New Model Adviser - For Professional Investors

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Adviser Profile: Saran Allott-Davey and Chris Jordan of Heron House Financial Management

1 Comment
Adviser Profile: Saran Allott-Davey and Chris Jordan of Heron House Financial Management

Cover star veterans Saran Allott-Davey and Chris Jordan have proved their pedigree, offering an ongoing service at Heron House Financial Management that can compete with the rest of the field.

Saran Allott-Davey, managing director of Newport-based Heron House Financial Management, last featured as a New Model Adviser® cover star in 2007. Since then, the financial planning pioneer has kept pushing the firm forwards and won an incredible six of the eight New Model Adviser® regional awards she has entered the firm for since then.

SARAN ALLOTT-DAVEY CV

  • 1994-present Heron House Financial Management, managing director
  • 2005-2007 AXA Avenue Project, consultant
  • 1988-1994 Sun Life of Canada, sales manager
  • 1987-1988 Natwest Bank, graduate management trainee

PROFESSIONAL MEMBERSHIPS/QUALIFICATIONS

  • Chartered Wealth Manager
  • Investment Management Certificate
  • Chartered Financial Planner
  • Fellow of the Personal Finance Society
  • Certified Financial Planner

Pillars of the community

Allott-Davey and Heron House director Chris Jordan have long been at the forefront of the new model movement, using a fee-based model since the firm began 23 years ago, and having key roles in running the South Wales branch of the Institute of Financial Planning (IFP).

In 2007 the firm had £75 million assets under advice (2017: £243 million) and 350 active clients (now 457). Since 2007, the firm has enhanced its ethical focus, both in term of investments but also in the way it treats its staff and clients. It also takes a wider role through volunteering and a corporate partnership with Gwent Wildlife Trust.

CHRIS JORDAN CV

  • 2001-present Heron House Financial Management, director
  • 1994-2001 Cavendish Financial Management, independent financial planner
  • 1991-1994 Mount Stewart Financial Services, IFA
  • 1990-1991 Sedgwick Financial Management, IFA
  • 1987-1990 Clifton Financial Management, IFA

PROFESSIONAL MEMBERSHIPS/QUALIFICATIONS

  • Chartered Wealth Manager
  • Investment Management Certificate
  • Chartered Financial Planner
  • Fellow of the Personal Finance Society
  • Certified Financial Planner

Expansion plans

Jordan says this partnership fits the firm’s ‘town and country’ ethos. While Heron House has kept its urban location due to its proximity to Newport rail station, he and Allott-Davey now live in the countryside and have built home offices from where they can also see clients.

Jordan says: ‘We have both worked on our work-life balance, as we recommend our clients should. There was a time when we both worked six day weeks. But now we do four or four-and-a-half days.’

Heron House has doubled its income since 2007. It bought the Victorian mansion next door to its office in Newport, knocking a door through, to double floor space.

The firm has focused on raising the amount of assets per client, and rarely takes on clients with less than £500,000 of liquid assets. All 457 active clients are serviced by Allott-Davey or Jordan plus a team of support staff that include junior advisers, paraplanners and administrators.

‘People say you can only handle 160 to 180 clients per adviser,’ says Jordan. ‘We do more than that because we have three technical people looking after each client.’

Allott-Davey says having six technical support staff – soon to be seven – allows the lead advisers to focus on developing the investment proposition [see box on page 25], which ‘has moved on tremendously and gets increasingly good results, all included in our 0.5% ongoing financial planning charge. We rarely come across such a proposition elsewhere.’

Heron House has enjoyed steady organic growth for many years, based on client referrals, four or five solid professional connections and occasional conferences. Income has only fallen once, slightly in 2016, after one adviser left the firm.

Despite only charging 0.5%, Heron House has also continued to increase recurring income in total and as a percentage of overall revenue by increasing average assets per client.

FEES

Heron House charges for initial planning at either 1% or 2%, or an hourly rate of £175. Ongoing fees are 0.5% for all clients. Allott-Davey says: ‘There has been a big move towards firms like ours charging more than 0.5%. But we shouldn’t be greedy. It annoys me when business consultants say: "we can show you how to charge 0.75% and 1%". If we did that, all our clients would accept it because they trust us. We have a duty not to help ourselves to as much of their money as we can. But some people do.

‘To keep ours at 0.5%, we had to target [high-net-worth] clients. The best way to achieve that was to explain to existing clients and professional connections that these were the suitable clients for our services. Then it falls into place.’

For the ongoing charge, clients receive a range of services, broken down into 12 areas. These include: maintaining financial plans, annual reviews, unlimited contact, portfolio management, professional links, hassle-free administration, second opinions, inheritance tax and estate planning, other tax planning, retirement planning, and services for close family.

Qualified success

Allott-Davey and Jordan have charged ahead with qualifications.

Allott-Davey says: ‘Chartered is the most important of those as clients understand the word. However, we are great believers in proper financial planning as well. We like challenging ourselves to be at least as good as everyone else. That is also why we entered the New Model Adviser® awards so many times.’

