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Adviser Profile: Darren Cooke of Red Circle Financial Planning

Adviser Profile: Darren Cooke of Red Circle Financial Planning

Red Circle Financial Planning director Darren Cooke has done some soul searching since he established the Derbyshire-based firm in 2012.

Many advisers see growing their businesses for scale as essential, and Cooke initially set out with the same intention. However, following the death of his father-in-law he changed direction.

‘The idea was to build a larger business, but that made me think about my late dad. He always taught me that life was for living and not for ending up the richest man in the graveyard,’ Cooke says.

Consequently, his aim became simply to earn enough money to support his family while maintaining a flexible work-life balance.

DARREN COOKE CV

CAREER

  • 2015-present Red Circle Financial Planning, director, chartered independent financial planner
  • 2013-present DE55 Business Networking, chairman
  • 2013-2015 Positive Solutions/Red Circle Financial Planning, chartered independent financial planner
  • 1994-2012 HSBC, various roles including commercial independent financial adviser

PROFESSIONAL MEMBERSHIPS/QUALIFICATIONS

  • Chartered Financial Planner, 2014

Striking out

Cooke worked at HSBC for 18 years before leaving when his division announced a plan to go restricted. Red Circle started with network Positive Solutions but went directly authorised last year. He says the suggestion by large organisations, such as networks, that small advice firms cannot afford to remain independent amounts to scaremongering.

‘Most networks are run by life insurance businesses that are trying to create a route to market for their products. On the contrary, it is cheaper to remain independent, go directly authorised and not pay network fees.’

Cooke says he had the idea for the firm’s distinctive name a long time ago. ‘The idea was "your finances are important, so red circle them", but the circle also represents the concept of holistic planning and provides a memorable image for the branding,’ he explains.

He uses the Institute of Financial Planning’s (IFP) six-step process as the framework for his advice.

‘I’m chartered with the Chartered Insurance Institute [CII], but when I saw the IFP’s process I thought: "That’s what I do anyway,’ he says.

He also plans to start working towards the certified financial planner qualification soon.

‘The chartered qualification is more about proving technical ability. Becoming certified is more about applying it with soft skills and the ability to understand the client,’ he says.

FEES

Red Circle has three service levels. Initial fees are tiered between 0.5% and 2%, while ongoing is tiered between 0.5% and 0.8%.

Each level has a minimum fee calculated according to the time it takes to provide the service and worked back to an hourly rate of £150.

Clients in the most popular ‘level three’ service receive one annual review process, which takes four to five hours to provide. So the minimum fee in the first service level is £750.

Clients in the top ‘level one’ service receive up to four meetings a year and a range of other service benefits. Their minimum annual fee is £5,000. Cooke says this is worked out carefully so that the value to the client and in terms of income to the business is split evenly across the three levels.

Red Circle’s overall average recurring income per active client is around £1,400.

Helping hand

Cooke has had many sources of inspiration and advice.

He has been working with business consultant Marilyn Hamilton whom he met through a local networking group.

‘She was from outside financial services, which was very useful,’ he says. ‘She helped me think about making the business attractive to clients so they would come to my door rather than having to look for them.’

After reading New Model Adviser®’s cover star interview with Evesham-based Steve Perera, principal of Britannic Place Financial Management (issue 454), the two met up.

‘Steve was generous with his time. His business is similar to mine but was more developed,’ says Cooke.

Following this, Cooke read 7 Habits of Highly Successful Financial Planners, by cashflow planning guru Paul Armson. He also recently attended Armson’s ‘Back2Y’ conference.

Cooke also uses Verbatim Asset Management’s business consultancy service. Verbatim is advising him on the firm’s charging structure, which mainly involves documenting the process described in the section on fees (above). It is also helping him to rework his client proposition and agreements so they look more professional.

Finally, it is assisting Red Circle in fine tuning and documenting the process behind its investment proposition [see investment section below].

Investment: passive base with active funds used where they add value

‘Building my in-house portfolios is like building Lego, except no-one gives me a diagram,’ jokes Cooke.

He uses Dynamic Planner as a basis for his asset allocation, then applies tactical and strategic overlays. He uses FE Analytics to select funds.

