The bulk of Sheffield-based Blue Wealth’s business comes from referrals. That might not sound remarkable in itself, but it’s the method of cultivating this business that seems unique.
Raj Shah, principal at Blue Wealth, runs a business breakfast group in Sheffield on Fridays where individuals from relevant sectors - a single specialist representing the legal, accounting, mortgage and VAT tax planning fields - convene to talk business.
In an interview with FTAdviser Mr Shah explained how this arrangement has been a goldmine for his firm and the others involved.
“You have one category from each profession. There’s a solicitor, a mortgage broker, an accountant, a VAT specialist. We meet on Friday morning at 8:30, the meeting lasts until 9:00.
“About 60 or 70 per cent of my business comes from this group. In the last few months we have transacted over a million pounds of business.”
Mr Shah believes the trust built up over the years among this elite group has paid huge dividends, something he attributes at least in part to the fact that he offers independent advice.
“If we were a restricted business that may affect the work we get because my peers like the fact that I’m an IFA and I have told them to look for independent advice.
“It’s very cloudy area so RDR has confused it more than it has to. There are a lot of categories within restricted. You are either independent or restricted, and that’s how it should be. It’s confusing.
“It doesn’t matter if you are restricted or independent as long as you are delivering what you promise, your clients are going to stay loyal.”
Business in brief
Most Blue Wealth clients are 45, 50 or above, so Mr Shah focuses on the pre-retirement and post-retirement market.
The actual client demographic is mostly business owners and medical professionals and some legal professionals as well.
The team itself is small, with two direct employees and one associate self-employed adviser. “There’s myself and my office manager. We have another adviser that works with me but he is self-employed.”
In total they service around 150 clients at present, though this will fall post-RDR as Mr Shah is in the process of streamlining his client bank, cutting by a third the number of people he provides with a full service.
“We are streamlining our client bank and probably have 150 active clients who we see regularly. I’m trying to move that down to below 100 so I can do more with them. I’m trying to move away from transactional and towards proper financial planning.”
For the 50 clients that are cut they will not be cut off completely, but will be offered a simplified service to reduce the amount of resources and time required on the part of the firm.
“We know what each client has to be worth to be profitable and at the end of the day we are a business not a charity. Why wouldn’t I want to be like my wealthy clients?
At the end of the day we are a business not a charity. Why wouldn’t I want to be like my wealthy clients?“I disagree with clients who say I should turn up [to a meeting] in a clapped out car.”
While these clients will be offered a simplified, more defined service, of course if they are happy to pay for the full service Blue Wealth is happy to oblige.
“The difficulty we have had is we have taken on a few firms’ [client books] recently. It’s hard to explain to someone who has to be sold a bond that there is no trail being paid and we need to be remunerated.
“It’s been positive and negative. Some people have warmed to it because they understand the value of advice. We have explained to them we don’t work like this we work in a completely different way.
“Advice has never been free and they have had to pay for it somehow, potentially through higher charges on the contract.
“To be fair it isn’t that much of an upheaval for them because they have only seen us once a year anyway. Once a year is fine but if it becomes a burden it’s taking our time up.”
Staying competitive
The biggest challenge for Blue Wealth coming through the RDR was clarifying its position such that it remained unique and ahead of the improving standards. Their differentiator of being a service-led, fee-based adviser is no longer a selling point now that this is becoming a dominant model.
“The pre-RDR proposition was great because we were one of the few firms who was fee-based. Now everyone is. We have become the norm now.
“We have had to evolve as a firm. We have got feedback from our clients and some things they don’t like we have cut out. We have developed a process to ensure that everyone gets treated the same.”
These additions include client flowcharts and a meaningful lifetime cash flow modelling system which allows clients to see what their financial future looks like.
For all the opportunity RDR has brought, Mr Shah admits the regulatory change has shut the door for some.
“[The RDR] has closed the doors to the smaller transactional business that we used to do. We want longer-term clients. Do we really want someone who wants to come in and do an Isa? They want good value, they should go online. The fees have become a barrier, I would be lying if I said they didn’t.
“Some people don’t see the value in it and if I was a commission-based adviser earning 5 per cent the client would never see that.
“The problem is you’ve got 14m people out there who have been served by the banks and building societies and they have never had to pay for advice. There’s a huge learning curve out there. Is that going to push people away from advice? Who knows.”
