Adviser Profile: Robson Macintosh sets sights on expansion

Jeff Lewis, Alastair Robson and Andrew Hannay are determined to put their plans to grow Robson Macintosh’s client numbers into action, putting behind them the trauma of making an acquisition that ended in the vendor bailing out with his clients one year on.

One of the biggest dangers of buying a financial advice firm is that if the vendor does not like the new set up, they will leave and take their clients with them. That was the unfortunate outcome for Edinburgh-based IFA Robson Macintosh when it acquired another firm in 2007.

Robson Macintosh business development director Alastair Robson and director Andrew Hannay had been expecting the principal of the acquired firm to retire after three years but say that, following a disagreement, he left after only a year, taking the majority of his clients with him. Rather than retiring, he joined another firm, they say.

It was an earn-out deal, so the financial effect on Robson Macintosh (RobMac) was not too serious. Nevertheless it was a traumatic event for the firm; Robson says it was ‘a nightmare’ and ‘the worst thing that has ever happened to me’.

‘He took the majority of clients with him because it is a very personal business,’ says Robson. ‘You can’t stop someone doing what they want to do, so we ended up parting. It was disappointing because it meant we couldn’t then grow our business in the way we wanted.’

Not put off acquisitions

Robson says he would consider another acquisition but would understandably be very careful next time. Hannay says: ‘In retrospect, perhaps there is a different way to structure it. If we did it again I’m sure we would do things differently.’

In 2008 RobMac hired Jeff Lewis as a director, partly to take over the new tranche of clients from the acquisition. Despite the deal not going to plan, Lewis stayed on and the team turned this situation to their advantage by giving him responsibility for Robson’s clients.

In 2010, Robson deregistered to take on a full-time development role and focus on bringing in new business by improving links with the professional community. The firm now has 10 regularly active links with accountants and solicitors, and this is helping drive funds under management towards £100 million.

Understandably, none of the directors wants to dwell on the acquisition. ‘We didn’t pursue it,’ says Lewis. ‘We have moved on, very successfully.’

Inspired by the $2 million man

Robson’s first job in 1977 was at a firm of stockbrokers called Wise Speke in Newcastle. While working there he read a book called How I made $2 million on the stock market by Nicolas Darvas, which motivated him to pursue a career in financial services.

‘If you want an inspirational read, that is it,’ says Robson. ‘It’s just so exciting. You can’t wait for the next page. It’s why I am here today. I just loved that guy and the story of how he made it.’

It was not until 1992 that Robson decided to take his dream further by going it alone with his own IFA company, which he set up from home.

‘It wasn’t very structured to begin with,’ he says. ‘I probably should have done what most IFAs do, which is work for a large national first. However, a friend Neil McAllister came on board followed quickly by Andrew. We started putting ourselves about, got referrals and built up from there.

‘The Macintosh in the name came from Duncan Macintosh, a pal of mine who was going to be an equity director of the company but had to back out. I liked the double-barrelled bit, so I kept it. Duncan was a high-ranking commercial lawyer who helped RobMac at the outset and remained an influence, though less so now. Neil also helped build up the company and became a director but has since moved on to other interests.’

ALASTAIR ROBSON CV

Career

• 1992-present: Robson Macintosh & Co, director
• 1989-1992: Scottish Provident, investment sales manager
• 1986-1989: Fidelity Investments, Scotland & Northern Ireland, manager
• 1984-1986: Henderson Administration, sales manager Scotland
• 1982-1984: Towry Law, senior financial consultant
• 1979-1982: Albany Life, sales consultant
• 1977-1979: Wise Speke Stockbrokers, dealer

Professional memberships/qualifications

• FPC 1, 2 & 3

Fast expansion

Soon there were so many people in Robson’s house they had to move to an office in Edinburgh in 1997. The firm continued to grow and is now in its third office, overlooking the beautiful Victorian Gothic spire of St Mary’s Cathedral in the west end of the city.

Over the years the firm dabbled in different areas, including a link-up with a large mortgage firm, but in 2004 it took all mortgage work in-house, and up-market, with a department run by Alison Mitchell. The previous year Paul Porteous joined as operations and compliance director adding structure to the business.

The next stage came four years ago, notwithstanding the acquisition saga, the team started to shift the focus from general IFA work to financial planning and began to move to a fee-based, recurring income model.

‘We also adopted wrap, kicking off with Transact and Standard Life,’ says Hannay. ‘But Nucleus is our preferred wrap now and we have been shaping most of our business around that.’

Investment club aims to build engagement

RobMac is an avid user of Citywire services, including news and fund selection, and many of the staff have the Citywire website as their home page. Citywire also powers the news feeds on the front page of the firm’s website.

Three years ago, RobMac set up a new investment proposition based on six model portfolios, which use Towers Watson’s asset allocations as a guide. Fund selections are then guided by OBSR, Citywire ratings and Citywire Selection. Portfolio total expense ratios (TERs) are around 0.9%, excluding wrap or adviser charges.

RobMac has recently started an investment club for interested clients. All the model portfolios’ funds are listed in the club, which also offers analysis on what it views as other potential satellite investments.

‘We add our own ideas and sometimes clients suggest some as well,’ says Hannay. ‘There is an undercurrent of education, which I think it is important. It’s a way of building engagement.’

Hannay says the investment club could create the seed of what might one day become an execution-only offering to the public. ‘We have discussed that idea with others in the industry,’ he says. ‘But we’re not sure how far we want to go with it yet.

‘A lot of people want our advice service. But there are also a lot of people who want to do it themselves; that number is growing rapidly.’

Robson says: ‘So many people just buy things online now, including financial services, and we want to be part of it.’

