Profile: Mark Robinson on turning new model in the financial meltdown

Mark Robinson hasn’t exactly been blessed with luck throughout his career, but the 38-year-old financial planner has managed to overcome a series of misfortunes to position his firm, Private Wealth Management, for growth in the wealthy Sussex countryside.

From having his application to join the Royal Air Force as an 18-year-old derailed by the Conservative government’s drastic defence cuts in 1990, to being one of the first five IFA firms to sign up to the ill-fated American Express platform, the windsurfing enthusiast has had to negotiate choppy waters throughout his working life.

Even the ditching of commission and move towards fees, which at the best of times can hit cash flow into IFA firms, was made more difficult for Robinson. Just as Robinson implemented the new strategy, the news broke that Lehman Brothers had gone bust, sending the world into financial meltdown.

‘In 2007 treating customers fairly (TCF) made us think, what do we need to do to ensure the best possible outcome for clients?’ says Robinson. ‘The idea was to offer financial planning and remove the requirement of commission and through the use of outsourcing deliver a better client proposition,’ he adds.

‘We made the conscious decision to do this early. But it didn’t help that we decided to do it in September 2008.’

Preparing for business post-RDR

Private Wealth Management is not, Robinson admits, a pure fee firm, but he says it is positioned to become one when that is required post-retail distribution review (RDR).

Most of the firm’s clients pay their fee through the offsetting of commission. Robinson tested clients’ responses to pure fees paid as a cheque when changing the firm’s client offering, but found that they were unpopular.

‘We tested the market and discovered the client still found that difficult,’ he says. ‘You have to accept some clients will not pay fees. Commission has been in this industry for a long time and people expect us to be paid by the providers.’

This resistance has nothing to do with the amount that the firm charges clients for advice, says Robinson. Most clients just find it more palatable for the fee they pay to be offset against commission attached to investments, rather than coming directly out of their pocket, even if it is exactly the same amount.

‘I don’t think clients mind paying fees, as long as there is the option to utilise existing investment products,’ he says.

Robinson says the process of drawing up the firm’s fee structure was a laborious one. Once he had made the decision to move away from his old system of taking 3% initial commission and 1% renewal, he then had to figure out just how much his company’s time was worth.

‘We went through a lot of work to sort out fees,’ he says. ‘You have to decide on an hourly rate for the firm. Then it is about working out how long each element of the work takes us.’

Thinking about fees

Despite only making the switch to fees towards the end of 2008, Robinson says he had long bought into the thinking behind fee-charging. He points to his time at the financial planning firm Hambro Fraser Smith, now owned by Towry Law, which focused on professional connections with law and accountancy firms, and operated a fee-charging system that Robinson says was ahead of its time.

‘It’s where I learned a lot about fees and working with professional connections,’ he says. ‘With commission, I could never really understand why a £1 million investment earned so much more than a £100,000 one when really the form [of work] was the same,’ he adds. ‘We were reducing the amount of income we could generate, but we could do a better job for the client. Because I was relatively new to financial services, I accepted it.’

Working at Hambro Fraser Smith also gave him an unwitting insight into the basics of what would now be called lifestyle financial planning – a philosophy that Robinson has embraced at PWM. Robert Lockie, now one of the partners at Bloomsbury Financial Planning, introduced him to cashflow modelling when the two both worked at Hambro Fraser Smith.

Lifestyle financial planning

Robinson began using the Truth cashflow modelling software at PWM in 2008, and has now switched to PlanLab, although he says that some form of lifestyle financial planning, although not formalised, had always been part of his approach with clients. But after honing that side of his proposition, helped by talking to his peers and lifestyle financial planning enthusiasts like Dennis Hall from Yellowtail Financial Planning, Adam Young from Dragonfly Planning and Tina Weeks from Serenity Financial Planning, he has seen an enthusiastic response from clients.

‘It means we can be better with clients and get a better understanding of their goals,’ he says. ‘When you ask a client about their goals, nine out of 10 times clients will say: "That’s a good question, no-one has ever asked me that before".’

Setting up PWM

Robinson left Hambro Fraser Smith when Towry Law bought the firm in 2000, together with Patrick Murphy, now head of professional standards and adviser support at IFA national Bluefin, James Edwards and Salli Anstey to set up PWM. The four spent a year outside of the IFA sector in order to satisfy a non-compete agreement with Towry Law, during which time they worked on promoting an investment bond from KeyWorld Investments before setting up PWM.

Robinson says the four were keen to avoid the more regimented business style that would have followed the takeover from a large national like Towry Law. ‘We wanted a smaller, bespoke, Jerry Maguire-style company,’ he says.

They set up first in Horsham, before then moving to Crawley, and began building up clients through referrals. A large number of clients also came through the firm’s mortgage arm – with those who came to PWM initially for a mortgage signing up to a full financial planning service.

PWM started to change shape, however, with the departure of the other three directors, leaving Robinson on his own at the helm. Edwards left first, before Murphy left in 2005 to join Thinc, which has since been re-named as Bluefin. Also that year, Anstey, who ran PWM’s mortgage division, left to run that side of the business as its own separate company.

