Ex-army man, boxer and entrepreneur Phillip Rose, chief executive of Group IFA, lists top business owners and premiership footballers among his clients and, by combining client numbers with high-earning professions, has put his business within striking distance of £1 billion of assets under advice.
Rose’s clients tend to refer their peers to the firm, which has enabled him to boost funds under advice rapidly to £692 million and project a £5 million turnover next year.
In 2011 a subsidiary of Group IFA, Pro Sport Wealth Management, had a contract to supply advice to the Professional Footballers Association (PFA), and several England players are Pro Sport clients.
This has given Rose and Pro Sport co-founder Gareth Griffiths an influential insight into players’ earnings – top Premiership players often earn £10 million or more a year, says Rose – to the extent that dealmakers often call upon their knowledge in wage negotiations.
Rose also advises well-known entrepreneurs, including Mahmud Kamani, joint chief executive of Boohoo.com, which last year floated for around £660 million, and John Dutton, chief executive of Appliances Online and still a major shareholder when it floated last year for £1.4 billion.
The firm’s biggest challenge now, he says, is that it has reached full capacity and needs to keep growing adviser numbers to meet demand.
To help ease the problem, it recently set a general minimum of £1 million of investable assets, and about £2 million for clients to see Rose himself.
Packing a punch
Rose spends his spare time boxing in a gym near his office in Bolton. ‘It’s a scruffy gym with six bags in an old cow shed,’ he says.
He says sparring in the ring keeps him on his toes, which is just the way he likes things at work as well.
He grew up on a council estate and went to a ‘rough school’ in Bury, Manchester. At 16, he joined the army, and had a son when he was just 17.
Among other postings, he served for 13 months in Northern Ireland attached to the SAS. He then left the army to avoid it posting him away from his son and took a job with insurer Liverpool and Victoria.
‘The army mentality is constant training and search for more knowledge,’ says Rose. He took this ethos into his new career and eventually became chartered and ISO 22222 accredited.
The move into advice
In 1991, Rose joined IFA firm Munro Greenhalgh and eventually became a partner, then bought out the other partners before selling it to Numerica for nearly £1 million. Numerica later sold it to BDO Stoy Hayward and Rose became a board member of BDO.
‘I started to feel that financial planning did not sit well in a large accountancy practice as the target markets don’t match,’ he says. ‘I recommended to the BDO board they sell [the financial planning arm] and agreed to leave in 2006 [with] about 150 of BDO’s largest clients in the North West.’
He set up his own company called Independent Financial Advisor, which is now part of Group IFA.
He initially planned to keep the firm small but found that other good advisers around the country wanted to join him due to his experience and the strong infrastructure he was building.
The firm therefore set up subsidiaries IFA South and IFA North and created Group IFA as the umbrella company.
PHILLIP ROSE CV
- 2006-present Independent Financial Advisor and Group IFA, managing director
- 2005-2006 BDO Stoy Hayward Investment Management, director and BDO Investment Management board member
- 2002-2005 Numerica Financial Services, director and board member
- 1991-2002 Munro-Greenhalgh (Life & Pensions), partner
- 1988-1991 Liverpool Victoria, inspector
- 1983-1988 Armed Forces
- Financial Planning Certificate
- Chartered financial planner
- Advanced Financial Planning Certificate
- ISO 22222
Group IFA now targets advisers who generate more than £300,000 in fees a year.
‘Our infrastructure addresses their two main concerns around compliance and investment governance, especially in making sure investments fit the best interests of clients,’ says Rose.
The firm has invested heavily in both. For example, its head of compliance, Jason Kirk, is the former joint head of compliance at Simplybiz; and operations manager Judith Blades was senior compliance consultant at Threesixty.
Rose also recruited the most experienced staff and consultants he could find to sit on the investment committee, including head of asset allocation Peter Bickley, who was previously UK chief strategist and global investment committee member at Deutsche Bank, and Graham Harrison, who is managing director at Asset Risk Consultants.
