Adviser profile: Gretchen Betts of Magenta Financial Planning

Having helped mould Magenta Financial Planning into an award-winning firm, Gretchen Betts now has plans to rekindle her creative side

‘Life is what happens to you while you’re busy making other plans.’ It’s a quote often attributed to the late John Lennon (or comic strip writer Allen Saunders 20 years earlier). But financial planning could be defined as: planning what to do when life happens.

Take Gretchen Betts, managing director of Bridgend-based Magenta Financial Planning. Betts had always planned to be an artist, and completed a bachelor’s degree in ceramics at the University of Cardiff.

But after graduating, and realising she could not afford to pay the next month’s rent, she took a job doing administrative work for an adviser at accountancy firm Grant Thornton instead. When the adviser left just a year later, Betts was handed more advice work, setting her off on the path to where she is today.

Now into the third year of running her business, Betts has been thinking about art again. ‘The planner in me is setting a timeline so hopefully in the next two years I can get a studio in the garden of my new house,’ she says.

‘Ceramics is quite difficult without a kiln, and a lot of equipment and time. So at the moment I do other crafts, try to learn new stuff and take on new projects just to relax.’

Does Betts have her own financial planner? ‘I have this conversation a lot, particularly in the NextGen Planners group,’ she says, ‘about whether we should employ each other or have a planner that’s more removed.

‘I kind of do because [Magenta chief executive] Julie [Lord] and I have done that for one another.’

‘Life is what happens to you while you’re busy making other plans.’ It’s a quote often attributed to the late John Lennon (or comic strip writer Allen Saunders 20 years earlier). But financial planning could be defined as: planning what to do when life happens.

Take Gretchen Betts, managing director of Bridgend-based Magenta Financial Planning. Betts had always planned to be an artist, and completed a bachelor’s degree in ceramics at the University of Cardiff.

But after graduating, and realising she could not afford to pay the next month’s rent, she took a job doing administrative work for an adviser at accountancy firm Grant Thornton instead. When the adviser left just a year later, Betts was handed more advice work, setting her off on the path to where she is today.

Now into the third year of running her business, Betts has been thinking about art again. ‘The planner in me is setting a timeline so hopefully in the next two years I can get a studio in the garden of my new house,’ she says.

‘Ceramics is quite difficult without a kiln, and a lot of equipment and time. So at the moment I do other crafts, try to learn new stuff and take on new projects just to relax.’

Does Betts have her own financial planner? ‘I have this conversation a lot, particularly in the NextGen Planners group,’ she says, ‘about whether we should employ each other or have a planner that’s more removed.

‘I kind of do because [Magenta chief executive] Julie [Lord] and I have done that for one another.’

Key Connections

The pair met in 2012 when Lord hired Betts to work at Bluefin Personal Consulting. After Grant Thornton, Betts had worked as the sole adviser for accountancy firm Clay Shaw Thomas but had started to feel she needed the input and experience she could gain from other advisers.

Shortly after she joined, Bluefin was taken over by Towry. It soon became clear the new owners were not a good fit for Betts and Lord.

‘There wasn’t the freedom that Julie wanted and I was starting to find frustration with how we were being restricted and certain ways we had to deal with things,’ Betts says.

Before Magenta was founded in 2016, Betts joined former New Model Adviser® cover star firm Broadway Financial Planning, based in Worcestershire, where she worked from mid-2015 to 2016. This was only ever a stopgap arrangement.

Betts says it was ‘a great home for me while this transition was going on and really helpful in working out how we might manage things internally. It was a great learning stage’.

She says when she joined Broadway it was always on the basis that at some point they might part ways. But Betts is still part of a shared investment committee comprising Broadway managing director Keri Carter, her paraplanner, Betts and Betts’ paraplanner. The four also meet to share best practice.

‘From what I understand of the “good old days” of the Institute of Financial Planning, [sharing best practice among smaller firms] in local regions was a lot more prevalent,’ Betts says. ‘I think it still happens, but groups like NextGen are the new version of it.’

Betts was named a NextGen Planners ambassador in 2018 and was one of the early members of the group. ‘I think I was one of the first members of the group to be a bit more advanced in my career,’ she says. ‘It’s all about sharing ideas, giving feedback and being willing to share your time.

‘What I find lovely is, even though I am running my own business, I’ve still got loads of questions and there is always someone who can feed back. Then you find solutions quicker and without putting all your staff and resources on it.

‘It’s really helpful and I enjoy being part of it,’ she says. ‘We’ve got a little Bristol Massive that gets together, usually for a roundtable followed by casual networking.’

NextGen Planners might be a breath of fresh air for advice, but in a year that will see more discussion of the retail distribution review, Betts believes the 2013 reforms to advice businesses continue to be a force for good.

‘The move from commission and being more sales-led to a more professional financial planning service for clients has caused significant change,’ she says. ‘If you’ve taken on board and changed your business accordingly, you will be giving better advice now.’

