A crisis in the mortgage market, falling house prices and a volatile stockmarket may not seem the ideal background against which to be building up a fledgling financial services company but market conditions have not put a damper on the spirits of Paradigm Partners chief executive Paul Hogarth.
After 19 years running Bankhall, Hogarth left in 2006 to set up support services company Paradigm. Since launch in early 2007, it has signed up 152 IFA firms and Hogarth says he is delighted with the speed of growth. “It is a fantastic start. To get up to that level in 15 or 16 months of trading is absolutely brilliant.”
He predicts that it will have more than 200 firms on its books by the end of the year, well on the way to its target of 450 or 500 firms.
Hogarth does not seem daunted by current conditions and points out that he has worked through them before as the Bankhall launch in 1987 coincided with Black Monday and one of the worst stockmarket crashes in history.
Hogarth began in financial services as a trainee inspector for Scottish Provident in Edinburgh but his first exposure to the industry came earlier than that, as his father worked for Prudential “man and boy”, rising to the position of divisional life sales manager.
He says he still meets people in the industry who knew his dad. “It is amazing how many ex-Pru guys remember my dad and spot the similarities, particularly the nose,” he jokes.
Hogarth transferred to Manchester after six months, then after two years with Scottish Provident he decided to move into unit-linked investment. “I got invited by Vanbrugh Life, the investment arm of the Pru, funnily enough, to attend an interview. I think I became its youngest sales and investment consultant.”
Yet while he enjoyed his time at Vanbrugh, he realised that it was not the career for him. “I did not really fancy a career in the management of a life company. I had always thought of myself as entrepreneurial by design and it was inevitable to set up as an IFA practice.”
In 1987, he set up Bankhall Investment Management as an IFA firm rather than the support services firm it has since become. “That was an interesting time. We launched the business just at the time of the crash, so that was challenging but we made a success of it.”
After six years, Hogarth says the business morphed into what it is now and the name was changed to Bankhall Investment Associates. He stayed until 2006 and left when he felt he had done all he could with the business. He was also frustrated with the pace of change at the company.
“You could not move things forward very quickly at all. I thought the group had lost its entrepreneurial flair and had really become a straightforward compliance consultancy business and I thought the member firms wanted a lot more than that.”
Paradigm Partners is Hogarth’s answer to what he thinks IFAs want. He says it is more than simply a support services company and is keen to reinforce the partnership element of the business. From its three-yearly partners’ meetings where it exchanges ideas with IFAs to the financial stake that IFAs can build in Paradigm, Hogarth says the company is all about building value in IFA businesses.
Hogarth says it was refreshing to start with a blank sheet of paper and to be able to design everything from the company name to its website. He says he wanted to bring something different to the business. “We have come in as true business consultants to professional advisers. We do not position ourselves as a support services business, we are business consultants to professional advisers, helping them create and build value within their practices and have best practices to move forward in this marketplace.”
Central to this is the use of wrap. Hogarth says Paradigm is set up for professional new-model advisers and using a wrap is key to being able to base a business on recurring income. For this reason, he says the choice of wrap was important and Paradigm selected the Nucleus wrap. However, Hogarth says Paradigm has in effect leased the technology from Nucleus and controls all the aspects of how the wrap is run.
“We are not here to build Nucleus’s empire, we are here to build our members’ empires as well as our own, so we have certain key contractual benefits where we control certain key aspects of the wrap. I am talking about pricing and also the tax wrappers and the fund managers.”
The Paradigm business is effectively split into three parts – Paradigm Partners, which offers support services, Paradigm Investment Management, which is where the wrap sits, and Paradigm Mortgage Services.
The mortgage part of the business was launched last October, when the credit crunch was starting to take hold but Hogarth is upbeat about its success so far, with over 200 firms signed up. “It has been a challenging market with what has been happening but we are very happy with our recruitment and our growth. That has gone incredibly well.”
Hogarth is also upbeat about the future for IFAs. He says the industry has realised that adopting a professional model based on recurring income is the way to go and the retail distribution review has reinforced that.
“It could have been written for us,” he says. “It is spooky really because it is everything we had been saying for about a year before we even launched.”
Away from the office, Hogarth has a passion for cars. He is a keen amateur racing driver, with his own team competing in the GT Cup. Hogarth recently drove the Paradigm Racing Porsche 911 GT3 to its first win of the season at Brands Hatch. It seems like the winning habit is infectious.
Born: Durham, 1959
Education: Scotus Academy, Edinburgh; BA Economics at Heriot Watt University
Career: Paradigm Partners, Bankhall, Vanbrugh Investments, Scottish Provident
Likes: Professionalism. “I am an perfectionist. I love to meet driven individuals”
Dislikes: Sloppiness, arrogance, people resting on their laurels
Drives: Audi R8
Favourite book: Anything by James Patterson
Favourite film: Pulp Fiction and Gregory’s Girl
Favourite album: Barry White Greatest Hits
Career ambition: “I would like to make a difference and help IFAs get a bit more of what they rightly deserve”
Life ambition: To be a successful amateur racing driver
If I wasn’t doing this I would be … Dabbling in private equity