‘You don’t get better than that. This is an infrastructure that top advisers want to buy into,’ says Rose.
‘Also, because the business has grown, we have natural career progression and the ethos is that people should be qualified.’
Group IFA has 15 employed advisers, most of whom are chartered or working towards it and three who are Personal Finance Society fellows.
Each of the subsidiaries has corporate chartered status and will continue to qualify under the Chartered Insurance Institute’s new rules, which means by 2020 all firms holding corporate chartered status must have at least half their advisers chartered on an individual basis.
Rose also wants to push the firm’s professionalism further by achieving the BS 8577 British standard, the ‘framework for the provision of financial advice and planning services’, created by the Chartered Insurance Institute, Personal Finance Society, Standards International, consumer group Which? and the Institute of Financial Planning.
The firm’s pay reviews link to exams passed and top advisers receive share options as they hit pre-agreed levels of business.
Keeping client costs low with in-house and DFM portfolios
For clients with less than £1 million, Group IFA tends to use portfolios that are constructed in-house with help from Parmenion.
Group IFA’s investment team, led by head of asset allocation Peter Bickley, constructs these using data from FE Analytics and quantitative and qualitative criteria.
The team stress tests the models to see how they might perform in adverse conditions. It then uses Parmenion to populate the funds according to its requirements and to provide the platform.
‘We have £140 million with Parmenion so have negotiated costs down. Our team is constantly pushing Parmenion’s boundaries to improve. As it realises the quality of our team, it will do that,’ says Rose.
‘Most IFAs think they have a vast knowledge of investments. I would ask them to spend five minutes in the investment committee meeting with [my investment team] Peter, Graham Harrison and Simon Brett. It is a wake-up call. It astounds me that IFAs still select their own funds and asset allocation.’
Blending DFM styles
For clients with over £1 million, Group IFA tends to use a blend of discretionary fund managers (DFMs) with different styles.
‘For example, we have one client with £10 million, who has a blend of DFMs, including Close Brothers and Standard Life Wealth,’ says Rose.
‘To select them, we use Asset Risk Consultants to look across the whole DFM market – over 200 providers.
‘We also use its research portal Suggestus, which is good for blending portfolios and styles, such as top down versus bottom up, and benchmark their portfolio against other DFMs.’
Group IFA looks for DFMs that have first quartile performance over as many periods as possible but whose asset allocations match those of its in-house portfolios.
‘Having our own portfolios means we can benchmark DFMs against our own house view and approach,’ says Rose.
‘If they have a lot in gilts and we have zero, we can ask them why. It also means that throughout the organisation our asset allocations are uniform.
‘Peter also creates a scatter graph of risk versus reward. Our portfolios have delivered in a straight line between risk and reward. If a manager is ahead of or behind that line, we also need to find out why.’
Despite having so many in-house resources, Rose says it still makes sense to outsource amounts over a certain level due to cost and because DFMs can do more specialist investment work, such as using direct equities.
‘We aim for no client to pay more than 2% total expense return on anything,’ he says. ‘I need to sign off anything above that.’
- ACTIVE FUNDS: 85%
- PASSIVE FUNDS: 15%
Under the umbrella
Group IFA set up Pro Sport in 2009 specifically to pitch to the PFA and for other sports-related work in 2008, and it eventually won the PFA contract in 2011. The PFA liked the firm’s infrastructure, says Rose.
‘Also it is important that we stick to vanilla investments and avoid anything unusual. The PFA contract actually refers to that,’ he says.
To add to its increasingly complex structure, Group IFA also bought Sipp and SSAS provider The Pension Partnership (TPP) in 2011.
Group IFA is independent, so to avoid a conflict of interest, it avoids recommending TPP except in a small number of cases where it is clearly the best option, says Rose.
‘The reason each business was set up separately was to reward each one individually,’ he says.
‘When I worked in a multinational, you could have one region doing very well but not getting its bonus because another region was doing badly and pulling it down.
‘That was a bugbear for me. I want to reward people for doing a good job.’
