Darren Lloyd Thomas has gone from flogging carpets two decades ago to punching above his weight at Thomas and Thomas Financial Services, thanks to a timely career kick start.
In 1997 Darren Lloyd Thomas worked in a carpet shop earning £5,500 a year. He had no self-belief, had just failed at nursing and was barely getting by on his retail salary.
It was around this time he took up kickboxing once a week, a decision that would put him in training with former world and European kickboxing champion Graham Brockway.
Now managing director of Haverfordwest-based firm Thomas and Thomas Financial Services, Thomas attributes a lot of his drive to the sport.
‘That push, that competitiveness, it all comes from the kickboxing for me,’ he says.
DARREN LLOYD THOMAS CV
2006-present Thomas and Thomas, managing director
2004-2006 Towry Law, IFA
2003-2004 Royal Bank of Scotland, IFA
2000-20003 Standard Life, financial adviser
Cefa 1, Cefa 2, Cefa 3, J11, J10, Cemap, R04, J06, CF2, H15, G10, G20, CF8, ER1, RO1, R05, R03, chartered financial planning, fellow
Window of opportunity
This drive led Thomas to respond to a newspaper job advert in 1998 for which he was underqualified and lacked the necessary experience.
The job was for a fully qualified financial adviser at Barclays. Despite his shortcomings, Thomas was called in for an interview, and talked the regional manager into giving him a chance. ‘I promised him faithfully I’d pass all the exams if they’d just put me in front of them,’ he says.
At Barclays, Thomas had to cold call lists of people who had not been contacted in years. ‘When it got hard I would drive down to that carpet shop at 10pm and stand outside the window, just looking through at the carpets.’
This would provide all the motivation he needed. ‘I still look through those windows now and again,’ he admits. ‘If I’ve ever had a bad day I ask myself whether that’s the life I want. The answer is no. That’s my drive.’
It may never have happened had he not started his regular visits to the Merlins Bridge Boxing Club.
Hitting the sweet spot
Since New Model Adviser® last profiled Thomas and Thomas in 2010, funds under advice, client numbers and staff numbers have grown at a rate most small businesses would be very happy [see business figures below].
‘The reason we’re profitable is we don’t pay ourselves huge salaries,’ says Thomas. ‘The percentages are good, but most of it is pumped back into the business. We put around £60,000 back into the business last year and we now have more than £250,000 in retained profits.’
In 2010, the business had £16 million in assets under advice. Several internal changes have had to take place to safely manage the £37 million it currently has. ‘We were very much in a sweet spot because we have a high level of recurring income. It was just the two of us, and it was really lovely.’ Nonetheless, Thomas happily notes they were ‘victims of their own success’, and needed to make a hire.
Thomas and Thomas charges £100 per hour for building a financial plan. There is however no further charge for implementing an investment or financial product recommended by the plan. It does charge a percentage fee for ongoing portfolio management and care.
Its main, ‘proactive’, service is for ongoing clients with more than £100,000 to invest. It charges 1% ongoing for this.
‘We’ve broken it down so it’s roughly 40 basis points for our actual fund management care,’ says Thomas. ‘Our quarterly review system is roughly 10 basis points per quarter.’ For proactive clients, Thomas conducts quarterly reviews, an annual review, rebalancing, cashflow modelling, ISA wrapping for funds, pensions wrapping, and he will also attend meetings with lawyers alongside the client. ‘I know some people will say "we only charge 0.5% and anything more is greedy," but from our point of view, we know we deliver,’ says Thomas.
For clients with less than £100,000 to invest, the bespoke reactive service costs 0.5% ongoing. This covers part of these services, with a top-up fee for additional work such as ISA wrapping and rebalancing if the client wants it.
Finally there is a transactional service at 0%, which covers newsletters and contact. The client then pays for anything additional they may want. ‘We’ll write to them and say what we’re charging,’ says Thomas. ‘It won’t be big because we’re in Pembrokeshire. We’re a world away from London and we can’t charge £5,000 fees.’
Hiring can be a struggle due to the firm’s remote location. ‘The nearest university of note is in Swansea,’ Thomas says, adding that young potential recruits tend to head to London for financial roles.
‘Growth has to be very organic and very careful,’ says the managing director. ‘I’ve managed teams in the past in retail and financial services, and if you get the wrong person in it can ruin everything.’ Despite the risks, he has made two new hires: client account manager Katy Owen and trainee financial planner Emma Jones.
In spite of this effort to get the right people in, plans have gone awry in the past.
Prior to the hire of Owen and Jones, Thomas and Thomas had brought in a young trainee adviser, taking him from scratch through the RO exams. However, he later decided that financial advice was not for him. Thomas believes this ‘set us back a good few years,’ though there is no hint of acrimony. ‘He’s actually a client of ours now, and we’ve stayed great friends,’ he says.
