Selling an advice business to a consolidator may not be everyone’s cup of tea, but for Cube Financial Planning director Mike Godfrey, at least the option is there for smaller firms whose owners are looking for a way out.
Godfrey points out that financial advice has been a “cottage industry” for a long time and increased regulation over the years has created higher barriers to entry, making it harder for new entrants to break through and potentially take over from owners who leave the industry. “If you want out of a small business, you have to decide what you are going to do,” he says. “There will always be a place for aggregators and consolidators. It’s good to know there are firms who will create opportunities for yours to be part of their structure and provide a career for individuals and continuity for clients.”
Some advisers balk at the idea partly because they fear that being acquired by such firms would be a threat to independence and force their business down the restricted route, but for Godfrey this isn’t an issue.
“We could run Cube on a restricted mandate and still service clients in the same way as we do now – but all firms are different. I could operate on a restricted mandate because there is so much choice – I don’t see it is a big deal,” he says. “It would just be another conversation we’d have with clients. I’ve never felt that you’ve got to cover every single aspect to retain clients. If you have a strong relationship, clients recognise that it’s up to you what you get involved in – as long as you’re clear with them about what you do and what you don’t do.”
Godfrey points out that if clients wanted to invest in something that he didn’t advise on, it would be easy to direct them to the Personal Finance Society website so they could find someone who did. That said, he isn’t planning to take the plunge and go restricted in the foreseeable future.
Cube was founded in 2010 by Godfrey and his fellow director Neil Emburey – a long-standing colleague. Godfrey began his financial services career straight from school with Natwest Bank, following the traditional route into independent financial advice by becoming a broker consultant. He met Emburey at Smith Adams Life & Pensions in 1996 and they set up their own advice firm, FS3, in 1999. This was sold to Thinc, rebranded Bluefin, in 2008.
FS3 operated in the employee benefits market as well as the private client market. However, the need for scale to compete in the employee benefits market meant something eventually had to give. “With FS3 we had good growth and recruitment but it became clear that we needed to spin lots of plates,” says Godfrey. “I could have stepped back from advice to run the business but I enjoyed the client-facing role. You think to yourself: do you want to bring in a manager? But in the middle of trying to work out the right thing to do – whether we should we offload the employee benefits bit – Bluefin came in with an offer.”
Godfrey and Emburey moved across to Bluefin but unfortunately the move didn’t work out, partly due to the impact of the credit crisis, so they left after two years to start Cube. Given the problems they had faced in the employee benefits market with FS3, they decided to focus on private clients at Cube.
“It’s what I enjoy and it’s where you have the greatest degree of control,” says Godfrey.
The process of setting up Cube was easier for Godfrey than establishing FS3 had been. “Brett Davidson [founder of financial planning management consultancy FP Advance] had helped me to get my thinking straight on FS3,” he says. “So by the time I set up Cube, I knew the right way to structure it – what worked and what didn’t – as the hard thinking had been done in the evolutionary phase of FS3.”
Godfrey shares Davidson’s view that if a business is running as it should, it will not need to take up every waking moment of the adviser’s time.
“There should be down time, family time, doing pleasurable things,” says Godfrey. “Last year, my sons and I went to New Zealand for the Lions tour to see the All Blacks. This is a tour that takes place every 12 years, so we took a month out and Neil held the fort. That sort of thing is important. If you’re full on making the business run, it’s draining and you don’t have that time for ‘blue sky thinking’. You can become entrenched in the here and now – not thinking about strategy and how to reposition the business in five years’ time.”
Cube’s future, particularly in terms of succession plans, has occupied Godfrey and his team in recent months.
“We’re always looking at our options; it’s been part of our dialogue over the last year or so. That’s not to say I’m hanging up my boots, but we are looking at what’s the right thing for the business and what’s best for clients and the team going forward,” he says. “It’s naïve to think you can wake up one day and think ‘I’m done with this, I want to leave’. It needs to be thought through carefully, because there are different ways to go. That’s what we’re focusing on over the next few years. We want to make sure that everyone is looked after and that we have a proper strategy in place so we don’t leave clients in the lurch.”
Having his sons Jonny and Leigh on board at Cube, in the financial planning and operations side respectively, has given Godfrey a few ideas to play around with.
“One option is to look at the possibility of being acquired and for Neil to take on more of the consultancy and advice work that I’ve done, but we would have to look at whether the company we were being acquired by was right for our clients and the business,” he says. “Our options are continuity and to slowly phase me out, or to join a bigger group which takes on the central functions and frees Neil
up so we can cope with servicing
the client bank.”
What is the best bit of advice you’ve received in your career?
To recognise that people don’t plan to fail, they fail to plan.
What keeps you awake at night?
Nothing, I’ve never had a problem with sleepless nights.
What has had the most significant impact on financial advice in the last year?
Pension freedoms and the death benefit rules.
If I was in charge of the FCA for a day I would…
Work on communication with the FCA staff. A principles-based approach is the right one but needs to be supplemented with clear guidance.
Any advice for new advisers?
Strive to be as good as you can be, always act with integrity and put the client’s interests first.
2010-present: Director, Cube Financial Planning
2008-2010: Head of private clients south-east region, Bluefin Private Clients,
1999-2008: Managing director, FS3
1997-1999: Director, Robert Fleming Benefit Consultants,
1993-1997: Director, Smith Adams Life and Pensions
1989-1993: Associate director, CLM Financial Services
1984-1989: Broker consultant, Allied Dunbar
1978-1984: Manager’s clerk, NatWest Bank