McHardy Financial managing director on how contract terms dictate that many advisers in Scotland stay put
Growing up in Edinburgh – second only to London as the largest financial centre in the UK – McHardy Financial managing director Andy Kerr was never going to be oblivious to financial services.
Not only was it common for friends and classmates to join firms such as Standard Life and Scottish Life in the early 1990s, the industry was seen as attractive because it offered job security, a final salary scheme and cheap mortgages.
“Edinburgh has always been a business place with a lot of financial services’ head offices. From a recruitment viewpoint, as soon as someone leaves a company, it starts a chain of movement for everyone else,” he says.
McHardy Financial has six offices dotted around Scotland, including one in Edinburgh. Kerr says one good thing about the city’s big financial services presence is that it has plenty of experienced administrators, which is useful in the advice business. However, recruiting advisers is a different matter.
“Recruiting IFAs in Scotland can be difficult. People in the industry typically tend to have restricted covenants, so if you join one firm and leave another, the clients are going to be stuck with your previous firm. It restricts movement in the industry as so many clients are paying recurrent fees that advisers don’t want to walk away from,” says Kerr.
“Around 10 years ago, when we had commission, there was a lot more movement as people weren’t leaving behind recurring fees.”
Kerr says that with 40 people at the company currently, McHardy is not looking to recruit anyone else.
“A lot of good people are employed and tied down on long-term incentives. We don’t want to employ the best of a bad bunch – we only recruit good people and not just for the sake of it,” he says.
Kerr started his career with Scottish Widows from school. After four years, he took a year out to travel, initially to Greece then South Africa. Was he tempted by a permanent move abroad?
“I wanted to get home and be with my family – I even missed the dog. It was nice for a short time but you’ve got to come home,” he says.
Upon his return, he joined General Accident and began studying for his financial planning certificate. However, after four years he was made redundant following the firm’s merger with Commercial Union and decided to go into financial advice.
“When I knew General Accident was going to close its Edinburgh office, it was the right time to be made redundant, as I was planning on making the move anyway,” he says.
After nine years at a small IFA firm, he decided to move again. His current role at McHardy came about via his role as director of Borland Insurance, which bought IFA McHardy & Burnett in 2013 and merged it with its own advice arm the following year.
McHardy & Burnett had made money through commission from group pensions, so the move to fees under the RDR prompted a change of direction towards individual clients.
“We needed to focus on the individual private client side of business and that was very hard. It was tough at that time, but we knew it was coming and we had to adapt,” says Kerr.
McHardy also found that once auto-enrolment was introduced, it became more difficult to deal with scheme members directly.
“We still do corporate business – we picked up two new corporate clients last month, so we are open for business. We still work with a number of large companies, but only around 5 per cent of income comes from corporate clients,” says Kerr.
What is the best bit of advice you’ve received in your career?
If you don’t ask you don’t get, and you need to step outside your comfort zone.
What keeps you awake at night?
Waking up at 3am remembering that I’ve forgotten to do something. I deal with it then sleep easier.
What has had the most significant impact on financial advice in the last year?
Everything going on with final salary pensions. It has created a fear factor so it’s almost as if people are frightened to talk about transfers.
If I was in charge of the FCA for a day I would…?
Engage with the Financial Ombudsman Service and Financial Services Compensation Scheme to come up with a joined-up approach.
Any advice for new advisers?
You need to be patient and persevere. You have to build your reputation and client bank, but that takes time.
McHardy Financial’s last acquisition was at the end of 2016, when it bought Galashiels-based advice firm Fraser James Partnership. Kerr says no more acquisitions are planned but adds the firm will “never say never”.
“We are focusing on what we’ve got. It’s exciting when you buy a company but you’ve got to remember there’s a big team of people to look after rather than looking for the next deal,” he says.
McHardy is selective and proceeds with caution when it comes to acquisitions. Kerr says deals are not just about money and how much profit can be made.
“Some people do deals when they don’t know if they are going to get on. Our deals were done with people who have a similar outlook on life and business. There were no skeletons in the cupboard; we all knew what we were getting into.”
Kerr concedes that organising his time is challenging but he is committed to visiting each of the six offices regularly for coffees and chats. “It’s important to see everyone – I can’t be faceless and just send emails. Sometimes people can become detached because it’s easy to sit in a room and avoid other people.”
Kerr used to drive to the various McHardy sites but does not do that so much now. “The traffic made it stressful and I’d have 50 emails waiting for me when I arrived. I get the train now, as I can sit and relax while dealing with emails and phone calls. I made that change recently and it makes life easier,” he says.
“We preach to clients about having a work/life balance, so we need to practise what we preach.”
Despite his preference for face-to-face contact, Kerr is no technophobe. He would be lost without his iPhone and talks about the importance of embracing technology – when it works. Like many advisers, he gets frustrated when the latest bit of kit does not quite live up to expectations.
2010-present: Managing director, McHardy Financial
2009-2018: Director, Borland Insurance
2000-2009: Manager, Albannach Financial Management
1995-1999: Various roles, General Accident
1994: Career break spent travelling
1989-1993: Various roles, Scottish Widows
“You find a platform upgrades to smarter technology then, all of a sudden, you experience problems. We have had situations where the platform’s technology issues have created a lot of problems and work for us and our clients,” he says.
“It would be nice to think that, in the era of artificial intelligence, a platform could work efficiently.”