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Chris Gilchrist: How to rake in the cash in financial services

Chris Gilchrist 700

Running a professional financial planning firm is challenging and, though it is rewarding both intellectually and emotionally, it is unlikely to finance a 40-foot yacht or a villa in the south of France. That said, it might be possible to make a great deal of money in UK retail financial services. Here is my fantasy of how to do it.

First, set up an insurance company. They have always been great corporate vehicles thanks to flexible and opaque accounting. Create a large set of internal funds and hire in big-name external managers to run them for fixed fees you never disclose to anyone. The cost of running these funds is a lot less than the fees you charge investors. The margin is far greater than that on run-of-the mill Oeics and grows as the size of the funds increases.

Structure the plans you offer (Isa, Sipp and so on) to levy high charges in several tiers. Then “gate” clients by incorporating surrender charges – disclosed towards the end of your necessarily long charges disclosure – that run down from 6 per cent to nil over a period of five years. There is nothing like a good lock-in to preserve the lifetime value of clients.

Motivate the salesforce by rewarding them hugely and flattering them grotesquely. The kind of salesmen you want can never be offered too much in the way of titles, clubs, annual conferences and shindigs. Make sure senior managers phone top producers to congratulate them on every big hit. Ensure everyone knows the names at the top of the leaderboards and knows they are millionaires.

Allow the salesmen maximum freedom of operation. Permit them to form relationships with independent advisers so they can pass clients to these firms for certain types of business. Gild the lily by offering these same advisers the ability to abandon independence and join the firm with a guaranteed multiple of six times their recurring fee income – and give your salesmen a bonus for each such recruit. Let the salesmen collect big capital sums by, in effect, selling on their client banks to younger salesmen when they retire.

Enable salesmen to get client introductions from solicitors and accountants by setting up joint operations that fudge the issue of independence. Buy up providers of other services like bespoke discretionary fund management that fit neatly into a restricted advice proposition and widen the product range the salesmen can offer.

Spend a fortune on below-the-line marketing and sponsorship. And spend yet another fortune on suitably aspirational and feelgood charitable ventures like disabled children sailing round the world.

Spend much less on compliance but agree with your PI insurers that they are there just for catastrophe insurance. You will, in effect, self-insure and write out all the cheques you have to in order to settle complaints so they never trouble the Financial Ombudsman Service and keep your slate clean.

Talk freely to investment analysts about your model. Chuckle as the investment managers you have hired for pennies invest millions in your shares based on the analysts’ forecasts of ever-growing earnings. Forget salary – you  are now a dividend millionaire. But never, ever talk to personal finance journalists.

Chris Gilchrist is director of Fiveways Financial Planning

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Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. Great article Chris – but it couldn’t happen in real life could it?!
    Oh hang on……………..

  2. So you recon I should use more Brylcreem, get a loud check suit, correspondents two tone shoes a very large signet ring and try to find an outfit like the one you describe. I wonder who it could possibly be?

  3. Stiffler's mom 3rd March 2017 at 4:58 pm

    St James’s Place

  4. Great scheme Chris. Cannot understand why no-one has thought of it before…

    • Stuart Rathbone 6th March 2017 at 11:08 am

      They did, back in the year I was born and soon after Sir Mark famously went into an insurance brokers asking to buy an (endowment?) policy. The broker gave him a brochure and left it at that. So it began 😉

  5. Chris have you ever thought of swapping your modest backwater operation and starting this type of business? Or perhaps you could join an existing successful business that fits this profile.

  6. You’ve forgotten the second option of being a failed MP!

  7. Cynical you Chris never.

  8. Literally the most pointless illinformed, inaccurate article I have ever read. I suggest more research required Chris rather than latching on to other lazy journalists….

  9. peter mulholland 4th March 2017 at 2:40 pm

    You took me back to the ’80s in Dunbar’s Brighton branch – not particularly happy days but it made me appreciate the mutual I moved to.

  10. peter mulholland 4th March 2017 at 2:42 pm

    Took me a few months to remove the scales from my eyes. I had been well and truly brainwashed:(

  11. I wish I’d written this myself Chris but this looks more like therapy than journalism. And the last laugh in your scenario? Sit back and wait for all your competitors with chips on their shoulders to provide the oxygen of publicity (good or bad) as you watch them writhe and squirm over your success.

    Not sure whether to laugh or cry…

  12. One could read this as a flight of fantasy; on the other hand………

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