Heron House now has a graduate scheme, which has taken on two new staff in the past two years, with a third job just offered.

‘The first of those has taken all his exams and became an adviser within two-and-a-half years,’ says Allott-Davey. ‘The second is nine months behind him. To make such a scheme work, you need a clear structure so they understand their career path. Make sure there is a role for them at each stage and make that exciting, interesting and lucrative enough to make them want to stay.’

They hope more firms will help develop the next generation of financial planners by creating graduate schemes. Allott-Davey says: ‘There is huge work to be done. My son was given a book on career possibilities with 150 options, but it did not mention financial planning.’

Jordan adds: ‘We also talk to local universities, offering to take people on work experience, but they send CVs of people who want to be accountants.’

Bespoke portfolios offer ethical option for all clients

Allott-Davey and Jordan say an in-house investment service makes Heron House valuable to high-net-worth clients. While both hold the IMC they decided not to get discretionary permissions for the firm because, as Allott-Davey says, ‘we want our clients to be involved in the decisions’.

For clients with smaller investment pots, Heron House uses multi-asset funds, such as the Seven Investment Management AAP range. But it uses bespoke in-house portfolios for most.

Allott-Davey says: ‘We hate model portfolios with a passion because all clients are different. Every time you make an investment decision you impact the portfolio with potentially expensive consequences for individual clients so you shouldn’t do that across the board.’

The portfolios use a range of vehicles, including multi-asset funds, investment trusts and exchange-traded funds (ETFs). Jordan says: ‘We use ETFs often to access more esoteric asset classes, for example, [green] themes such as iShares Global Water and Impax Environmental Markets. They are a good story in terms of investment and the environment. Also we are long-term investors, so we love the long-term view that investment trusts take.’

At the firm’s last investment meeting it started to reduce allocations to US equities in favour of those in UK, Europe and Japan, based on valuations. Jordan says: ‘We are concerned about the pound returning to something closer to its long-term average.’

A typical client portfolio beat the AFI Aggressive benchmark last year and in 2014; and underperformed it in 2015 (see chart above). Jordan says: ‘The underperformance was due to too much fear in markets. The assets were undervalued, so we changed nothing and performance recovered last year, also helped by the sterling devaluation.’

Around 25% of Heron House clients have purely ethical portfolios. The complexity of ethical views and screening is another important reason for being bespoke, says Allott-Davey.

Spreading the word

Allott-Davey suggests firms should not be shy to push their young recruits forwards when it comes to speaking to the press. Quotes and contributions are our bread and butter at New Model Adviser® and many planners have built their standing in the profession from their regular engagement with the trade press and then national press.

‘We would like to see our younger planners entering awards and having more of a voice in the press because we did that extensively for years and it shaped our experience,’ says Allott-Davey.

‘Building profile is important because it’s a big thing to refer your friends to a financial adviser, so it helps to have that brand awareness from media work and awards. It also means good people come to us looking for jobs, often persistently.’

The firm holds conferences for clients and potential clients, covering issues such as pensions legislation changes and inheritance tax planning; and they want younger staff to start presenting at those too.

Setting the standard

Allott-Davey and Jordan are no longer involved in running their IFP branch as they also feel it is time to hand that on to a new generation.

However, Allott-Davey says she has been less involved because the various professional bodies need to consolidate.

‘I suppose the IFP joining with the Chartered Institute for Securities & Investment means there is one less body, but I have long thought IFP and the Personal Finance Society was the obvious merger,’ she says. ‘Once they were worlds apart but they have come much closer.

‘The profession is too fragmented, so we need to stop being competitive and all come together to represent good financial planning. The PFS should be the body to do that. Instead of a raft of different qualifications, chartered needs to be the standard because that is what clients understand.

‘Everybody deserves access to a financial planner and we shouldn’t be snobby about the term and who provides it. We can all call ourselves financial planners if we up our standards generally and we have a duty to train and encourage them all.’

Shared ethos

Allott-Davey and Jordan own the firm jointly and pay themselves salary and dividends from profits. They describe themselves as friends who became business partners, and appear to have a strong rapport.

They say they will never sell the firm to a third party as they feel the ethos would not be replicated.

Allott-Davey says: ‘Because we are working fewer hours, we feel we can go on for much longer. We have put much thought into succession and will pass on responsibilities gradually.’

What does she think the next generation of new model firms will look like?

‘Those who overcharge will come under pressure as it becomes easier for people to access advice. Keeping our adviser charge under 0.5%, ongoing charges figure under 1.5%, and delivering lots of extras is a model that can survive.’

FIVE TOP TIPS

  1. Always put clients’ interest first. Do not raise fees just because they trust you.
  2. Build trust between your clients and your team, so clients are not reliant on you for everything.
  3. Only work with clients and staff with whom you enjoy spending time.
  4. Practice what you preach so make sure your own finances, fitness, family and friends time are all well tended.
  5. Create the best possible working environment for your team.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Comment & analysis

Twitter