London-based Bradbury Hamilton has been on the acquisition trail of late, recently acquiring two client banks: that of Hampshire-based Wealth Management and a section of Surrey-based Thomas Hall Partnership. It is also now looking to recruit additional advisers to help service those books.
In one of a number of optimistic growth stories post-Retail Distribution Review, Sheriar Bradbury, managing director of Bradbury Hamilton, says he is still looking to acquire more firms that have anything up to a £1m turnover. He but is keen to stress, however, that in buying only the client banks, the firm is not picking up the liabilities.
“It’s a matter of funding more than anything as I fund all this myself, but the advantage for the people that are selling their business is that I don’t have a big committee and people that I need to go to, to ask for permission.
“What I am looking for is potential to grow it, to grow the revenue stream and looking to improve the service to the clients.”
The 20-year old firm currently has 10 advisers, of which three are chartered and two “are very close”.
To help deal with the additional clients, a new adviser will be starting at Bradbury Hamilton in September and Mr Bradbury is planning on recruiting an additional one or two more.
“We need more advisers to service the client banks. We are going to continue acquiring client banks and to steadily grow our presence. We want to expand in Manchester and possibly places like the Midlands and, of course, to grow London a bit more.
“The idea is to steadily grow the business, to grow the recurring revenue and long-term to grow the profitability and to steadily increase the number of advisers but just slow and steady. It’s not a question of world domination though.”
Protecting fees
Bradbury Hamilton has adopted a customer agreed remuneration model where clients sign fee agreements prior to the firm doing any work for them. The model long pre-dates RDR, with the basic model having been in place for close to eight years and the requirement for agreements to be pre-signed having been around for five to six years.
Clients have several options to pay for their advice - a fixed price basis, an hourly fee or a percentage base charge “with an underpin”.
“Some clients find it difficult to adjust [to signing client agreements prior to work] and some people don’t want to sign fee agreements, however there are very, very few, who don’t deal with us because of the fee agreement.”
Mr Bradbury is critical of firms who do not operate with a pre-signing requirement, highlighting that some firms will produce a report for clients prior to signing off on fees, leaving the client to take the report without proceeding with the recommendations. This is a particular concern given the growth in ‘DIY' investor platforms that is now expected.
“Now they have got the report all they have to do is implementation and I think as an adviser, and from a business perspective, it’s a bad idea to go ahead and produce work without fee agreements in place.”
As had been expected by many, Mr Bradbury says he has also noticed that since the start of the year there has been downward pressure on fees and has seen clients, particularly those with large investment amounts, attempting to negotiate fees.
He says that this should be resisted in most cases, advising fellow intermediaries to have “price integrity”.
He explains: “I had one particular client that had a lump sum investment and he wanted that set up for a particularly low initial price and a low ongoing cost for servicing it and that was out of kilter with our charging model.
“We had to say no to that although it was quite a substantial investment, and he went somewhere else.
“What’s very important for IFAs is they have to have price integrity. I think that if someone wants to get a service it shouldn’t be a cut-down service – they should get the service and pay the price for the service.”
Mr Bradbury says anther trend in pricing is that most clients prefer to pay a percentage-based charge.
“What we do in those situations is operate a fee underpin which will be a minimum charge for doing the work, and then if we recommend something we might get a percentage of that.
“It will be done as customer agreed remuneration where possible and if that exceeds the amount of the minimum fee then, if we implement, we keep the difference. If they don’t go ahead with the advice that is not a problem in any of these circumstances as we just invoice them.”
Client grab
Although the transition to the RDR seems like it has been a smooth ride, Mr Bradbury has acknowledged that there have been issues with some of the clients they have taken on via the acquisitions who have not been used to paying fees.
“Some clients need to come to terms with the fact that commission doesn’t exist anymore and advice isn’t free.”
Some clients need to come to terms with the fact that commission doesn’t exist anymore and advice isn’t free.Mr Bradbury also believes that the larger life offices may be struggling in the post-RDR market as they are “losing business to the wrap and platform providers”. He believes they will switch off traditional commission to recover losses - and are already doing so for smaller advisers.
He says “swathes” of commission will get cut off by life offices and potentially providers will go direct to those clients, with their argument being that if the advisers firm is not going to look after them, the provider will lose them anyway.
As well as traditional life offices struggling, Mr Bradbury also thinks that traditional old-style platforms are encountering problems.
“I find the administration more of a headache generally - the older the products are, the worse the admin is and the more difficult it is to get information but it depends on the provider.”
RDR increased professionalism but...
Although Mr Bradbury is certainly an advocate of the Retail Distribution Review, like many in the industry he has also come across “unintended consequences”.
The main problem identified by Mr Bradbury is that the man on the street can no longer afford advice. He is calling for a return to commission so that advisers are incentivised to deal with lower-value clients.
He does not believe that the Money Advice Service will be able to close the advice gap as lower-value, non-sophisticated clients need to be ‘convinced’ to take out products to boost their protection and savings.
“They may not want advice or want people to come and sell them products, but it doesn’t get away from the fact that people need advice. They need to put some money into something tangible for their retirement.
“Yes we have auto-enrolment and that will be fine and you will probably, through inertia, see a certain take up of it. But it doesn’t go far enough.”
Mr Bradbury also flagged up that the RDR has not only cut certain consumers out of the market but also advisers.
“On balance although I think RDR has done a lot to increase professionalism, there are problems. It has cut loads of people out of the market.
“To be honest there were probably quite a lot of perfectly good advisers at the simple end of the market who now can’t give advice as they didn’t want to do the exams.”
