Lee Waters has taken over Barwells Wealth from his father and is managing the existing partnership with a law firm while prioritising client welfare over profit growth.
‘A lot of lawyers look down their noses at IFAs,’ says Lee Waters. It is a comment I have heard from other advisers, yet it is not what you would expect to hear from the chief executive of an IFA business integrated within a law firm.
In spite of this common perception, East Sussex-based Barwells Wealth has been making its relationship with QualitySolicitors Barwells work for the past 26 years. ‘It’s a really good fit,’ Waters says.
A decision to report Barwell’s business figures separately from its legal counterpart in 2015 means that we are unable to report any business statistics prior to that time.
What is the key to making it work? Waters, who doubles up as a slow left arm bowler and middle-order slogger for the Balcombe Cricket Club second team during the summer, says it is simply about doing the best for your client.
‘Too many IFAs go in on the basis of "my average fee is £6,000 and I can give you 25% of that," he says. ‘Lawyers just shut off to that.’
LEE WATERS CV
- 2010-present Barwells Wealth, chief executive
- 2005-2010 Homes Partnership Estate Agents, financial consultant
- 2003-2005 Sequence Financial Management, financial planning manager
- 2000- 2002 Woolwich Building Society, adviser
Waters says lawyers are looking to optimise client outcomes, and will work with an IFA who can validate their work and add value. ‘It works really nicely,’ he says. ‘The number of times we both work with the same client surprises me. I thought it would be "them and us," but it’s not. It’s very much integrated.’ Accordingly, Barwells carries out more trust and planning work than your typical IFA.
It has not all been plain sailing for the south coast firm. Waters says there was a degree of scepticism to confront when Barwells Wealth joined the fold.
‘It was very difficult in the first couple of years,’ he says, noting that some members of the team had been concerned about losing control of their clients. ‘Once they realised they weren’t losing control, and that they were actually doing more for the client, it worked.’ There were also reputational issues to resolve, as many lawyers perceived IFAs to be little more than product floggers.
Taking a quick look at Barwells’ numbers, there are a couple of outlying statistics to account for. Firstly, the reduction in employees is the result of three directors being removed from the team, but not the firm as a whole. They were all lawyers, and the decision was made under the guidance of compliance support firm Threesixty.
For those wondering why client numbers have dropped (see business figures below), that was the result of having an older clientele, rather than poor retention. ‘I’m worried about an ageing client bank,’ Waters says, ‘but there is always a ready stream of clients.’
All the other figures look positive, as Barwells has been adding profit and assets under management (AUM) in recent years. At the current rate of growth, Waters is on course for a century, and should drive past the £100 million AUM boundary by the end of 2018.
This is not what Waters is primarily focused on, however. ‘I don’t measure success by profit,’ he says. ‘It’s important, but getting paid is secondary to doing right by the client.’ And the mark of a good firm? ‘Client retention. It is not profit. There are some dreadful firms that make a profit.’
Having said that, Waters is not blind to the realities of business. The growth in profit, combined with a drop in clients, is partially explained by a price rise that was introduced a couple of years back. ‘We did not raise prices by that much, and I think people generally expect things to get more expensive,’ he says. It had been 15 years since the advice costs were previously altered.
Barwells also benefitted from attracting greater numbers of high-net-worth clients, who in turn referred other similar clients.
Barwells offers a financial review service which charges 3% on the first £100,000 and 1.5% thereafter, with a minimum fee of £2,000 and a maximum fee of £12,000. Any hourly fees for this work come in at £215 for an adviser, £160 for a paraplanner and £97.50 for administrative work, unitised by six minutes. A fixed fee is also available.
Financial planning reports (e.g. for a pension transfer) are charged at 3% on the first £100,000 and 1.5% thereafter, with a minimum fee of £1,500 and a maximum of £12,000. Hourly fees are the same as above.
One-off transactional advice is charged at 3% on the first £100,000 and 1.5% thereafter, with a minimum fee of £750 and a maximum fee of £12,000. Hourly fees are charged as above.
One-off cashflow modelling is charged at £1,500, and ongoing charges are between 0.6% and 1%, with a £350 minimum charge.
