In recent years two factors – apart from the ubiquitous on-line revolution – have forced us to re-think how we manage wealth. These are the world economy and UK law changes.
Gone are the days of double-digit growth. Investors feel lucky to clear a handful of points lately and to make matters worse, the influences you need to consider when constructing a plan are expanding exponentially on an almost daily basis. At the same time there are a fast-growing group of people out there who require help to manage ever-smaller savings.
What this all means is that the traditional adviser model is irretrievably broken. A traditional adviser can no longer deliver a truly rigorous financial plan without bringing in expensive third-party expertise. That adds a cost that many clients can’t hope to cover from the diminishing return on their investments and places the less-affluent way out of field for the hungry IFA.
This isn’t news, of course. The sector has been trying to ignore its imminent demise for years, but all is not lost. While the sector has been tightening its belt, in a town on the outskirts of Birmingham, the IFA, AFH Wealth Management, have been pioneering a different approach. They call it “financial planning led wealth management”. It works like this.
Advisers team up with AFH on an employed or self-employed basis. They get a dedicated and fully resourced admin team and an even bigger squad of experts covering the widest possible range of disciplines. They also get a programme that everyone works to, to create really robust, holistic strategies individually for their clients. The fact that all the leg-work is taken off their hands means that the advisers can free-up around 60% of their time, which they can then re-invest in building their portfolio of clients and developing those they have still further.
Clients are guaranteed a far better thought-through financial plan than they would get from a traditional adviser, but that’s only the start. AFH are also a long way down the digital transformation route, which for those who are unfamiliar with this concept, means they are replacing all their work-flows and processes with automated systems that dramatically reduce overhead. They have also been growing – currently they have around 2.1billion of assets under management – and they leverage this volume to bring home any essentially third-party resources at big savings on rate-card. The really big news though is that rather than pocket the difference, AFH pass savings on to their clients. This means that not only do existing clients get a better service for less than they would pay elsewhere (so their diminishing returns become a bit more like the old days), the fast-growing less-affluent mass-market start to look like viable clients.
This is clearly an easy sell for AFH’s IFAs, but what does the sector make of it? Well, if acquisitions are anything to go by AFH have taken on forty of their competitors in recent years. This year, in fact, they have already acquired six businesses and have a queue at their door. It seems the news is out that AFH have the solution to the IFA problem.
So popular have they proven to be that, in order to shift up an acquisition gear, last week they gave new investors an opportunity to claim a slice of the action and were over-subscribed by commitments from big institutional investors within two hours. Outside of the tech sector it’s rare indeed for a company to raise around a quarter of its value in a single issue, but this is what AFH did and it’s definitely noteworthy. In fact, in addition to new blood like City Financial, Slater and Polar Capital every one of their existing investors upped their stake, which suggests they, at least, are happy with how things are at AFH.
An industry commentator once described AFH as “the future of wealth management in the UK” and it’s easy to see why, but more importantly the ever-critical investor-set seem to agree. If I were an IFA right now, I’m sure I too would be looking on AFH as a place I might like to call home.
First published on LinkedIn March 2017
August 3, 2018