Adviser Focus: Simon Lewis, MD of Partridge Muir & Warren

Partridge Muir & Warren managing director Simon Lewis explains how his business has benefited from streamlining and a technology-driven approach.

Visiting Partridge Muir & Warren, Chartered Financial Planners, on the 20th floor of Tolworth Tower (a landmark for any driver using the A3 in Surrey), is a memorable experience.

The boardroom provides an amazing view from the spires of Crystal Palace one way, to the Surrey Downs and Kempton Park on the other.

It is a good place to conduct an interview and PMW's managing director Simon Lewis is only too happy to talk.

He explains how the company has evolved over its 40-year history and the plans he has implemented to ensure PMW is in good shape for the future.

"The company really made its name back in 70s and 80s when it was largely a product manufacturer - notably the Warren Gilt Plan which had two former prime ministers as investors.

"But over time the gilts markets proved not so attractive and the plan stopped in 1993. The company also pioneered the use of split cap trusts back in 1989/90 and managed to avoid the bar-bell split caps that attracted such bad press."

By the time Lewis joined in 1993, the two products that had made the company's name, (the gilt plan and split cap trust) were not providing the numbers they once were.

"I joined as a financial planner and my remit was to develop this side of things - which at the time accounted for only a very small percentage of the company's business.

"Initially, we built up a lot of corporate clients and from presentations to corporate clients we could possibly get 10 private clients. Because it was such an effective way to bring in business, I used to do these presentations for a nominal fee. Back in the early 90s it was very different, there were many defined benefit schemes which meant employees were retiring with large amounts of money. The scenario has changed significantly now."

PMW still looks after corporate clients but it is the private client, high net worth side that has been significantly built up and developed.

The Hard Path to Success

But to bring the company to where it is now has been both painful and challenging and many lessons have been learnt along the way as Lewis explains.

"In 1996, I was part of a management buyout after a difference of opinion with the then chairman. He had a number of other business interests which meant he couldn't be entirely focused on PMW. The upshot was that he said ‘OK make me an offer for the company.' So I got in touch with corporate finance people and put together a ₤1.8m deal that only required ₤60,000 of our own money upfront."

From there, the deal went through and the business grew quickly getting up to a headcount of 55 in 2002.

But with the benefit of hindsight Lewis concedes that some mistakes were made along the way. "We opened a regional office in Birmingham with a local adviser that talked the talk but failed to live up to expectations. And in general we became top heavy in terms of people - too many committees and a lot of expensive hot air."

And Lewis admits that when the stock market crash came in 2002, PMW was hit hard.

"We were very dependent on new business and that really fell back. Our business model was not focused on recurring income and that was the central problem. The fact that our IFAs are salaried meant that we had to pay wages at a time when there was very little business coming in. The upshot was that we had to cut back severely in terms of staff and salaries. The staff count went down to 30 and salaries were cut - I survived off a credit card for a year!"

Learning from Experience

There is saying from Warren Buffet that: ‘It is only when the tide goes out that you see who is swimming naked'. And this encapsulates what Lewis thinks about those dark days of 2002.

"There is another saying that ‘turnover is vanity and profit is sanity' and looking back as a company we were unfortunately measuring our success by increases achieved to turnover. You become obsessed with growth and then the market goes south and your turnover just falls of a cliff. We went through a lot of pain back then and I took the view that I would never let it happen again."

So how did the company get back on course and how has it coped during the current economic downturn post credit crunch?

"We started to change our business model in 2003, to build up recurring income and be less dependant on new business (45% of PMW's revenue is recurring business now and growing)," Lewis says.

"The temptation might have been to dig our way out by taking higher upfront commissions but there is no point in surviving only to be killed off next time. It was painful but by making the changes we made the business sustainable.

"This time around because of the decisions we took back in 2003, we are in a much stronger position. We made a good profit for 2008 and things look positive for the future."

Though it is now time to look forward to the future rather than dwell on what was a difficult past, there are certain things that have left a bad taste in the mouth - in particular the lack of backing PMW got from its bank.

"My view now is never trust banks. Our bank had promised to help in the restructuring of our business but they backed out when we needed them most. We wanted ₤250,000 for a company with a turnover of ₤3.5m."

Lewis adds: "We only wanted it for one year but they stalled and stalled and then turned it down saying ‘we are negative about your sector'. We had banked with them for 20 years and yet they wouldn't give us a penny in overdraft. We did survive and we had to make big cuts as already explained, but things could have been a lot easier if our bank had supported us."

Going for Growth

The company in its present shape no longer has the regional office in Birmingham nor is it top-heavy in terms of staff at its Tolworth HQ - there are seven RIs and an overall staff of 21.

Lewis combines his role as MD with acting as one of the company's financial planners.

"When in the past our staff levels got up to 55 I was pretty much devoting my time to doing admin and running the business. I handed all my clients over which was a big mistake. I enjoy the advisory role but I also think it is important to keep your hand in if you want to run the business effectively. My time is now spent 50/50 between running the company and seeing clients."

Time management and team motivation are identified by Lewis as important elements in running a successful IFA business.

"We have a very workable system here. We are split into teams so I will be in a team with one other RI and three paraplanners. The other teams will be made up in the same way.

"In the case of my team, no calls will come directly to me - instead a client will talk to someone on the team and if it needs to be referred up to me, it is. I am still giving the advice but we are able to service a much bigger client base this way. I never attend a client meeting alone, that way the client's interests and goals are understood by the team as a whole."

The teams are pretty much mini-businesses in themselves. Though all are salaried, they receive bonuses based on profitability and each team decides how that is split. Although this might sound awkward to administer, Lewis insists there have been no problems.

Technology

Though the company has not spent enormous amounts of time and money on its website (something that is on the ‘to do' list) it has invested heavily in IT and Lewis insists the money has been proven well spent.

"We invested a lot of time and money in setting up really good IT and management information. Within 30 seconds of going to my computer I can see how much cash has gone in and out of the company account and how much business we have for this quarter."

Technology also allows members of the team to work efficiently even if they are away from the office or even abroad.

"Our compliance officer lives in Switzerland - the remote working has functioned perfectly well. We invested in Citrix software and this means I can log on from anywhere in the world. The unique number generators ensure only the authorized user has access and the information always remains on our servers back at HQ - there is no data on the machines being used remotely."

A paperless office is something that everyone wishes for but not always achieves. As far as PMW is concerned, the scanning in of 1.5 million pages from old files might have been a huge job for all concerned (everyone chipped in, including family and friends!) but it proved hugely beneficial in the end.

"Before we did this we had paper records deteriorating in storage which took a week to retrieve. It was expensive and time consuming but thankfully life is a lot easier now. And that is the point about PMW, it is about working as a team and making life as easy for ourselves and our clients as we possibly can."

TOP 3 BUSINESS TIPS:

• Always know what you are talking about! Being a chartered financial planner indicates that you want to develop your own knowledge and provides a competitive advantage.
• Never forget you are a business. The client is important yes, but it is equally important to understand that it is in the customer's interest for us to be commercially successful - the FSA doesn't always get this!
• Profitability is more important than turnover.

KEY FACTS:

• Number of RIs: 7
• Number of clients: 6,000 active clients
• Fee/commission split: 75% commission; 25% fees