Ian Browne and Helen Lindo want to expand Russell Ulyatt, but having learned a harsh lesson when overreaching too soon, they have tightened procedures and have long-term plans in place.
Nottingham-based Russell Ulyatt Financial Services has expanded dramatically in recent years, with funds under advice nearly trebling since 2012.
The pace of change at the firm must keep accelerating to stay ahead of market trends, say director Helen Lindo and head of advice Ian Browne. Ulyatt already has 57 staff and around £400 million of funds under advice. Expanding further will require significant additional investment in staff, training and infrastructure, and learning the lessons of recent growing pains.
Russell Ulyatt is not quite as ancient as Nottingham’s 900-year-old pub, Ye Olde Trip to Jerusalem. But it does trace its roots to 1881, when a group of insurers joined to form Scanlan, which later became Russell Scanlan.
In 2003 a later incarnation, Russell Tomlinson, joined with FS Ulyatt to become Russell Ulyatt Financial Services. Its fee-based wealth management and lifetime planning services, which are now its main business, were launched in 2007.
The firm had a large existing base of clients. But it took two large segmentation exercises, in 2007 and 2012, to establish the current bank of 1,500 active clients.
‘We started developing a service proposition with a large fee menu, which we later simplified,’ says Lindo. ‘In the second segmentation, we barely broke even on some smaller, sub-£100,000 clients. Since then, we stopped taking on clients below that amount.’
Browne says they started with an overcomplicated investment proposition that they later simplified into one set of in-house model portfolios (see investment box below). Another important change was to centralise existing advice processes and due diligence, rather than leaving it to individual advisers.
HELEN LINDO CV
2012-present Russell Ulyatt Financial Services, director
2001-2012 Russell Ulyatt Financial Services, IFA
1994-2001 The Wilson Organisation, paraplanner
- 1984-1993 Norwich Union Life, team leader and pensions administrator
Chartered Financial Planner
Level 6 Advanced Diploma in Financial Planning
The firm has grown quickly by acquisition and through developing professional connections. But this expansion came at a cost. Following a period, between 2012 and 2013, where funds under advice nearly doubled, the firm received three client complaints stemming from errors by paraplanners. Russell Ulyatt acknowledged these and paid compensation.
‘We learnt the lessons and changed processes rapidly,’ says Lindo. ‘We went to four eyes checking calculations rather than two. We introduced calculation software to double-check our work and undertook training. Now we are committed to continual development of processes and training staff.’
Russell Ulyatt paraplanners must now be at least level four qualified and studying towards chartered status. The firm supports exam entries, gives time off to study, and provides mentoring for advisers and administrators.
‘We were almost overheating at that time,’ says Lindo. ‘We were bringing on new clients so quickly we felt the pressure in other areas and were starting to outgrow our infrastructure.’
In response, they created Browne’s position, recruited 11 more staff in the past three years, and are still looking for more. The current total includes nine paraplanners and 15 advisers.
‘With over 50 people, you need more specialist functions,’ says Browne. ‘Six months ago, we engaged business consultant and coach Rachael Hurdman of Arch Inspire, to run new adviser and leadership development programmes.
‘We gained corporate chartered status in 2016. That is a technical service standard but [we are adding softer skills] like deeper questioning techniques.’
IAN BROWNE CV
2014-present Russell Ulyatt Financial Services, head of advice
1991-2014 Standard Life, regional platform manager
1990-1991 Scottish Amicable, broker consultant
1988-1990 Standard Life, broker consultant
1987-1988 Sun Alliance, trainee broker consultant
Financial Planning Certificate
- Investment Management Certificate
Russell Ulyatt has two joint ventures and around 20 other professional connections. But it wants to simplify again, by reducing it to around 10 deeper relationships.
Lindo, who trained in advising divorcees with law firm Resolution, says the firm wants to work more with solicitors.
‘We are focusing on people at retirement, when sometimes the accountant’s relationship is ending but the lawyer’s is just starting,’ she says. ‘I work with several family lawyers and [they recognise] the cashflow planning we use helps people who are divorcing.
‘They may want to keep their houses but do not realise they cannot afford to run them. So the lawyers involve me because they need their clients to understand this.’
Browne says chartered status will help strengthen relationships with lawyers. ‘We are looking at what else to study [to align with them], such as the Society of Trust and Estate Planners certificate,’ he says.
Russell Ulyatt made a large investment in IT infrastructure recently, by moving its back-office system to Iress Xplan.
‘We went for the bespoke version of Xplan, so we can code it ourselves and control the interface and reporting,’ says Lindo. ‘We don’t want to rely on a third party to develop what we want.
‘Some of us have had to learn coding, but it will help ensure everything we do is robust, scalable and repeatable. The more clients you have, the slicker your IT needs to be so risk does not increase.’
