John Porteous, director of private client services at BDO Stoy Hayward, is questioned by Simon Hildrey.
Q. You joined BDO Stoy Hayward 18 months ago. What attracted you? A.
A.I was attracted to BDO Stoy Hayward Investment Management because of the culture and breadth of service offering at the firm. There is an emphasis on strong relationships with clients, taking personal responsibility and offering a full financial planning service.
Q. How has the private client service at BDO developed? A.
A.When I joined, the private client service was divided into pensions and investment divisions. But we felt this did not adequately explain the full range of advice that we provided to clients or how it could be joined together to offer comprehensive planning. To achieve this, we repositioned the offerings as corporate benefits (including actuarial services), asset management and private clients. This better reflects the full range of services that we can provide to our personal, corporate and institutional clients.
As part of this process, advisers at BDO Stoy Hayward have been encouraged to gain the Certified Financial Planner (CFP) qualification. It is vital that our advisers not only have the technical knowledge required to advise in a range of areas but also the skills to work with other professional advisers.
We are committed to needs-based financial planning, where we work closely with clients to understand their requirements before implementing any solutions. The demand for full financial planning as opposed to more fragmented services has increased and we want to be well placed to benefit from this trend. Indeed, clients need advice as much if not more during this challenging economic environment.
Q. Is the firm completely fee based? A.
A.The firm offers fee-based services to clients although we will also work on a commission offset basis. Many of our clients are referred by our colleagues in the accountancy practice. This means they are used to paying fees and have an expectation that they will also pay for our services in this way.
Q. Do most of your clients come through the accountancy practice? A.
A.Most of our clients have been referred in this way although we have been developing our relationships with other professional service firms.
Q. How many advisers do you have and has this number been growing? A.
A.Across corporate benefits and private clients, we have 67 client-facing registered individuals (RIs), of which 43 are advisers. The number of advisers has grown over the past five years. This is a result of recruitment and acquisitions. This has enabled us to develop our discretionary investment proposition and also build regional presences.
Q. Have you found it difficult to find and recruit advisers? A.
A.Every firm will say one of the biggest challenges they face is to recruit the right quality of adviser and support staff. Given this, it is important we can offer advisers career development. Advisers have moved into research, IT and management, for example.
We have developed our recruitment process to identify advisers who are able to understand our business model and have a passion for financial planning.
Q. Will discretionary management become more prevalent? A.
A.We believe financial advisers will offer discretionary management alongside or in preference to advisory portfolios. It is difficult for advisers to provide financial planning, maintain a client-facing role and research the markets. My feeling is that clients do not expect to be put in a fund by their advisers and for it only to be reviewed five years later. A lot can change over this period, such as the investment environment or style drift that may impact on performance. Clients are looking for proactive investment management services that can capitalise on opportunities or market conditions.
Q. Do you include BDO funds in client portfolios? A.
A.We do where we believe BDO funds add value. But we choose funds from across the investment market. Investment research is carried out by our in-house asset management team.
Q. What have your clients’ reactions been to the stockmarket turmoil? A.
A.We aim to minimise portfolio losses through constructing multi-asset allocations. Many portfolios have small allocations to long only equities. Portfolios also hold cash, bonds, property, hedge funds and commodities. Therefore, clients have not suffered the losses they would have done if they had only invested in equities or property in isolation. The market conditions illustrate the importance of diversification and asset allocation. Events such as those surrounding Northern Rock have done little to help consumer confidence.
It is also important to manage client expectations. We have been contacting clients during this period of volatility. Many clients have seen market corrections and volatility before and realise that often the best thing to do is to sit tight. Of course, for some investors the market weakness represents a buying opportunity.
Q. Will the Markets in Financial Instruments Directive (Mifid) offer BDO expansion opportunities? A.
A.We believe Mifid will give us opportunities outside the UK. We are considering the best ways to take advantage of the new legislation. This is of particular interest to our asset management business, which is looking to develop its distribution in the intermediary market.
Q. Which type of wealth managers are your competitors? A.
A.Given that the firm is able to offer a range of services from discretionary management through to actuarial consultancy we have few like-for-like competitors. We would classify ourselves as being between IFA firms and private banks in our service offering. We are aware that competition is increasing from both private banks and the top end IFA firms who are seeking to broaden and upscale their client offering but we feel we are well placed to capitalise on changes from the Retail Distribution Review (RDR).
Q. Do you envisage the proliferation of multi-disciplinary firms? A.
A.I think this could be an interesting area. Some firms have already achieved this successfully although there may be some difficulties where a business relies on multiple relationships with third party introducers of work if it causes a conflict.
Q. What will be the impact of the RDR? A.
A.We are not convinced the RDR proposals will provide clarity for consumers. The IFA market will probably undergo a great deal of change over the next five years. The well-publicised demographics suggest that many practitioners will look for an exit while the industry still tries to find a way to attract sufficient new talent, which is ironic given the potential market for advice.
BDO STOY HAYWARD Investment Management has 43 advisers in its private client team. It is based in 15 offices across Britain and offers general financial planning and investment management services. John Porteous is the director in charge of private client services.