Waters took over from his father, Roger, in 2014. Roger still advises, and the firm’s ethos is what you might expect from a family business. On a personal level, the younger Waters’ main goals as an adviser are straightforward.
‘I just want to do a good job. I want people to be happy for us to act for them, happy what we charge them is reasonable, and happy to talk to me in Tesco if I bump into them,’ he says.
He points out that clients all receive the same level of respect, regardless of the size of their portfolios. ‘Some people ask "who’s your best client?" Without wanting to be trite, every single client is the most important client,’ he says.
Beyond Barwells, Waters believes in further promoting the advice profession and bridging the advice gap. He has no minimum level of investment for clients, and regularly runs half-hour clinics for clients or prospective clients at a rate of £99 plus VAT. He sees the work as a method of providing an affordable introduction to advice for those who might benefit from an ongoing service.
Waters also regularly connects with local advisers for a business leaders’ forum. The forum, which includes leaders of several of the south’s leading IFA firms, enables open idea sharing and discussions about best practice, without any suspicion.
‘No one is bothered that you’ll take their ideas from them,’ says Waters. The group has pooled resources for training, and every firm currently has trainees on board.
With IFAs across the UK wondering how to recruit graduates and how to create the next generation of advisers, the forum sets a shining example. Credit is due to Matthew Cheek, associate director of Henderson Global Investors, who facilitates the group. ‘There’s no product push at all: we just use Henderson’s room,’ Waters says.
Five-star treatment through carefully chosen managers
Barwells Wealth offers five in-house model portfolios, which are named Barwells three, four, five, six and seven. The model portfolios are risk rated, using Distribution Technology for risk profiling, and the Nucleus Financial and FundsNetwork platforms. Barwells will occasionally outsource to discretionary fund manager Canaccord Genuity, and this is typically, but not exclusively, for wealthier clients.
Barwells has a strong preference for active funds, and aims to beat the Asset Risk Consultants benchmarks while minimising volatility. ‘A lot is said about the underperformance of active funds, but they can be valuable during a downturn. When we select a good active manager, we’re seeking that downside protection,’ Waters says.
Among the managers Waters recommends is Citywire AA-rated Alexander Darwall, who runs the Jupiter European fund. The fund has returned 33.2% in the three years Barwells has held it. ‘He has an extremely strong conviction, with a high active share,’ Waters says. ‘You know what you are getting, which is reassuring to clients.’
Waters backs Citywire + rated Andrew Rose and his Schroder Tokyo fund, which has grown 49.9% since Barwells invested. ‘The performance has been exceptional, and it has the added advantage of a hedged share class, which we have been able to utilise when required,’ says Waters.
- ACTIVE FUNDS: 95%
- PASSIVE FUNDS: 5%
Next man in
Barwells recently took on paraplanner Sean Banks. It is early days but Waters hopes that Banks will have a big role to play in the future of the firm, and is impressed with his contribution so far.
Regarding training costs, Waters concedes that ‘it’s a sacrifice.’ He chooses to accept the costs, rather than take on an adviser who already has a client bank. ‘That brings cultural differences and potential problems with legacy business.’
Barwells seems a fine example of a well-run family firm, with a focus on providing a focused service rather than shooting for the stars. That said, Waters is considering where the firm goes next, and wonders if progress should come via an acquisition, recruitment, or organic growth. He is leaning towards the latter, and enjoys local life too much to want to make any major changes. As he captains Barwells through its next innings, it is obvious he will lead from the front.
‘We’re a good, solid, dependable business,’ he says. ‘We’re not flashy, we’re not trying to be all things to all men. We’re dull and boring, but we do dull and boring quite well.’
You would not put that on your advertising materials, but it is a laudable attitude. He concludes by adding: ‘If people say "he was a nice bloke and he did alright by us," that’s what I want.’ Some people make millions and never achieve that.
FIVE TOP TIPS
- Treat each client the same.
- Respect your employees.
- Have fun.
- Nurture new talent.
- Do it your way and do not worry about what everyone else is doing.