it doesn’t happen overnight. They have to build their confidence in you; they’ve got to know that you will do a good job. So we made the decision that in order to build the business we would need to go on the acquisition trail,” Thomas explains.

“My fellow joint managing partner Martyn Griggs and I took a look at the market. Frankly, we didn’t like what we saw – we kissed a lot of frogs before we found a company we felt would be a good fit.” The first business the firm bought was Chandos Rose, a financial planning firm built up by Philip Rose after he sold his original business Wentworth Rose to Origen.

“It gave us another £60-70m under management – so not a large amount but something to build on,” Thomas says.

Having integrated Chandos Rose into the business the firm started looking for more potential acquisitions. In 2010 it bought Pensions and Wealth Planning Limited, based in Sandhurst. “The majority owner was retiring and wanted to sell up but also to find a good fit for those staying in the business,” Thomas says. “Everyone moved across to us and they are all now partners in the business.”

However, the purchase brought challenges as Chandos Rose used a different back-office system and also different wrap providers, “so there was a lot of streamlining necessary to bring PWP into the business,” says Thomas.

“What helped was that Sandhurst is close enough to where we are that we could bring everyone into this office. It’s much easier when you are buying a business and integrating it when they are under the same roof as you.”

This acquisition brought Chadney Bulgin another £120m in assets under management.

However, when it came to looking for its third acquisition, in 2013, this proved a lot more difficult than envisaged, given the firm’s previous two experiences, Thomas admits.

“We kissed an awful lot of frogs again but eventually we bought a company called Cawley Financial Services, which brought in another £80-90m.”

What was different about this acquisition was that Cawley was located in Chichester, too far away to integrate into the Hampshire office and it was a well respected brand in the Chichester area. “So we made the decision early on that we wouldn’t try to integrate the firm, we would maintain the Chichester office and we wouldn’t rebrand to Chadney Bulgin; so Cawley is now a trading name of this firm,” Thomas explains.

Chadney Bulgin’s current situation and future plans

Today, Chadney Bulgin has 30 advisers and 45 support staff. Sixty percent of the firm is owned by four of the partners: Bruce Bulgin, David Thomas, Martyn Griggs and Jonathan Clarke. Altogether, as a result of Tom Chadney’s sale and the firm’s acquisitions, there are 25 partners, “which can make for interesting partners meetings but it keeps us on our toes,” says Thomas.

Through acquisition and organic growth Chadney Bulgin has been able to build the assets under management of its wealth management side to around £700m. The strategic aim of the business, Thomas says, is to grow that to £1bn by 2020.

“We’re on track. Whether we make any further acquisitions remains to be seen. We’ve done it three times and I think exceptionally well. But they will have to be the right fit.”

Visit Chadney Bulgin website

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