It is difficult to think of the upside of being attacked by a bull but it brought Tim Page into financial services. He was in Australia at the time, trying hard to resist becoming part of the fourth generation of Page brothers to work in a family business. But just as he was laid up and feeling homesick, he got a call from his brother Stephen saying that they were expanding the family business and needed his help. Ten years later, he is still there.
He describes the original practice as “classically Robin Hood”, where big commission from wealthy clients subsidised £25 a month pension payments. The business had its roots in life insurance sales and was tied to Scottish Amicable. It was founded in 1990 by Tim’s father Richard Page. In 1999, the family bought out the client bank of one Stanley Russell and some years later merged to two businesses to form PageRussell.
In 1999, when stakeholder started to become a reality and there were problems with endowment mortgages, Tim and Stephen started to realise that the business had to change. They had had one of their most successful years to that point but they looked at what stakeholder could do to the pension industry and decided to investigate the viability of charging fees. But this bought unintended consequences – they quickly realised that people were unlikely to pay fees to be sold tied products.
- Number of RIs: Three (Richard, Stephen and Tim)
- Outsourced investment management: No
- Wrap provider: Transact but now trialing Macquarie for £250,000-plus clients
- Back-office provider: 1st
- Networks/nationals: None
- Membership of associations: The IFP and the PFS
- Qualifications: Tim – CFP and chartered, Stephen and Richard both have CFP
- Number of clients: 220 clients across 84 groups
In April 2001, the group started to charge fees. Tim admits that they made huge mistakes along the way and did not follow what is now generally accepted practice when changing a business from commission to fees. He said: “If you had spoken to me in 2000, I would have said I had 1,500 clients. In fact, I had 1,500 policyholders. I didn’t ‘fire’ them as part of the process, it was just natural attrition.” He also admits it was painful from a cashflow point of view and had they been husbands and fathers at the time, they would have had to take a more systematic approach.
Charging fees worked well with the SSAS business. Instead of putting a proportion of premiums into life companies funds, they were free to invest client money as they wished. Equally, it worked well on the mortgage business but the rest of their clients were extremely resistant. Prior to the change to fees, their father – recognising the value of ongoing revenue – had got the business onto 100 per cent non-indemnity basis. This cushion helped them through the early stages and allowed them to make mistakes.
They now have 83 groups of clients – each “group” might be a family or a company. They are all segmented, although this exercise was done post-fees implementation rather than before. Tim believes that one of the most valuable exercises for them was working out how much they earned from each client. This was just done with a spreadsheet to begin with. Tim says: “There is a crying need for better business skills across the industry. Knowing your profit per client is fundamental, even if you are not charging by the hour.”
They got a lot of the tools for transition through the IFP. Tim says that they came to think about their business as a financial planning service instead of being product brokers.
They believe they took too long defining their service proposition and it has taken a lot of remoulding along the way. Tim says: “Initially, we defined our service proposition by a process of elimination, then we bought the positives back in. Collectively, we were agreeing where the business would go. We can now say to people that this is the service we can provide you with and for this price. I think a lot of advisers spend time thinking to themselves, is this client taking me for a ride? Can I afford to talk to him? Defining your service proposition gets rid of those thoughts.”
‘Fine-tuning and making final decisions’
Tim admits that the business is not there yet. He says: “Over the last year, we have been fine-tuning and making the final decisions on things. We have recently taken the decision to remove hourly charges from the terms of business. Now we simply talk about ‘adviser charges’, which seems to be clearer. When we started to talk about commission offset, a lot of them thought we were double-dipping.”
At the moment, ‘adviser charges’ account for around 78 per cent of PageRussell’s income, with the rest old trail commission. Sixty-seven per cent of income is now ongoing. Tim says: “We want to have a situation where all our overheads and salaries are covered by ongoing income, so everything else is pure profit. We should be there in a year. Only then can we say our business is truly sustainable.”
The group has just one trainee paraplanner at the moment but plans to recruit at least two more. Tim admits that they have not been sufficiently structured in their use of admin staff. He says: “There is a tendency to use administrative staff to do all the things that you don’t want to do but we want to make sure the opportunities are there for her to progress as she wants to. At the moment, she is formalising processes for us.”
Tim says the business has learnt the hard way about the value of written processes. The paraplanner has been tasked with creating an operating protocol for every task she does. Where there have been glitches, it has tended to be as a result of a poor briefing and therefore documenting these processes ensures a smoother operation. The plan is always to train their own future advisers. Tim says: “We don’t want someone else coming in and saying ‘this is the way we did it at x or y.’”
The business has spent some time defining its ‘ideal client’ but admits there is still more work needed on this. Tim says a good starting point is to identify the clients that you love to work with. If you don’t like someone, it is unlikely you are going to do a good job for them. He adds: “TCF is all about explaining what you are going to do clearly, doing it or, if you don’t, sort it out. It is all about client expectation management.”
And the good things about the transition? Tim says: “Having made the transition from a chaotic reactive environment, you take much more control over your interaction with your clients. You end up with the clients you like and your life is so much easier. We find that it is much nicer coming to work these days.”
Key points: what the company has learnt
- One of the most valuable exercises was working out how much they earned from each client
- A good starting point is to identify the clients that you love to work with
- Talking about ‘adviser charges’ rather than commission offset and other structures seemed to be clearer for clients
- The business has learnt the hard way about the value of written processes and has an operating protocol for each process.
- The company ended up with the clients they liked and life became much easier