CV: Mark Robinson

Career

• 1991-1993 Woolwich Life, data input
• 1993-1995 Prudential, various consultant positions
• 1995-1997 Canada Life, broker consultant, Kent and Sussex
• 1997-1998 K&M Tavistock, adviser
• 1998-2000 Hambro Fraser Smith, financial planner
• 2000 KeyWorld Investments, broker consultant
• 2000-2005 Private Wealth Management, director
• 2005-present Private Wealth Management, managing director

Education

• Henry Fanshawe School, Derbyshire

Qualifications

• FPC
• CF8
• J01
• Taking J06 in July

Hobbies 

• Windsurfing, golf, watching Sheffield Wednesday

Membership of Professional Bodies 

• Institute of Financial Planning
• Association of Independent Financial Advisers
• Institute of Financial Planning
• East Sussex Trading Standards ‘Buy With Confidence’ Scheme

And then there was one

‘Since I took over in 2005, the vision has become a lot clearer,’ says Robinson. As well as the shift towards fees, he also took the decision to move the firm to the Sussex town of Uckfield. ‘We moved specifically because we know the area, and we know there are lots of wealthy people in this area, and we knew there were not many financial planning firms here,’ he says.

Robinson’s focus is now on attracting as many of those wealthy people as possible to become PWM clients. The firm currently has £11 million under management, but Robinson is hoping to attract another £7 million by the end of the year. Given that PWM is now predominantly attracting clients with around £500,000 to invest, Robinson sees that target as plausible. This fits into his wider strategy of getting the business to a position where its trail income can pay for all business costs. Currently the level of trail is 41% that of costs, although Robinson anticipates it will rise to 60% by the end of the year.

Three-layered segmentation

Increasing numbers of high-net-worth clients means that it is PWM’s premium service, the Titanium offering, which is expanding the most. The firm offers three service levels: Titanium, Platinum and Mercury, with 28, 59 and 109 clients currently in each respective category.

‘We’re a firm believer, having worked with Brett Davidson [chief executive of consultant FP Advance], that segmenting is the way forward,’ says Robinson.

As with most firms, the number of meetings clients get per year depends on which service level they belong to. But unlike many, so too does the nature of their investment and the platform it is held on.

Clients with less than £100,000 to invest receive the Mercury service. Robinson invests these clients in a number of funds held on the Skandia Investment Solutions platform, formerly known as Selestia. The firm draws up a list of funds in each of four asset classes which he reviews quarterly: UK equities, international equities, property and fixed income, and then draws up risk-profiled portfolios that it then regularly rebalances.

Skandia offers a cheaper upfront cost than other platforms for smaller clients, says Robinson. By investing in a small number of funds that are well-diversified, he can cut down risk for clients, he says.

For UK and international equities he uses passive tracker funds, which give good diversification as they are invested across the whole index, and are cheap, he says. For property exposure he uses the £2 billion Swip Property Trust, which he says is large enough to give plenty of diversification. For fixed income he uses the £760 million Henderson Strategic Bond fund, and argues that effectively he is delegating investment management in the bond space to Henderson, as the managers are able to take strategic decisions to invest across all areas of the sector.

Clients with between £100,000 and £250,000 to invest receive Platinum level service, and are entitled to one annual meeting. Their assets are held with discretionary manager and platform provider Parmenion. Robinson says he was enthused by Parmenion’s offering, but took his time before placing client assets with the relatively small player, following his experiences with American Express, which pulled out of the platform market.

‘We started talking to them very early on, and took six to seven months before we put the first client on,’ he says. ‘What I have learned is that it is absolutely essential to ensure the platform is stable. There is a lot of work involved in moving from one to another.’

Using different platforms

Robinson’s use of different platforms for the two offerings also reflects his view that IFA firms do not need to be tied to the same wrap. He says that IntelliFlo, the firm’s back office software, effectively serves as the over-arching wrap for the business. Even though it cannot be used as a trading platform, Robinson says IntelliFlo gives him the best picture of a client’s portfolio, and his client bank as a whole. So with less of a reliance on the platforms and wraps it uses to consolidate all clients together, he feels more free to use a number of solutions for different client groups with different needs.

PWM’s top-end clients, with more than £250,000 to invest, receive the Titanium service and are entitled to two meetings per year as well as outsourced discretionary management. Robinson uses UBS in the main, although he also uses Williams de Broë, and is currently looking at Thesis due to client demands for socially responsible investment solutions.

Growth strategies

Having honed PWM’s client proposition, Robinson believes he has arrived at a scalable model, and is now looking to acquire client banks that could fit into his offering.

Robinson will also seek to recruit new advisers as he takes on more clients. At present PWM is made up of just himself and office manager Angela Honey, but Robinson anticipates that if he is to reach his ultimate target of £100 million under management, he will need two or three more advisers and an in-house paraplanner.

He admits, however, that care needs to be taken when looking to acquire new client banks. As a user of support services provider Threesixty, he is able to call on the expertise of consultant Phil Billingham when conducting due diligence on any new acquisitions.

‘It’s about talking to people and finding out what is in their client banks. Ideally we would be in a position where there is a suitable back office where we can take data from and move it into our system,’ says Robinson.

He says that most firms obey the 80/20 rule – that 80% of revenue comes from 20% of the clients – so being able to look into client banks in enough detail to identify who that 20% might be is the key to successful acquisitions.

He is also keeping a close eye on prices in the market. The norm at the moment is for firms to demand 2.5 times trail, with some money upfront, but he recognises that could change in the run up to the RDR with large numbers of advisers looking to exit the sector.

Robinson is not averse to borrowing to finance the firm’s growth and has an eye on the opportunities to get government grants. A recent change in the laws meant that IFAs would no longer be classified as banks with regard to securing funding, he says.

‘If we can do it using funding from banks through government schemes, we will look at that opportunity,’ he says.

Robinson’s target is to take a step back from the business once he hits 45 and look after just a small number of clients. That gives him seven years to reach his business goals. But unsurprisingly, for a lifestyle financial planning enthusiast, he has it all mapped out.

Five top tips

• Do what you are good at and outsource the rest
• Invest in technology
• Look to build name awareness through the use of social media
• Consider the benefits of lifestyle financial planning when working with a client
• Focus on the quality, not the quantity, of client relationships