‘The base is usually passive funds, although I will use active where they add value, which is in smaller companies, value opportunities, Asia funds, and high yield bonds,’ he says.

BUSINESS FIGURES

Making your mind up

Selection criteria include one and three-year performance; fund manager tenure; alpha; beta; volatility and other measures, such as tracking error and active share.

Cooke started the current portfolios at the end of last year.

For the year to 17 May, the Red Circle 5 portfolio produced 0.15% returns, net of platform fees, versus -0.29% for the IA Mixed Investment 40% to 85% Shares sector.

‘That came from having a lower allocation to corporate bonds,’ says Cooke. ‘I also have a slightly higher allocation to biotechnology funds such as AXA Framlington Biotech, which had a negative effect.

‘But I will keep that fund as I believe its performance issues are related to the sector, not the fund, and that sector will bounce back.’

One fund that has done well for the portfolio is Miton UK Value Opportunities. When Citywire AAA-rated managers George Godber and Georgina Hamilton resigned from it recently, Cooke decided to keep it as Miton has replaced them with Andrew Jackson who has a good background, he says.

  • ACTIVE FUNDS: 45%
  • PASSIVE FUNDS: 55%

Building blocks

Red Circle is based in a small office in South Normanton, Derbyshire, and Cooke does not see that changing. He is a Lego fan and has some valuable, limited edition models in his office. He even did a presentation about Lego’s business model at a recent networking event.

He says there are lessons for the planning profession in the way that Lego re-engineered itself: ‘Lego got customers to buy into the whole brand and ethos of the company, which builds loyalty,’ he says. ‘Apple has been doing a similar thing for 25 years.’

After starting Red Circle, clients from his previous role at HSBC gradually joined him. He also has business relationships with five local accountants and acquires clients through Unbiased and other marketing activities such as sponsoring a hole at nearby Shirland Golf Club.

Reaching out

Cooke hopes to increase high-net-worth client numbers by attending more networking events. ‘One of my clients runs a professional networking group in Nottingham, which has some larger solicitors and accountants as members, so that may help [improve the value of the client bank]. I also want to try the Chamber of Commerce.’

Red Circle’s figures have shown healthy growth, except last year when profits fell from £78,000 to £65,000. This was due to the one-off time and investment spent becoming directly authorised, says Cooke.

He also recruited his wife Melanie as practice manager in January and administrator Valerie Laughton in 2014. He says he has no plans to recruit another adviser, though he would not dismiss the idea if one walked through the door.

He wants to stop doing execution-only business entirely and stick to ongoing clients instead.

‘I plan to grow from 49 clients to 80 or 100, depending on their service level, in the next two years. That will give me a more than sustainable level of fees for the income to sustain my family.’

Cooke pays himself in salary and dividends but would not disclose the amounts. He initially used credit card debt to finance himself in the early days but that is now paid off.

Family first

He has no specific exit plans. ‘You have no idea what the landscape of the business will be in 20 years’ time,’ he says. ‘By then there might be people working here who I could pass it on to.’

Cooke has become a member of NextGen Planners, set up by Adam Carolan and Rohan Sivajoti, to encourage and support younger planners to develop in the profession.

‘It is beholden on us to help younger professionals,’ he says. ‘Many advisers started their careers in the banks and life insurance companies. Without these companies, you wonder where the next generation of advisers will come from.’

The biggest weakness in the business is that it lives and dies with him, as he puts it. ‘That is the same with a large percentage of the adviser population.’

Cooke is a devoted father to his four children, all aged between five and 11.

‘I’d like to play a bit more golf but my family is my priority,’ he says. ‘My father planned to retire at 55, sell everything, buy a camper van and tour the world. Life is for living.

‘Sadly he never got to do that as he died at the age of 45,’ says Cooke. ‘I was only 16, but a lot of his philosophy stays with me. Once time is spent, it is gone forever.’

FIVE TOP TIPS

  1. Look after your clients and they will look after you.
  2. Never get so busy making a living that you forget to make a life.
  3. But do not forget to run the business; it will not run itself.
  4. Seek help when you need it and pay for it if you need to; you cannot do everything yourself.
  5. Enjoy what you do and, if not, change what you are doing.

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