Independence was the natural course for Provisio Wealth Management director Andrew Whiteley. He says: “I recognised pretty early on that I did not like selling someone else’s products on the direct side of things.”
This is something he learned during his time in his first job at Provident Mutual. He joined the company on recommendation from his brother-in-law but only stayed for a year before moving to Merchant Investment Group.
“I had learned that I did not enjoy doing direct. I was one of the three people to set up MI Independent Intermediaries, the company’s independent arm.”
Following a brief foray into the sporting world, with a role at Bolton FC manager Bruce Rioch’s IFA firm, his next role was as an IFA at Ridgefield Financial Services.
Provisio Wealth Management, previously WKH Financial Services, grew out of professional connections Whiteley made during his time at Ridgefield. Two accountancy firms merged to become WKH Chartered Accountants and approached him in 2003 to run an internal financial services operation.
However, Whiteley soon realised that WKH needed to expand its proposition and a name change was essential. While at WKH, Whiteley had developed a specific wealth management proposition called Provisio, and he decided to use that name for WKH’s new venture.
“We set up Provisio because I knew in 2008 that the writing was on the wall for transactional arrangements. I wanted us to move from a position where we were getting 0.5 per cent trail to a position where we were charging a 1 per cent fee. This was a long time before most other IFAs realised the benefits of fee-charging.”
Whiteley also decided to change the focus from active to passive funds.
“We used passive funds because, in my view, it is asset allocation that makes the difference. I did not want what I thought was a 20 per cent stake in the FTSE 100 to be a 15 per cent stake with 5 per cent cash because the fund manager has made the wrong decision. We still actively manage the asset allocation, we just do not actively manage the underlying funds.”
At the time, Whiteley opted to use ETFs because tracker funds were more expensive and could not access certain funds.
“The by-product was just that it was low-cost, that was not our main reason.”
So far, Provisio has been a hit with clients, says Whiteley.
“Typically, our TER was 2.2 per cent with 0.5 per cent trail, so we went to our clients and said: ’We are going to move you from where you are now, which is not satisfactory, to a position where you have daily access to your portfolio and extremely low cost funds. While we are going to charge you twice what we charged previously for this, overall you will be paying about 0.6 per cent less than you were yesterday.’ Only one client said no.”
Today, Provisio’s recurring income is at about 80 per cent compared with 15 per cent in 2008. The advisory team of four has generated assets under management of about £100m and it has 500 clients.
The success of Provisio is partly why Whiteley launched insourcing fund management company Assetfirst in 2011. “Effectively, Assetfirst is a carbon copy of what Provisio does internally, but leased out to IFAs. The idea came about at the start of 2010 but my son, who was nine at the time, developed a brain tumour and died later that year. It was a horrific time and so Assetfirst got off board for a while.”
A year on from launch, Assetfirst has six IFA clients with £150m of client money and Whiteley has ambitious plans for this side of the business.
“Insourcing is a viable alternative to traditional outsourcing. IFAs have been duped into thinking that if they use a DFM they are not responsible for the fund advice but they are. What we are doing is providing the nuts and bolts for them to manage the funds themselves.
The cost for the service is a flat fee paid by the IFA firm, not the client. For small IFAs, it costs £500 a month plus VAT, regardless of the number of clients or size of assets under advice.
“If a firm manages £10m of client assets and our fee is £6,000 plus VAT per year, for a fee of six basis points, they are getting all the wherewithal to build their own model portfolios. The cost is very competitive and does not appear on clients’ balance sheets as it does with a DFM.”
Whiteley believes the RDR may signal the death knell for the DFM-IFA relationship. “At some point, a client is going to get a statement of the costs they pay and most DFM solutions will be north of 3 per cent. The client could turn round to the IFA and say, ’I cannot do anything about the fund costs or DFM but I am not paying you that 1 per cent.’ All these clients being merrily pushed on to DFMs are an accident waiting to happen.”
He also says the use of DFMs, which have their own advice arms, raises the potential for IFAs to be cut out of the loop.
Whiteley says the way that Provisio is set up has made the business properly insulated from the changes being forced on the industry by the RDR. “We saw the RDR coming a long time, before it was even mooted. It makes no difference to us.”
Without the RDR to worry about, his time can be focused on expanding the businesses.
“We aim to pick up £15m of new assets each year at Provisio and I think we will do that. At Assetfirst, we have a target of 15 businesses by the year-end. That will be a bit more difficult as adviser apathy is the challenge. Just because something is low-cost and passive does not mean it is below average and that is what we need to overcome with IFAs.”
Education: King Henry VIII School Coventry
Career: 2010-present: partner, Assetfirst Limited; 2003-present: director, Provisio Limited; 1993-2003: Associate Director, Ridgefield Financial Services Ltd; 1993-93: IMR Financial Services; 1987-92: Merchant Investors Independent Advisers; 1986-87: Provident Life
Likes: Value for money
Dislikes: Overpriced investment propositions
Drives: Golf GTI
Book: Perfume by Patrick Süskind
Film: Betty Blue
Album: For Emma, Forever Ago by Bon Iver
Career ambition: Make fixed-fee investment propositions a default choice for IFAs
Life ambition: To make my son – who died of cancer 18 months ago – proud of me
If I wasn’t doing this I would be…Raising money for www.tomstrust.org.uk