Change of allocation

RobMac’s investment committee made a significant call last year to move money from fixed interest into property and all their portfolios now hold 15% in that sector. ‘Having met with some fund managers, we thought the yields on property were looking good and they seem OK about the down side too,’ says Hannay. ‘So we halved our fixed interest allocation and put it into property funds from M&G, Aviva and Swip.’

In January this year, the committee made another big call, which was to put between 5% and 15% into absolute return funds, depending on the risk rating of the portfolio, also to reduce risk and volatility. The firm has started using Standard Life Global Absolute Return Strategies (Gars) but is considering adding other absolute return funds for diversification of style.

‘We were worried that bonds were shooting up, then tailing off,’ says Robson. ‘We had quite an exposure to fixed interest but we wanted less volatility. This was an excellent move.’

Hannay continues: ‘Following a lot of research on absolute return, we added the Gars fund and have been very happy with it. It’s nice if you get the cash plus 5% but it also provides a huge defensive prop. We put that fund into our portfolio model and it showed on the chart as moving the risk to the left but keeping the growth. In other words, it was a great way to derisk the portfolio.’

RobMac has outsourced investment to stockbrokers and banks in the past but prefers to have the control in-house in what it believes is a simple, transparent proposition (albeit that absolute return is a slightly more complex vehicle). ‘For example, some outsourced funds got locked in,’ says Hannay. ‘But it’s essential to be able to get clients’ money out if they need it. Now we can do that.’

‘We are advisory not discretionary, says Robson. ‘That’s good as it means more client contact. With discretionary, you might not see the changes to the portfolio until a year later.

‘The investment committee meets every quarter unless there are any real alarm bells ringing, so clients hear from us if anything needs changing. We also think Nucleus’ ability to auto-rebalance every six months is great. Keeping the allocation in shape regularly makes a huge difference to clients.’

ANDREW HANNAY CV

Career

• 2004-present: Robson Macintosh & Co, director
• 1989-2004: Prolific, Scottish Provident, senior investment consultant, Scotland
• 1987-1989: Scottish Mutual, senior consultant investment & pensions, Scotland
• 1982-1987: Royal Insurance, senior consultant life & pensions, London

Professional memberships/qualifications

• FPC 1, 2 & 3
• BA Strathclyde University

Percentages are better

A book club with investment and business-related themes is one of RobMac’s initiatives, although the team admits it is no match for Richard and Judy yet. Along with the investment club, news feeds, a regular blog and some fun interviews with the directors, the book club is part of a revamp to the website that the firm has initiated with the help of financial services PR Scott White.

Rather than making the website a corporate brochure, White says the aim is to engage the readers in a way to elicit a reaction that should eventually lead to a business outcome.

‘It’s all about ways of trying to make the site interesting and bring people back to it. The only thing is keeping it up to date,’ says Robson.

Charges and service

RobMac charges for its advice at up to 3% initial plus between 0.8% and 1.25% ongoing. Clients can also choose to pay by the hour at rates between £65 an hour for an administrator and £200 for a director.

New business is mostly fee-based now, although the firm still receives some commission from legacy business, says Hannay. ‘For example, many employers won’t pay for group personal pensions (GPPs), so employees are paying for it through their contracts. But there has been a shift away from that from good employers,’ he says.

Robson says: ‘We did a group pension scheme recently, which we moved across within the same supplier to a much better contract. A lot of legacy issues will disappear naturally because you are looking after the client in this way.’

The team generally disagrees with the idea that charging a percentage of funds under management is flawed because it ties income to the vagaries of the stock market, even as the firm faces another economic downturn.

‘Clients like it because they know that if you make a complete mess of it you will suffer too,’ says Robson.

However, Hannay adds: ‘We’re open minded. If the stock market goes down 50% then the model probably isn’t sensible; then maybe we will have to look at it again and move to hourly fees for ongoing advice.’

Between 2007 and 2008, the firm’s figures were in a state of flux following the credit crisis and the failed acquisition but stabilised in 2009 and are now heading steadily up again. ‘Client numbers, funds under management and profits are going up based largely on referrals,’ says Lewis. ‘We are very lucky on that score.’

Strong team

In addition to Hannay and Lewis, the firm has two self-employed IFAs, Trevor Mitchell and Norman Jack.

Hannay says even though the self-employed advisers work in the office and follow a tight process, they realise they will have to become employed after the retail distribution review (RDR) because of the weight of regulation they will have to meet, and because it is the only way to be able to show clearly that they are providing the same advice and charging across the business.

Robson is proud of them nevertheless: ‘I would pit our self-employed advisers against any advisers in Scotland; and our mortgage department. We had champagne and truffles delivered here the other day because they had done such a good job on a mortgage, and that happens all the time. It is fantastic for the business.’

JEFFREY LEWIS CV

Career

• 2008-present: Robson Macintosh & Co, director
• 2001-2008: D G Pryde, independent financial adviser
• 1999-2001: Canada Life International, regional manager
• 1987-1999: Clerical Medical Investment Group, senior consultant

Professional memberships/qualifications

• FPC 1, 2 & 3
• AFPC G10/20/60
• DIP PFS
• BA Honours (Economic Policy) Stirling University

Civilised business

Hannay, Robson and Lewis are keen golfers and take Friday afternoons off in summer for a round or two, often with a professional contact.

‘We take a balanced approach to work,’ says Hannay. ‘In summer we work longer in the week and shut the office at 1pm on a Friday so all staff get a proper thrash at the weekend. We think that’s a healthy and civilised way to do business.’

The conversation then collapses into a good-natured debate about handicaps, holes in one and who, therefore, should be spending more or less time on the golf course. If it is time spent with professional connections, Robson will not mind, he says.

Five top tips

• Learn body language
• Listen to your client
• Know when to shut up
• Be completely honest, especially if you make a mistake
• Imagine what you want