David Evanson is leading Cowens back into the familiar territory of corporate advice as demand for auto-enrolment services grows.
Just when David Evanson, managing director of Cowens Financial Services, thought he had left corporate advice behind, auto-enrolment has dragged him back in.
Evanson has been building an ongoing private client model based on lifestyle financial planning at Cowens, while moving away from workplace pensions.
He started the Mansfield-based company 27 years ago as part of a wider group, RA Cowen & Partners, and grew his side of the business by focusing on the corporate pension market. But after the introduction of stakeholder pensions narrowed margins for advisers, Cowens switched the emphasis towards providing advice to individuals.
Auto-enrolment has presented an opportunity to move back into group pensions, but Evanson says it took a lot of soul searching to decide to take up the challenge.
The draw of auto-enrolment
‘Initially we were not going to get involved in workplace pensions again,’ says Evanson. ‘We were looking to get rid of our corporate book and focus solely on lifestyle financial planning, but the old pensions manager in me kicked in and I realised we should do it.
‘There is a lack of quality advice to help people meet their auto-enrolment obligations. With an estimated 1.2 million companies staging between now and 2018, there is a massive job to be done.
‘We had to work with our existing corporate clients on this anyway [the company still has £30 million under advice in 50 small schemes]. We also have an associated commercial insurance business and our colleagues there wanted us to get involved and offer a good proposition [to their clients].’
Hearing what Steve Bee, founder of Jargon Free Benefits, had to say about the opportunities in auto-enrolment also helped to persuade Evanson. ‘I have been a big fan of Steve’s for a number of years,’ he says. ‘He is very perceptive and has read the market correctly.
'He realised early on that auto-enrolment is not principally a pensions issue but a compliance issue, and that a systems-based approach to compliance is essential if employers are going to meet their workplace pensions obligations.’
Cowens has recently formed a new company, Cowens Employee Benefits, to provide advice to new corporate clients.
Cowens has operated a full financial planning model, including the use of cashflow planning program Truth, for the past five years.
‘In 2008, I attended an open day at Prestwood Software,’ says Evanson. ‘Paul Armson inspired me and I came away thinking we were not doing proper lifestyle financial planning at the time. I saw it as a weakness in the business, so we signed up for Truth software.
‘Now we are totally committed to lifestyle financial planning and Truth. Users do find it complicated, but it is comprehensive and every client sees the benefits.’
Cowens describes itself grandly as ‘lifestyle financial architects’. ‘The IFA name and brand became tarnished,’ explains Evanson. ‘So advisers started to call themselves financial planners, despite the fact that many did not offer a proper financial planning service.
'When a major bank advertised that it had a financial planner in every branch, I decided it was time to try to differentiate ourselves from them and others not providing the service you would expect from a financial planner. "Lifestyle financial architects" reflects the fact that we produce comprehensive financial plans and manage them as an ongoing project.’
A blended passive-active approach to add alpha
Cowens outsources its investment and predominantly uses a range of multi-asset, multi-manager funds from Seven Investment Management (7IM) and Architas, and full discretionary fund management from 7IM.
‘As financial planners, we want to spend most of our time advising clients on financial planning and we don’t have the resources to provide an in-house proposition,’ says Evanson.
‘We have had a long-standing relationship with 7IM. But we also like Architas as an alternative; its fund performance has been quite credible.’
Cowens uses active and passive approaches or a blend.
‘7IM were a bit ahead of the market in offering that combination of active and passive,’ says Evanson. ‘We have used the blended approach for some time to help add alpha.
‘Architas has now launched the multi-asset blended funds [to get the best of both]. Its fund managers do not have a set target of how much of the portfolio should be made up of active or passive funds, but use their judgment to decide which style will provide the best value.
‘We also use Architas’ active and passive approaches. A lot of the decision is down to the client’s risk strategy. If it is high risk, then a more active approach is fine. Most fall into the medium-risk strategy, for which we would use a combination.’
Evanson says 7IM is currently generally overweight equities and underweight bonds, and he is satisfied with this approach because he does not think most equity markets are overvalued.
‘But I may be wrong,’ he says. ‘That’s why I am happy to outsource to fund managers who apply strategic and tactical asset allocation to their portfolios.’
The firm charges up to 0.75% a year, with a minimum of £2,000 to £3,000 depending on the service level. Evanson believes percentage charges could eventually die out though and is transitioning clients to a flat fee. So far only about a third have completed the move.
‘If clients prefer to stay on the old basis, we will leave them,’ he says.
‘But adviser charging is under threat. I think it is already on the regulator’s mind. The retail distribution review removed blatant concealing of remuneration, but adviser charging is still there to be abused and it is being abused.’
He refers to the news that the Financial Conduct Authority is looking at ways of checking that clients are happy to pay ongoing fees every two to three years. ‘That will focus people’s attention and probably introduce some price competition as well, but not in our particular sector, as I have not come across many lifestyle planners,’ he says.
Employee benefits arm
As well as providing advice to new corporate clients, Cowens Employee Benefits will focus on helping companies meet their workplace pensions and auto-enrolment duties. Evanson says a new marketing and distribution approach is required because it is a totally different proposition from lifestyle financial planning.
‘We know that some advisers in this market are adopting the old model of focusing on the sale of a pension scheme,’ he says. ‘A pension scheme is part of the solution but it is not the major part for most employers. It is a compliance issue. We can’t see how employers will be able to meet all of their statutory obligations without adopting a systems-based approach that can work with their payroll and pension providers.
‘As well as all our existing clients and those of our commercial insurance brokerage who have to meet this obligation, we are also talking to professionals, particularly accountants, who are the people that companies will turn to. The level of knowledge out there is surprisingly low.’
