Warren Shute is committed to providing clients with a financial education at Lexington Wealth Management. The author, master’s student and master practitioner in neurolinguistics is also on a mission to be the best he can be.
Warren Shute’s zest for financial planning and education is immediately evident when I meet him at his comfy office: a large wood cabin next to his home in rural Wiltshire.
The director of Swindon-based Lexington Wealth Management says he is on cloud nine. This is due to winning the Certified Financial Planner (CFP) Professional of the Year 2017 and achieving New Model Adviser® Top 100 firm status for the second year running.
‘I’m blown away,’ he says. ‘I think I won these awards mainly because I am passionate, enthusiastic and I love what financial planning can do.’
Shute entered the CFP award for the first time this year. ‘I thought I was internally referenced: I don’t need approval. But I am pleased and proud, and our clients will find it reassuring,’ he says.
WARREN SHUTE CV
- 2006–present Lexington Wealth Management, director
- 2014–present Lexo.co.uk, director
- 2011–2015 Dennis & Turnbull Wealth Management, director
- 2003–2006 Lexington Financial Planning, director
- 2001–2003 Lexington Independent Financial Advisers, principal
- 2000–2001 Dolphin Investments, IFA
- 1998–2000 Castlegate Investments, IFA
- 1997–1998 Inter-Alliance, IFA
- 1995–1997 Pearl Assurance, adviser then area manager
- Certified Financial Planner
- Chartered Financial Planner
- Fellow of the Personal Finance Society
- Associate Member of the Institute of Professional Will Writers
- Masters in Financial Planning & Business
- Fellow of the Institute of Financial Planning
- Chartered Wealth Manager
- Chartered Fellow of the Chartered Institute for Securities & Investment
Spreading the word
Shute is also excited about the imminent launch of his book The Money Plan. This educates people on managing their finances in areas such as: identifying and setting goals; financial organisation; life assurance, wills, trusts, and powers of attorney; reducing debt; and retirement planning.
Shute was inspired to write it by financial educator and broadcaster Alvin Hall, who he has kept in touch with after the two worked together on a BBC programme in the 1990s. ‘Alvin has done a great job on education and I wanted to go in that direction,’ he says.
‘Most advisers are moving towards high-end advice because the more complex someone’s needs, the more value we can add. But there are thousands of people in the advice gap who can’t work with advisers any more. I find it sad when people worry about money. We need to help them.’
Shute also teaches finance in schools and has started writing a second book on money planning for children. ‘I have two young kids, and I’m passionate about being a father,’ he says. ‘If you can raise money-smart kids, you should have fewer problems later. It will focus on areas such as linking pocket money to age, tests on how much they spend, and children’s accounts.’
Lexington charges around £1,495 for initial planning, depending on complexity. For ongoing work, it charges a retainer of £85 to £150 a month. For investments, it charges an additional 1% up to £2 million; 0.85% on the next £3 million; 0.75% on the next £5 million; 0.5% on the next £10 million; and 0.4% above £20 million.
For the retainer, clients typically receive one financial planning meeting a year and unlimited contact. But a typical client has £370,000 to invest, so the total ongoing charge could therefore be around £5,000 a year, excluding fund or platform charges.
‘The retainer is for the financial planning,’ explains Shute. ‘If they invest, they have additional needs, such as tax calculations and work around the investments, so that is charged separately.
‘My aim is not to compete [with those who say that’s expensive]. Clients only pay the fees if they think the service is valuable. We go above and beyond for them and they are happy. We calculated the fees based on how long it takes us to look after clients’ affairs, including meetings and contacts, throughout the year.’
Food for thought
Shute started his career at Pearl Assurance, then worked as an IFA at several firms before setting up Lexington with his wife and finance director Nicky in 2001. They named it after the restaurant in Soho where they were brainstorming ideas for the new firm.
Lexington was initially with Berkeley Independent Advisers network but went directly authorised in 2006, just before Berkeley went into default. In 2005, the regulator censured Berkeley for failure to establish effective systems and controls between 2001 and 2004, after which the network quickly unravelled. The Financial Services Compensation Scheme said it received 300 claims for compensation but Shute says none related to Lexington.
‘[We weren’t affected by these issues], but I felt we had grown to a size where we could be directly authorised,’ he said.
Shute initially grew his client bank by building relationships with accountants and solicitors, encouraged by a joint venture with accountancy firm Dennis & Turnbull in 2011. His vision was to create a family firm providing quality advice to business owners. ‘I don’t want to build the company to sell it or list it. I don’t want a big team of advisers, nor to make acquisitions: that would be a nightmare.’
Shute has been using Prestwood’s back-office system since 2000, and an early influence and mentor was Prestwood founder Paul Etheridge. ‘I like the way he deals with clients. Everything is process-driven and documented. We have adopted similar approaches and made them our own, which has enabled me to do a lot more with a small practice,’ says Shute.
His father is from the US and he makes personal and professional trips across the Atlantic regularly. These have included attending life and business strategist Tony Robbins’ Mastery University in the 1990s and using coach Doug Carter of Carter International.