‘Previously it was a big frustration we supposedly had the most popular back-office system and the biggest investment platform, but we couldn’t get a valuation report we liked,’ says Browne. ‘We would like wrap platforms to provide more data, such as transaction histories.
‘We have been considering whether to use Xplan’s investment management system to produce independent valuations instead of parochial wrap platform valuations. That would make quarterly reporting and bulk communications more streamlined.’
‘We are also considering using Xplan’s cashflow modelling,’ says Lindo. ‘We still want best of breed, but all software providers need to get better at integration. Whether it can talk to your back office becomes an important part of the decision.’
‘We use (financial planning software) Truth, which is incredibly analytical and may still be suitable for some clients,’ says Browne. ‘But the best route is one where we can avoid rekeying.’
Russell Ulyatt’s fees are up to 3% initial (typically 2%) and 1% ongoing. For the ongoing fee, clients receive unlimited access and a 10-point wealth management plan, including cashflow review, estate planning and joint meetings with accountants and lawyers. They also receive regular communications and valuations.
‘We are not feeling any pressure from clients on the 1%, [especially when they realise they might be paying more to] a private stockbroker or bank,’ says Browne.
‘We typically deal with clients at or near retirement with significant wealth,’ says Lindo. ‘So if we save them tens or hundreds of thousands on inheritance tax, our fee is good value.’
Can such higher end percentage fees survive?
‘In future, we want to see if we can charge lower initial fees,’ says Browne. ‘But that will be for us to compete rather than clients insisting on it. The more money you have, the more you pay but, if we are doing a good job, the more you will gain.’
Investing for the future
Another important aspect of Xplan is clients will input their fact-find information with two-way secure document exchange. It will help the firm price work accurately and provide better management information. So business managers will see when a work crunch is approaching further off and will have time to recruit and add capacity.
These investments in staff, training and software have led to profits falling slightly in the past two years, in terms of total, percentage and per staff member. But the directors anticipate these figures will climb again by next year.
Lindo says the aim is to keep growing 15% a year, which is crucial to the long-term sustainability of the business. This is because so many clients are drawing income, which means their assets are falling and may disappear entirely when they die.
Property returns to mostly passive in-house portfolios
Russell Ulyatt has six in-house portfolios, mainly invested in passive funds from managers such as Dimensional Fund Advisors, plus some legacy active funds.
The firm uses consultant Tim Hale of Albion Strategic Consulting. He sits on the investment committee, monitors fund and portfolio risks, challenges strategy where necessary, and selects funds based on factors such as size, charges, return capture, style and liquidity.
In the past six months, the firm moved from zero to 6% in property in its 60% growth assets portfolio. ‘We regard property as a diversifier and chose the BlackRock Global Property Securities Equity Tracker fund as it is a liquid, daily traded vehicle,’ says Browne.
The Russell Ulyatt Moderately Adventurous portfolio outperformed the AFI Balanced benchmark last year but trailed it in the previous two. ‘That portfolio tilts to small caps and value, so the value side would not have performed as well as growth in 2014 and 2015,’ says Browne. ‘But last year there was a positive contribution from value stocks, smaller companies and emerging markets, plus sterling depreciation brought currency gains.’
The firm started providing tailored income portfolios recently. These start with lower volatility assets to mitigate sequence risk for those entering retirement, then move towards riskier assets as time periods lengthen.
The firm changed the way it pays advisers last year by giving them a higher basic salary, plus a bonus linked equally to new and ongoing business, and to behavioural objectives. ‘Previously we were overpaying for servicing revenue as recurring income grew,’ says Browne. ‘Now we need to switch the focus back towards new business to ensure growth.’
The firm is owned by director Kevin Jow and managing director Andy Dyke (pictured below). They are not planning to sell, but instead aim to bring on potential future shareholders in the business.
‘We are looking at how to encourage the next generation,’ says Browne. ‘Profit-related pay may incentivise people to not reinvest, so we are currently taking advice on how to do it better.’
The work-life balance ebbs and flows. ‘We have put a lot of change through the business in the past three years,’ says Lindo. ‘That can make your own life uncomfortable at times, but we plan to see those things through.
‘It is a work in progress, but it is nice to have a secure business with recurring income covering fixed costs. It is exciting to know we can attract new clients from professional connections and by continuing to improve our marketing.’
FIVE TOP TIPS
Have a business plan and hold yourselves accountable to it with a scorecard.
Make sure the right people are in the right roles and develop them.
Treat recruitment as an ongoing business strategy rather than just to fill a vacancy.
Work with specialists who get to know your business and what you are trying to achieve.
Have a structured plan for all communication, such as regular meetings and one-on-ones.