Evanson recruited Paul Rodgers, from advice firm Harold Wilson Financial Services, as corporate financial planner in June to beef up the employee benefits team.
Rodgers says: ‘If the marketing plan works, there will be a tidal wave of clients coming in, due to auto-enrol between now and 2018. What will make the difference on turnover in future years is the adoption of our workplace solution. We have become licensees of Jargon Free Benefits, which is a fee-based computer software package. That will create recurring income; the numbers could become quite amazing in the long term.’
Rodgers says the companies staging between September 2013 and April 2014 – those with between 160 and 1,250 employees – will probably want consultancy advice.
‘Beyond that, when we get to the next tier we see an automated solution as being more appropriate. We are developing a strategy to attract business owners, but we also want to roll out the process to companies that don’t necessarily need consultancy. That will be an off-the-shelf online solution, where the employer has access to most of the tools required to become compliant, through a software solution that we will license to them.
‘We will still provide support for the selection and recommendation of an appropriate workplace pension scheme and the cost of this will be included in the licence fee.’
Evanson says the financial planning model will continue as it is, but Cowens Employee Benefits advisers will mainly provide compliance and systems solutions to help corporate clients meet their auto-enrolment obligations. ‘Pension advice is secondary to its main function,’ he says.
Cowens’ income took a tumble in 2011 following a transition from upfront commission to ongoing fees. Staff numbers also fell by a quarter last year.
‘As part of that transition… some of our staff may [not have] adapted to the challenges. We lost an adviser and paraplanner, and we slimmed the business down to a healthier proportion,’ says Evanson.
Turnover has struggled to bounce back. However, Evanson is gradually looking to expand the firm again by taking on a graduate trainee. ‘The business has remained fairly static over the last three years,’ he says. ‘But we have consolidated, our overheads have gone down as well, and recurring income has increased.’
Both the Cowens financial planning and employee benefits businesses gained corporate chartered status this year. Evanson wants to use this and Sifa membership to help develop professional connections more actively.
‘Chartered status has helped open more doors,’ he says. ‘Solicitors are more aware of the concept of integrating financial services. And the workplace pension requirements will create opportunities with accountants.’
Team effort: (L-R) David Baggley, project manager; Tony Duckworth, director; Sara Hough, accounts and administration co-ordinator; Tracey Scotting, corporate financial co-ordinator; Caroline Royle, director & head of compliance; Katie Evanson, assistant project manager; Gill Evanson, accounts administrator; David Evanson, managing director
Evanson, who started in financial services in 1978, has forged some close networks over the years. He has been a freemason for 24 years and family connections are also strong: his wife and daughter both work at Cowens, and he has five siblings who all live within five miles of each other in the Nottingham area.
As a result of the focus on developing employee benefits, Evanson says his work-life balance is uneven but is better than it used to be. ‘I used to work every Saturday. I was working very long hours to get the business established,’ he says. ‘But you can’t carry on at that pace, so you get the right people alongside you and don’t expect them to do things that you did.’
Freemasonry also takes up a lot of his time. He is a member of three different orders, has been chair of two lodges and is provincial officer in Nottinghamshire and Derbyshire.
‘Most people have a misconception of freemasonry,’ says Evanson. ‘People who try to join it to get ahead soon find out they are not appreciated. I have never used it to promote the business. I have clients who are freemasons. It doesn’t change the relationship but it does give them more trust. There is a strong moral code in freemasonry, as there is in being a chartered financial planner.’
1986 - present Cowens Financial Services, managing director
1985 - 1986 Royal and Sun Alliance, pension sales manager
1982 - 1985 Phoenix Assurance, life sales superintendent
1980 - 1982 Phoenix Assurance, City life inspector
1979 - 1980 Phoenix Assurance, life inspector
Personal Finance Society
Chartered Insurance Institute
Institute of Financial Planning
Chartered financial planner
Associate of the Institute of Financial Planning
Advanced diploma in financial planning
- Award in long-term care insurance
Looking to the future
Evanson says while most people say regulation is the biggest challenge facing the industry, he thinks it is about becoming accepted as a profession.
‘I am excited that we are getting there,’ he says. ‘The quality of advisers has improved. My daughter Katie is taking her professional exams now. She has only known lifestyle financial planning, which is great. She can whizz around Truth and she gets it.
‘We used to have individual targets but they have gone. Now we have a reward system, which gives a share of profits to staff every year. It is not a contractual requirement but we recognise the value of the team contribution. The way advisers are remunerated has come under scrutiny from the regulator, but we had already started that before RDR.’
Evanson has no plans to sell the business. ‘We have good people coming along and there is no reason to,’ he says.
‘I will probably take more holidays and work part-time in a consultancy role, but I have no clear plan to retire while I enjoy what I am doing. But I don’t want to recruit lots of advisers. My other directors, Caroline Royle and Tony Duckworth, make a valuable contribution and it is a family business too, with family members involved.
‘We have had our difficulties over the years with people. My tip is to employ people with similar principles to yours. We have a happy team but they work hard and they care about clients. The relationships they have with clients are similar to mine.’
He says his other main activity outside work is walking his two Cairn terriers, Rio and Rosa, with his wife, Gill, who works on management accounts and payroll at the firm.
‘Gill is my best friend,’ says Evanson. ‘We have had Cairn terriers all our married life – 35 years.’
Evanson will hope his familiar team can take the firm to the next level in years to come.
Five top tips
Always have one eye over the horizon.
Work with people who have similar principles.
Systemise as much of your business process as you can.
Define and focus on your target market.
- Remember, you’re on the bridge, not in the engine room.