However, he recognises that the group has become confusing and fragmented, and plans to simplify it by rebranding all parts more clearly under the single Group IFA brand.
Tight reins on cost efficiency
Rose scrutinises the profitability and efficiency of the company closely.
‘Everything in our office is timed, even staff toilet breaks,’ he says. ‘For example, my system tells me if a paraplanner spends 30% of their time on administration, which makes them an expensive administrator.
‘If staff know you are analysing this on a weekly basis, they won’t do these things. If you don’t record time, how can any IFA calculate the profitability of a client?’
Group IFA’s ongoing charge ranges from 0.1% to 1%, depending on the work required. For this, clients receive between one and four reviews a year with a cashflow forecast and tax planning.
‘The structure of our business, the people behind our investment committee, compliance and risk management, the ISO, which is much harder to achieve than chartered, everything is done to achieve the best possible client service,’ says Rose.
Online ‘comparison engine’
Rose has launched a comparison site for pensions, life insurance, annuities and protection, called Rosey Futures, which will point clients to advice online or face to face should they need it. The main engine for attracting site visits is social media.
Rose describes the site as ‘a comparison engine with a twist as we compare more features than any other: life insurance, pensions, annuities and investments. We are also three months away from integrating a cashflow modelling tool.’
Rosey Futures has required a large upfront investment and Rose accepts it is a risk that may not pay off. But he says he knows many successful ventures that made a loss for years before becoming profitable, then floating for millions.
‘From a standing start this year, [Rosey Futures] now turns over £350,000. There is no profit yet; that could take three years,’ says Rose.
‘This is still in the research and development (R&D) phase. But I’ve seen what other big players are spending their R&D on and this is the future. We can’t afford not to do it.
‘The new generation will much prefer to access our screen for online advice. So in 10 years, this will be the biggest threat to advisers and the “new model” advisers charging 1%. This is more efficient and can be charged at a lower rate if done online.’
Ambitious targets in sight
The firm’s figures also look rosy. 2014 was a particularly good year as it grew from £419 million to £611 million after recruiting two top quality advisers who brought clients with them.
In comparison, Rose is disappointed with adding ‘only’ £81 million funds under advice in 2015. ‘I expected more growth in this year, but we started reaching saturation point. That is why we started increasing the new client level to £1 million.’
Rose projects that assets will grow to £800 million next year that £1 billion is not far off. He is confident of reaching these figures based on organic growth and the fact that a number of existing clients are expecting large windfalls.
‘These clients may have a £100 million turnover but are selling a business for the first time,’ he says.
‘I have sold a business before and they just want someone to sit with them – the comfort factor. They rely so much on your opinions, they often become friends.’
Looking towards a rosy future
Beyond that, Rose anticipates starting to look for a buyer in five years’ time.
‘To avoid uncertainty for clients, partners have a clause so that if we do sell, we all come with it,’ he says.
‘My focus is on growing and earning over the next five years, not on the sale because that might never come. I sold my first business for £1 million. I can make long-term decisions and am not in a rush.’
Rose says his work-life balance is ‘stressful’ because Rosey Futures is taking more time than he initially anticipated.
‘But I have good people around me,’ he says. ‘Each business is going well and I don’t need to do much day-to-day management. I only do direction and planning.’
Rose owns 75% of each company and the partner in each subsidiary owns 25%. While he could take 75% of all profits, he does not.
‘I don’t need all that money, so instead I reward partners whose businesses are still immature in comparison [to mine],’ he says.
‘It is exciting to see how successful the business has been; to see office juniors progressing to paraplanners and advisers getting to chartered or fellowship [status]. It is also nice to see your partners evolve and take on the mantel of being able to run a business.’
Then, as if steeling himself for another round in the boxing ring, he adds: ‘But the job is not finished yet.’
FIVE TOP TIPS
- Surround yourself with people better than you.
- Manage yourself out of jobs you do not like doing.
- Before you start a project, obtain guidance from a specialist.
- Train to change: educate your staff to be better than the competition.
- If you don’t like it, change it.