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MM Profile: Andrew Fay on building on the Cavanagh/Close Bros deal

Fay originally wanted Cavanagh to be a small adviser business but it is now in a very different place

Andrew Fay
Close Brothers Asset Management head of wealth management Andrew Fay

When he’s not running the wealth arm of Close Brothers Asset Management, head of wealth management Andrew Fay is likely to be indulging in any number of adrenaline-fuelled sports.

He counts white water rafting, skiing and cycling as three of his favourite hobbies and names the treacherous Austrian district of Zell am See as one of his best-loved rafting spots.

“There are a few places in Europe where once glaciers have melted and rivers are high, the rafting is superb. I love anything outdoors really,” says Fay.

His most recent business challenge involved himself and the Cavanagh team successfully negotiating the sale of the national IFA to Close Brothers against the back drop of looming regulatory changes and concerns about the viability and value of sizeable adviser firms.

Close Brothers acquired the firm in April 2011 in a £26.2m deal which saw the Cavanagh management team of Fay, Simon Redgrove, Neil Millard and Charles Gillespie exchange 50 per cent of entitlements from the deal for Close Brothers shares alongside a number of other Cavanagh employees.

The Cavanagh brand was dropped after a transition period. Fay was appointed Close Brothers Asset Management head of wealth management business development, Redgrove head of personal advice and Gillespie head of corporate advice.

“We are in a good place. We have got 130 advisers working alongside 50 investment professionals and we think through that proposition we are really adding value that clients can actively see. We want consistency across the business so every adviser is offering the same service.”

The group was set up in 1996 by Fay with Simon Redgrave and Neill Millard. They all came from a direct-sales background at Royal Life. Fay had a progressive career path at Royal Life where he became a “top 20” executive. But he says changes in the market, clients and products all pushed him towards the IFA profession.

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Although Fay says his original intentions for Cavanagh were to keep the business as a small enterprise with selected numbers of clients, the firm began to expand, Fay’s ideals about staying small were changing.

“We thought it was important to have right people within the business. We started to generate more activity and got referred to more and more clients. We were starting to build a bigger business which was not originally the plan.”

In 2003 Cavanagh acquired Ernst and Young’s financial advice arm in a reverse takeover which took the firm from its regional three office presence to a national with 12 offices across the country.

Two years earlier Cavanagh had floated on the Aim market in a move to boost capital reserves by attracting large shareholders.

Skandia, Aviva and Friends Provident all held significant stakes in the business during its time on Aim.

It was a time when life companies were all looking to acquire stakes in sizable distribution firms, a situation which Fay says is no longer the case.

“Adviser firms would not attract the same insurance interest now. The landscape has changed. Insurance companies in 2003 were looking at how the market may change and therefore if they could invest and be close to a number of organisations then they could see some benefit.

“That seems to be gone now because they do not want to invest and a lot of advisory businesses are now looking to have their own investment propositions in place.”

Cavanagh expanded its reach within the advice sector with the 2007 acquisition of employee benefits specialist JIG and started looking at creating its own funds.

Around the same time the firm began employing paraplanners within the business.

“We wanted to build a business where we had number of people there to support it. We started to employ paraplanners to support us, which was not very common at that point.”

The growth of the business meant Fay and the other directors had to stop giving advice.

“It wasn’t long before myself, Simon and Neil had to give up writing business and taking on clients. I ended up with the role of chief executive overseeing strategy and Simon took on greater role in managing the adviser side. Neil was good how he dealt with conflicts of interest within the business.”

He says the eventual acquisition by Close in 2011 was part of the natural evolution of the firm and was driven by the senior management’s desire to keep building the business.

“We have always been very ambitious, despite capital requirements and challenges ahead were confident we would get through those but wanted to do it at a pace at which we could do would be hindered. We did not want to stop and say it was not going to meet people’s ambitions. We saw the deal as the next chapter, considering how things were changing in the market.”

Fay says the RDR qualification and business transition requirements were “relatively straight forward” for most of Cavanagh’s advisers.

He says: “Cavanagh was pretty advanced in terms of where we were going anyway and how we charge for the services. We have not seen any material impact in terms of transition which has been really positive.”

Towards the end of last year, Close Brothers announced its advisers would be restricted, Fay says this was inevitable given the fact the firm has its own investment proposition in place.

Close Brothers Asset Management currently has around £4bn assets under advice. The business has a total of £8.5bn assets under management.

He says although advisers can recommend outside the in-house investment products, the majority of investments go through the Close Brothers investment solution.

He adds advisers do not receive extra remuneration for going through the in-house option. He adds that the restricted framework means advisers avoid looking at esoteric investments.

“We are very positive about going down the restricted route and have made sure there is real clarity around what we are going to deliver and what it will cost.

“We are whole of market in terms of what we provide. On the investment side we research and look at the entire investment market universe of all items without bias. We are restricted because we do apply our own investment solutions.”

Close Brothers now has around 130 advisers and Fay says the firm is not looking at further acquisitions at the moment. Fay says the aim is to increase headcount through organic growth and promoting the benefits of the business model to advisers and their clients.

He says: “We have never been afraid to go out and tell people what we do. We are not afraid to tell people about how we work. If you are totally convinced about your business model you have to go out and shout about it.”

Fay-Andrew-Close-Brothers-350

Born: Crawley, West Sussex

Lives: East Grinstead

Education: Thomas Bennett Comprehensive, Crawley

Career: July 2011 – present: head of wealth management, Close Brothers Asset Management; June – July 2011: head of bsuiness development, Close Brothers Asset Management; 1996-2011:chief executive, Cavanagh Group; 1989 – 1996: senior financial adviser and sales manager, Royal Life

Likes: A ‘can do’ attitude, skiing, cycling and extreme sports, travel and the theatre

Dislikes: Wasting time – as we do not have much to start with

Drives: Range Rover

Books: Current read – My Time, Autobiography of Sir Bradley Wiggins

Film: Road to Perdition

Album: All Coldplay albums

Career ambition: To eventually share my experience to help other people achieve their ambitions

Life ambition: To see my family be happy

If I wasn’t doing this I would be: Up a mountain

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