Credibility and customisation
In 2006 when the firm was set up, prior to the retail distribution review (RDR), Thomas and Thomas was ahead of the curve, with a fee-based proposition, a quarterly review system and in-house control over investments.
Since then Thomas has made few changes to his advice process but he says that, post-RDR, having credibility is of utmost importance. He has built this by becoming chartered in 2012, a fellow in 2016 and having the firm chartered in 2013.
Changes he has made include designing a ‘Ready Regna’ asset allocation tool, as well as the ‘Pro-Flow’ cashflow modelling tool.
He is keen to embrace technology but mentions he would rather not buy in tools unless necessary; a prime example being Simplybiz’s compliance offering, which he describes as ‘extremely good’ at providing an external audit and verification.
Thomas has also looked at newer technology that allows clients to alter the inputs themselves, but is concerned this might represent a step too far.
‘It’s wonderful but I’m concerned it’s a bit like "Doctor Google", where you go on Google because you’ve got a sore throat, and then convince yourself it’s something far worse.
‘If my client is paying for professional advice, it’s my job to operate the cashflow with them, show them and explain what realistic looks like. Otherwise there’s a danger of a car crash further down the line.’
Above and beyond
The Thomas and Thomas process is paying commercial dividends, but in some ways the business model is a product of its Haverfordwest location. The typical client has £180,000 to invest, is retired, and likely worked in local government or a local oil refinery.
In terms of new clients, Thomas receives plenty of word-of-mouth referrals, meaning the firm’s marketing costs are next to nothing, but his close working relationships with professional connections have also brought in clients.
‘I don’t believe in just going "there’s the phone number of a lawyer",’ he says. ‘I set the meeting up, take the client to the meeting, sit in the meeting, and I prep the lawyer beforehand.’ How many advisers do that? ‘It really pays off,’ says Thomas.
Clients’ ethical needs catered for and changed quickly via in-house risk-rated system
Thomas and Thomas manages all investments in-house. Client money is placed across five risk-rated conventional model portfolios, and three ethical model portfolios. The team commit a week every three months to provide in-depth quarterly reviews.
For this review, the whole team blocks out their diaries to backtest portfolios for volatility, invite fund managers to contact them (typically six or seven will respond), grind the numbers on the portfolios and decide where changes should be made. Following this, clients will be emailed a short report explaining why changes are needed, with information on the new fund(s) and a request for permission to adjust. ‘50% of our clients respond in 24 hours, and 90% respond in 48 hours,’ says Thomas, who credits the speed of the response to client education.
Although the conventional portfolios are rated 1-5, the ethical portfolios are rated 2-4 as Thomas does not believe there is a large enough range of funds to provide a fully defensive portfolio. Equally, at the higher end of the risk spectrum, he feels funds start to lose their ethical edge. £6 million of client funds are currently on the ethical proposition, and these funds are increasingly becoming a regular feature of client portfolios. He accepts that ethical screening requires extra work, but says clients appreciate it.
Thomas says most of his clients have ethical holdings to some extent, and adds that these portfolios have outperformed the conventional alternatives. Many of his clients have gone from working in oil refineries to investing in renewables. ‘Often they’ve got more of an insight into the future of oil,’ he says.
Funds in the Thomas and Thomas Adventurous 4 portfolio include Jupiter India, managed by Citywire A-rated Avinash Vazirani; MFM Slater Growth managed by A-rated Mark Slater; and Schroder Recovery, which Thomas says he stuck with when it was at rock bottom due to speaking with its fund managers, Kevin Murphy and Nick Kirrage, at a Citywire event in Chepstow.
Tried and tested
There is a lot to be said for Thomas’s competitive nature and determined spirit. He has raised more than £7,500 for Cancer Research through various running events. Meanwhile at his local church, he has grown the Sunday school from three children to 36, through the launch of a children’s choir.
‘I believe in testing myself,’ he says. ‘Life is too short. Go and do things. If you think you want to do it, go and try it.’
Thomas today bears little resemblance to the uncertain carpet shop employee. ‘I’m enjoying being me,’ says Thomas.
‘I’m not wonderful, I’m full of faults, but I love my life and I’ll do anything I can to help others enjoy their lives too.’
FIVE TOP TIPS
- Treat every day with clients and staff as an interview; be on top of your game.
- Filter out negative headlines and statements; happiness is a mindset.
- It is OK to worry about clients. When you stop worrying you are vulnerable.
- Profit is sanity, turnover is vanity.
- 80% of your problems will come from 20% of your clients. Do not be afraid to end client relationships that cost your business consistently.