‘Tony introduced me to the world of personal development and psychology,’ says Shute. ‘I subsequently obtained master practitioner and trainer status in neurolinguistic programming.
‘Doug gave me lots of emotional skills: how you connect with clients to find out whether they have a compelling vision,’ says Shute. ‘Often, they don’t, so that is what they buy from us. That makes the job much more enjoyable.’
Shute says in the future new model advisers will need more of these soft skills. ‘The current focus is on improving technical abilities, but good financial planners will also need to learn what clients want at a deeper level.
‘Some just do financial planning: they might package cashflow modelling or a plan and sell it as a product. They pick it up and put it down. For a financial planner, it is all about finding out what your clients want at a deeper level and helping them achieve that. Talking to clients passionately and excitedly about that differentiates you.’
Shute is also chartered; certified; an Institute of Financial Planning (IFP)/Chartered Institute for Securities & Investment (CISI) fellow; and has a master’s in financial planning and business. ‘If you are not developing, you are going backward,’ he says.
‘The CISI has developed the profession well. Its head of financial planning Jacqueline Lockie does a great job. It is also good that the Personal Finance Society is getting involved with financial planning because that makes everyone raise their game, and improves competition and choice.
‘The merger between the IFP and CISI has been brilliant. The IFP was like a family and I was initially concerned that would change. But I haven’t seen any negative changes. The extra investment has enabled the IFP’s continuing professional development and online learning facilities to grow.’
Shute says his master’s was one of the hardest things he has done. ‘There is lots of writing. But I met some incredibly clever planners on the course and learned about academic rigour: referencing, researching and testing assumptions. It doesn’t earn you more money or more clients, but it is fulfilling.’
Lexington launched its direct-to-consumer investment site Lexo in 2015. It uses the same portfolios as Lexington’s clients, enabling the firm to retain people who might not be suitable for its main proposition.
Shute writes regularly for different newspapers. Writing as founder of Lexo helps him promote the service. ‘I get more awareness from that, rather than just relying on social media,’ he says. ‘Other advisers have also referred people to Lexo. I am proud of it, but it is not profitable and I don’t see it shooting for the stars. We are not trying to take on Hargreaves Lansdown.’
Lexington now takes fewer referrals from professional connections, as those from existing clients are enough to support steady growth. Funds under advice have risen steadily and, this year, a tidy 58% of the firm’s £620,000 income is profit. Shute attributes the high margin to this shift towards client referrals, with nearly all meetings at his office now, and to continual honing of processes.
In-house, passive portfolios offer clients the best chance of achieving their goals
Shute belongs to a group with five other financial planners around the country that meet quarterly to swap best practice ideas and annually to discuss investment. This acts as his investment committee.
Lexington runs six in-house model portfolios with asset allocations based on 20% increments of risk assets. Portfolios are 100% passive with tilts towards small cap and value.
Shute says the commitment to passive is because, ‘Often clients don’t need more money; rather they want more happiness or security. An academically-proven investment strategy that takes certain variables out of the equation, like how a fund manager might perform, improves the odds of achieving that.’
Two of the most popular funds in his portfolios are the Dimensional World Equity fund and the Dimensional Global Short-Dated Bond fund. ‘I like the diversification in these. The equity fund has [a huge number of] holdings and I like its charges,’ says Shute.
The Lexington 80% Equity portfolio fell behind the AFI Balanced benchmark briefly in 2016, but has outperformed it significantly over the last three-year period.
Pleasure over profit
As with many planners, staffing is the biggest challenge for Shute. ‘As a small rural office, we suffer from the lack of technically skilled staff in the area. That was the case with our last paraplanner,’ he says. ‘We therefore outsource paraplanning, compliance, secretarial and IT. But if I could find a great paraplanner, I would bring that in house.’
Staff receive a salary plus a bonus based on personal and corporate performance. Last year, the firm paid the two directors a joint dividend of £87,500.
‘Dividends are growing,’ says Shute. ‘But our plan doesn’t include a target such as £1 million turnover. Having fun and enjoyment is important, not money.’
But it is crucial to earn enough to keep building the business, he adds. ‘Development is around building Lexo; promoting The Money Plan; working on the next book; and building my other website, Warrenshute.com. These are all loss leaders, but we have a strong business that enables me to do them.’
In his blood
Shute says his work-life balance is good. He enjoys spending time with his family, and on hobbies such as triathlon and clay pigeon shooting. In the future, he would love to do more educational work, for example, in helping schools get more finance into the curriculum.
Beyond that, he says he hopes to ‘die a financial planner’ and has no plan to sell up. This may create an issue of succession in such a small firm, but he says: ‘I am 43, so there is no point planning for something that far away yet.
‘My vision is simply to run a successful, happy and ethical financial planning practice that helps our clients achieve their goals.'
FIVE TOP TIPS
- Know what you want to achieve in business and in life. Financial planning is the business of helping clients live the life they desire, so we need to be living our own.
- Provide more value to your clients and staff than you receive back to build a successful and happy business.
- Every night before you leave the office, write down the five most important actions to do the next day.
- Write three things you are most grateful for in your life and then journal a few lines to clear your mind.
- There is only one thing that counts: happiness. So have fun.