When Tom Skinner read that the FCA thinks smaller firms are falling short of regulatory standards, he was confused.
Over three years, Skinner and his business partner Emma Walker have built London-based Barnaby Cecil into a modern financial planning firm, embracing technology, flexibility and the changing needs of clients. Yet it appears the regulator is writing off this model.
‘If any innovation is going to come into financial planning, it will come from small firms,’ Skinner says.
‘The big ones are just following a process that everyone can dial into nationally. Smaller firms, if set up properly, will raise the bar for the bigger firms to follow.’
He is talking from experience when it comes to large firms. Skinner and Walker first met while working at wealth management giant Smith & Williamson, he as an adviser and she as a paraplanner. Both became frustrated by the red tape they felt was stifling their ideas.
‘At a firm of 300 advisers, you might have a team of five marketing people and two PR people. They are rushed off their feet and never have any time for you,’ says Skinner.
‘If you have an idea, by the time it has gone through compliance, it is not worth it any more. I was frustrated because I couldn’t change anything. I wanted to make things better and do things differently but, when you work for a big juggernaut, they cannot just change one thing for you, it has to suit everybody.’
Walker, who is the more cautious of the pair, says that when Skinner approached her with the idea of launching their own firm, she did not think twice about it, despite being just 26 at the time.
‘On paper it was the sort of thing that would have normally terrified me, but it felt like exactly the right thing to do,’ she says.
How it works
Barnaby Cecil does not have an office, just a membership of Eight Members Club, which describes itself as ‘a premium venue to work and socialise’ and has sites in London’s Moorgate and Bank. Skinner and Walker are the only full-time employees; everyone else is outsourced.
They use a Nottingham-based PR company, an Edinburgh-based marketing specialist, a Wiltshire-based administrator and an Australia-based company strategist and have paraplanners all over England.
At a firm of 300 advisers, you might have a team of five marketing people and two PR people. They are rushed off their feet and never have any time for you
‘It works extremely well,’ says Skinner.
‘Each of them has other clients but they are completely committed to what we are trying to achieve when they are working with us, something you do not get when you are in a large firm.’
This is not to say the transition has been without challenges. Exposure as a small business is tricky. Big firms are well known and mostly trusted, meaning it can be difficult to get noticed.
However, this issue has been largely solved through LinkedIn. Their Australian consultant advised that one of them be the ‘face’ of the firm on social media and post content regularly.
‘I said: “Absolutely no way.” You have to know your own strengths,’ Walker laughs.
That left Skinner to be the social media frontman. His LinkedIn posts comprise simplified financial advice as well as more personal snippets of his home life.
‘If you have a couple of messages and you articulate them well, you can get plenty of exposure,’ he says.
It seems to be working. Skinner says that lots of people have contacted him because of his posts, some just asking finance-related questions, others enquiring about what the firm does and how much it charges. While this was good news, it became difficult to work out who was interested in becoming a client and who was not.
‘We offer everyone who contacts me access to our free PDF brochures, but I now ask those who enquire to fill out a fact-find about themselves and their assets. If they are willing to spend an hour doing that, then they are invested.’
On target
Currently, Barnaby Cecil has the capacity to take on as many as 150 families as financial planning clients. However, Skinner and Walker have set an even more ambitious target with their wider education offering.
‘The model we are following is one where we help maybe 10,000 families with their finances by producing high-quality, free, educational content,’ Skinner says.
‘One of our goals this year is to start a YouTube channel and post videos. Not only will this help with the advice gap, but eventually someone will say “My situation is more complex” or “I don’t want to do it myself, so I will pay you to do it for me.”’
The firm’s website is already full of engaging videos, with each stage of the advice process defined and explained. This was something Walker and Skinner were determined to get right.
‘My wife works in marketing, and when we were planning the website I would show her examples of other websites I thought were cool,’ says Skinner.
‘She said that, by looking at most IFA websites, it isn’t obvious what financial planners actually do. She said we had to turn our service into a product that those who do not work in finance can understand. That was a game changer.’
