Profile: Andrew Merricks

"Why should the mega-rich get a better level of service? They need it less."

Skerritt Consultants went discretionary in July 2008. Head of investments Andy Merricks says it was the best move the company ever made, but “bloody hard work”.

The Brighton and Hove-based IFA received FSA approval following eight months of toil by the company's administration team, and Merricks himself says he had to go "back to school" to take the Investment Management Certificate (IMC).

"I was getting increasingly frustrated by not being able to do the job I wanted for clients," Merricks says. "Investments work until the markets change and are no longer doing what you want them to. Those cycles of change seemed to be picking up pace and there were more and more switches needing to be made.

"Under FSA rules, advisers need the client's agreement before any [portfolio] changes can be made and it was proving impossible to get the signatures we needed fast enough. We felt we were letting clients down."

Discretionary powers have given Skerritts the ability to make any necessary changes as soon as they are required.

"The main reason we went discretionary was because I genuinely think it is better for clients to leave the investment management up to us. After all, that is why they came to us in the first place, to manage their money to the best of our ability."

Merricks says the move meant the firm could also provide a better level of service to its customers: "There is one client I have known for years. He doesn't have a lot of money, but he has to keep what he has got intact and earn from it.

"Just because he's not mega rich, why should I deal with him any differently to how I would a client with more than £1m? In fact, he needs it more."

Now the firm is able to offer clients both advisory and discretionary options. "We can say to clients: ‘You tell us what you're comfortable with'. They might want us to do everything or they might want an input in the decisions. It's their choice."

But Merricks says most clients have opted for the discretionary service. "It is certainly the route I would always encourage," he says. "Most people who come to us say: ‘You're the expert, that is what we pay you for'."

The main sticking points in the process of moving the company to a discretionary basis were gaining the qualifications and the capital adequacy requirements.

On studying for the IMC, Merricks says wryly: "I am of that age now where learning is not as easy as it was, but it was good for me. If what you are studying is relevant it is worth doing, and I now know more than I did before." A discretionary firm needs at least two IMC-qualified advisers. Skerritts used a locum IMC investment adviser until new hire Mark Waters came on board in February.

The biggest administrative hurdle, however, involved meeting the FSA's new capital adequacy requirements. "It wasn't just a case of making sure we had money in the bank," Merricks says, "they looked at everything, from turnover to our accountants. It was a long and thorough process."

Merricks says the point at which the business went discretionary was a classic case of perfect timing.

"We didn't know it at the time of course, but when Lehman Brothers collapsed in September 2008 we saved a lot of money for those clients who had got their discretionary agreements back to us in time. That would have been impossible before."

He says the investment team aggressively switched out of "anything equity based" and put the company in a position to make money again when markets began to calm.

Client reaction was rewarding too, Merricks says. "I was genuinely surprised and heartened by the number of clients who either rang me up or wrote to me to say thanks."

Positioning the brand

Having established the company's credentials as both an advisory and discretionary investment manager, Merricks says he has begun the process of re-positioning Skerritts with this change in mind.

"When it comes to financial advice on investment, pensions and mortgages, we want people to think of us first and foremost, to be their default option, certainly in the Brighton and Hove area," he says.

To this end, the firm has an ongoing brand awareness campaign locally, with advertising boards at the Brighton Races, Brighton and Hove Albion FC and the local cricket club, as well as the occasional local radio placement. Skerritts staff even carry the company logo on their cars. "It's all about getting the name out there, drip feeding awareness on a not very large budget."

New pastures

Skerritt Consultants moved into new premises in Hove in April last year, allowing it the space required to continue an acquisition spree that has so far seen it make three big purchases in three years.

Back in 2006, the company acquired Robin Lloyd Associates in Eastbourne while, in March this year, Skerritts purchased Shoreham-based adviser Watkins Oram, which moved its offices to the new Skerritt HQ. In the same month, the company acquired London-based IFA Huntingdon Investments.

Merricks says the rationale behind the Huntingdon deal was to begin spreading the Skerritt brand beyond the environs of West Sussex.

"We see ourselves as an IFA that happens to be based in the Brighton and Hove area," he says. "The majority of our business is local but quite a big part is now based in the City."

Huntingdon was a major move for the firm, Merricks explains. "Alongside bringing us a good client bank, having a City office is particularly useful because Richard Skerritt (the company MD and its main pensions adviser) does an awful lot of business in London. Being there makes it easier to deal with more clients."

The only downside to the office move, he says, is that Skerritts has lost its high street presence. "This mainly affects the mortgage side of the business, where we used to get walk-ins," he says.

It's our time

One reason Merricks is pleased the firm can now operate on a discretionary basis is that he believes investment has come back to the fore in the advice process.

"It is the one area people really, really need advice on at the moment," he says. "Property hasn't been working, nor cash, and income has gone down the pan. A lot of people have had capital loss, and they are generally confused and worried. That's where we come in. It is where all the work done in the past on brand-building starts to pay off. It's our time as investment advisers."

In July 2009 the firm signed up to the Ascentric platform and has been using Transact for a number of years.

"We will use Ascentric for the model portfolios we offer clients and Transact for the more bespoke business," Merricks says. "For dealing with legacy assets when bringing on a new client, platforms really prove their worth.

"In our area of the country you are often dealing with elderly people who have held investments for years without change. You can bring them all on to the platform and then manage them under the discretionary option."

Media work

Another means of promoting the Skerritts brand is through working with the media. Merricks is a well-known commentator on all things investment in the national, trade and local press. While it can take up a fair degree of his time, he says the reason for maintaining a media presence is less about creating leads and more about "building credibility in you as an adviser and the firm you work for".

"If you are quoted in the press, potential clients, who are always wary, are more likely to have heard of you. It breaks the ice. Our whole business is about advice so if you're not confident about giving your advice in the press, when are you confident about it?"

Working smarter

While investment and pension advice business have picked up in recent weeks, the third arm of Skerritt's advice offering concerns mortgages. How has the company dealt with the downturn and lack of products in the market?

According to Merricks, it is all about working smarter, and harder. "In these times, the importance of keeping good records really comes through, because good records tell us, for example, when a fixed rate mortgage is coming off and flags up that we have to go back to the client," he says.

"During the last downturn in the investment market, when it was really slow and the phones weren't ringing, I looked out across Brighton and thought: ‘Someone out there is doing some investment business'. It never stops, it just slows down.

"It's the same with mortgages now. You've got to work harder to get the clients in before you can get the message across that they are getting the sort of good, independent service they won't find in the banks and building societies.

"It is difficult. You have to work harder when times are hard. You just need the motivation to do it."

FACT FIND: Skerritt Consultants

Managing director: Richard Skerritt
Main offices: Hove, West Sussex; Laurence Pountney Hill, London
Number of clients: 25,000
Assets under influence: £200m
Number of staff in Sussex and London: 25
Number of RIs: 8