THE man with the plan for financial advice (just don’t ask him for an Isa)
Every industry has to adapt to shifts in the regulatory landscape, but one arena that seems to witness more upheaval than most is financial advice.
Why not outsource the daily pressing of buttons to professionals qualified to do so?
Whether it’s coming to terms with the end of commission through the retail distribution review (RDR), or steering customers through changes to the rules surrounding pensions, keeping up to date with the new rules could appear to be a full-time job in itself.
But Alan Reid, managing partner of financial planning service Cornerstone Asset Management, believes change is often for the better. “The industry is moving away from the dusty old salesman-type approach to a modern, client-focused service, and that was our focus from day one,” Reid says from the firm’s offices in Edinburgh’s west end.
Since co-founding Cornerstone three years ago, he has helped to build the firm to one with more than £140 million of funds under management, looking after about 300 well-heeled clients.
The past two decades of Reid’s working life have been devoted to financial services, having gone straight from school to work with high street lender TSB in Lanarkshire, then moving on to wealth manager St James’s Place, where he spent more than four years before deciding to leave in 2004.
“That’s when Albannach came along, It was an Edinburgh-based business that was looking to open a Glasgow office, and we sold the firm three years later to Towergate Financial Services.”
Albannach was the first independent financial adviser (IFA) bought by Towergate, but since that deal in 2008 the group has decided to focus on insurance and, in March, the Towergate Financial business was sold to private equity firm Palatine.
Reid teamed up with Albannach founder Laurie Dempster and former colleague Jason Hemmings to create Cornerstone in 2012 and the firm now has 15 staff across Edinburgh and Glasgow, including six advisers and three para-planners.
Last month the firm strengthened its management team with the addition of legal and governance expert Keith Oliver in an advisory position. Oliver, a former chairman of Cricket Scotland, is also a partner at law firm HBJ Gateley, the equity partners of which have a small shareholding in Cornerstone.
Reid divides his time between the firm’s offices in Edinburgh and Glasgow and regularly journeys to London.
“We have some wealthy clients down there, but my time is predominantly spent speaking to the four investment houses that we have outsourced our fund management to, seeing how they’re looking after our money.”
He adds: “We have four different approaches – active, passive, a combination of both and another that has direct equity holdings. We decided early on that what we’re good at is spending time with people and listening to them to help with their financial planning, so why not outsource the daily pressing of the buttons to professionals who are qualified to do so, to make sure you’re in the right place and the right markets?
“We don’t believe one type of investment manager gets it right all the time, so we have four. More people are moving towards that model, and it offers us true independence rather than being tied to one type of investment process.”
If there is such a thing as a typical Cornerstone client, Reid says they would have financial needs that are more intricate or sophisticated than most, adding: “If someone’s looking for an Isa, we’re not the people to come to.”
New pensions freedoms, allowing those aged over 55 to take their entire pot as a cash lump sum if they want, have prompted the firm to launch an at-retirement service, due to go live within the next few months, to talk people through the various options, whether that’s taking an annuity or leaving their money invested and drawing down funds as they need them. Following on from that, Cornerstone will target financial planning for the elderly, for example to cover long-term care costs and preserve their wealth through inheritance tax planning.
The average client investment is more than two-and-a-half times the industry standard, Reid says, at just under £300,000 each, or more than £400,000 per couple, but he points out this is just the money his firm looks after and clients will have wealth tied up elsewhere.
He says: “Each of our advisers only has an average of 50 clients, and we reckon the maximum is 80, so we still have some scope to grow organically in terms of new clients. We’re always looking to grow our own headcount, too.”
Cornerstone is also seeking to expand by taking over other business, and Reid says talks are ongoing with some potential targets. “Our industry is made up of loads of small businesses, which the government is trying to squeeze out by increasing costs and compliance, so we feel there’s a play in the middle ground for medium-sized businesses.”
The heavier regulatory burden also means that Reid believes the current regime of qualifications make it more difficult for budding advisers to follow his career path and work their way up straight from school, as most firms look for degrees and some life experience.
He adds: “We’ve got a lad who graduated in America and came over here and he’s absolutely fantastic. He’s the cleverest guy I’ve ever met and he’s completed all his exams within a year.”
30 Second CV
Job: Managing partner, Cornerstone Asset Management
Born: Motherwell, 1969
Ambition while at school: “Obviously it was to play for Motherwell, but that was never going to happen.”
First job: “Working in a branch of TSB in Lanarkshire.”
Car: BMW 330
Reading material: “Don’t have the time – my four children take up all of my spare time.”
Can’t live without: “My iPhone.”
Favourite place: “London is my favourite city, but I really like Turkey for family holidays.”
What makes you angry? “How the banks dumped all their financial services clients who really needed advice.”
Best thing about your job: “Meeting people and getting to know them.”