Turning a service into a product involves defining what it is, what it does and how it adds value. Clients can then decide whether they want it or not. Barnaby Cecil has four main products: WealthMap, Navigate Portfolios, Momentum, and Barnaby Cecil: The App.
My wife works in marketing and said it isn’t obvious by looking at most IFA websites what financial planners actually do
WealthMap is the cashflow planning element for clients, while Navigate Portfolios is the range of independent portfolios. Momentum is the ongoing service for clients, and Barnaby Cecil: The App acts as the client portal and was built with Moneyinfo technology.
‘By clearly defining each part of the advice process, it makes it easier for clients to get their heads around them and see how they all interact,’ says Walker.
Portfolios
Walker and Skinner favour passive funds, opting for a 95/5 split. Investments are outsourced to Betafolio, a relative newcomer to the discretionary fund manager (DFM) world.
‘Just like we expect 100% of attention from our outsourced staff when we need it, we expect the same from DFMs,’ says Skinner.
They say Betafolio is a perfect fit, from the way it thinks money should be run, to its fees and flexibility. It was with Betafolio that they created their own branded proposition, Navigate Portfolios.
‘It takes the regulatory headache away for a £1,500 monthly rate, and the portfolio fees are very low. It is very goal-driven and tries to do things differently,’ Skinner says.
Betafolio allocates towards passives. For example, the top holding in the Navigate 60 portfolio at 50.9% is the Vanguard FTSE World ex-UK index fund. It has returned 50% over the three years to the end of February.
The use of passives means fees are kept low, with transaction costs in the portfolio at 0.07% and a weighted ongoing charges figure of 0.14%.
The firm is equally happy to accommodate clients who come with an established wealth manager already.
In terms of platforms, the firm uses Transact and AJ Bell.
Fees
Barnaby Cecil charges between £1,995 and £4,995 for its detailed 35-page WealthMap plan, depending on complexity.
If clients decide to continue with its full service, the firm charges an ongoing annual fee of 1% for work involving assets above £300,000. Clients with less can either pay a percentage fee or £245 per month.
‘Telling people they have to have X amount of money to be accepted is a tired way of dealing with clients,’ says Skinner. ‘We wanted to create an affordable option for people who are just starting their saving journey.’
Affordability is relative, of course, which is why Walker and Skinner have committed to spending 10% of their time giving pro-bono advice. People can apply for the free advice via the Barnaby Cecil website and, if accepted, receive a full ongoing service.
Some people already benefiting from this service are a client who works for The Salvation Army and an NHS physiotherapist, who puts Skinner’s NHS Pensions knowledge to good use.
For those who do not want or need an ongoing service, Walker and Skinner are happy to meet with them once or twice a year and advise on their investments or answer questions they cannot find the answer to online.
‘We can help people on a one-to-one basis like this, but here we will see the benefit of our video and podcast content as it will reach a much wider audience,’ Skinner says.
Live and learn
While much has gone right for Walker and Skinner over the last two-and-a-half years, some things have not. Initially, Skinner thought location was important and so they took an office in London’s Highgate, only to give it up six months later.
‘The idea was that the company would become part of the community, but it didn’t ring true because the only reason we were in Highgate was because there is a lot of money there. It went against what we actually wanted, which is to help lots of people,’ Skinner says.
‘The community thing can work well for a lot of advisers, but it wasn’t authentic for us and it was really expensive.’
Other things haven’t worked out either.
‘We’ve had a couple of people we partnered with that didn’t feel quite right and we had to think on our feet. But that is the benefit of our set-up – we are dynamic enough to change quickly,’ Walker says.
It is this ability to adapt and innovate quickly that sets small firms apart from large ones, Walker and Skinner tell me, despite what the FCA says.
‘The FCA’s view is that they can sit down with the compliance department of a firm with 300 advisers and say: “Show us your process.” If there’s a problem, they can identify it quickly and the company probably has enough money to pay them. Whereas, 300 small firms take a hell of a lot of resources to audit,’ Skinner says.
If the regulator is serious about progress in financial planning, it should look to the developments being made in small advice firms like Barnaby Cecil.