Doing DB right

For defined benefit (DB) transfer advice, Magenta has a non-contingent upfront charge, but Betts says if this leads to advice to transfer, there will be an investment implementation fee. ‘So in a way, this fee is contingent,’ she says.

‘I’m not in favour of banning contingent charging because some people who can’t afford advice might lose out, but we do need a solution. It’s about how ethical you are as an adviser and if you’re doing the right thing [how you charge] shouldn’t matter.’

Betts says, having looked at the statistics recently for the Financial Conduct Authority (FCA) nationwide data request sent to advisers with pension transfer permissions, an uplift in DB enquiries at Magenta last year has subsided in the past six months. Out of around 10 transfers her firm has advised on, the majority were existing clients already. ‘You have more history, knowledge and trust that they really understand the seriousness of their decision and that you understand their objectives fully, if they are already a client,’ she says.

One case Betts highlights involves a partial transfer of a client in poor health. ‘He had four construction DB schemes, two of which had already gone into the Pension Protection Fund,’ she says.

‘In his own words, he had a really low life expectancy because of his health, his work and where he came from. He was in hospital when he was younger and both his parents died at 50. We advised him to transfer one of his [pensions], which wasn’t a massive amount of money. But it enabled him and his wife to do some stuff while he felt he was able to.’

Partial transfers go some way to solving the charging dilemma and there have been many calls to make them more widely available. It made headlines this year when Ford announced plans to allow partial transfers on its scheme.

‘Ford has a big plant in Bridgend,’ says Betts, ‘but partial transfers could offer more flexibility.’

Sweet spot

Now in its third year, Magenta, which this month won the New Model Adviser® award for Wales, has enjoyed a steady increase in income and profits. Betts says she and Lord were ‘almost stingy’ in the first year, being cautious about rent and personnel costs. Profits have so far been used to fund a new office and new staff who are not fee earners.

New clients come either from online contact (Betts says the firm has always had a strong presence on social media: her cat, Basil, has 15,000 followers on Twitter) or from referrals. The firm has hit a sweet spot when it comes to referrals: women professionals referring women clients.

‘We never set out to be a female firm, with female staff and female clients,’ Betts says. ‘But I think our branding and the fact we’re both female planners attracts more women.

‘A lot of women say they feel more comfortable talking to a woman. A lot of people we deal with lack confidence when it comes to money and might be a little put off by a male adviser, so that plays into our hands.’

She adds women solicitors might think: “Oh that’s nice because I can refer my female clients to another woman” and that seems to work, especially in divorce cases [see Adviser Workshop on page 17 for more] and family angst situations.’

 ‘You have more history, knowledge and trust that they really understand the seriousness of their decision and that you understand their objectives fully, if they are already a client,’ she says.

One case Betts highlights involves a partial transfer of a client in poor health. ‘He had four construction DB schemes, two of which had already gone into the Pension Protection Fund,’ she says.

‘In his own words, he had a really low life expectancy because of his health, his work and where he came from. He was in hospital when he was younger and both his parents died at 50. We advised him to transfer one of his [pensions], which wasn’t a massive amount of money. But it enabled him and his wife to do some stuff while he felt he was able to.’

Partial transfers go some way to solving the charging dilemma and there have been many calls to make them more widely available. It made headlines this year when Ford announced plans to allow partial transfers on its scheme.

‘Ford has a big plant in Bridgend,’ says Betts, ‘but partial transfers could offer more flexibility.’

SWEET SPOT

Now in its third year, Magenta, which this month won the New Model Adviser® award for Wales, has enjoyed a steady increase in income and profits. Betts says she and Lord were ‘almost stingy’ in the first year, being cautious about rent and personnel costs. Profits have so far been used to fund a new office and new staff who are not fee earners.

New clients come either from online contact (Betts says the firm has always had a strong presence on social media: her cat, Basil, has 15,000 followers on Twitter) or from referrals. The firm has hit a sweet spot when it comes to referrals: women professionals referring women clients.

‘We never set out to be a female firm, with female staff and female clients,’ Betts says. ‘But I think our branding and the fact we’re both female planners attracts more women.

‘A lot of women say they feel more comfortable talking to a woman. A lot of people we deal with lack confidence when it comes to money and might be a little put off by a male adviser, so that plays into our hands.’

She adds women solicitors might think: “Oh that’s nice because I can refer my female clients to another woman” and that seems to work, especially in divorce cases [see Adviser Workshop on page 17 for more] and family angst situations.’

As far as the business’s future is concerned, Betts and Lord are already thinking about succession. Betts will increase her shareholding in the company so that at some point ‘the balance will swing’ and Lord holds fewer, potentially reducing her hours or taking more of a backseat. In fact, Betts is already looking at ‘who is coming up behind’ her.

And when that time eventually does come, Betts will have practiced what she has preached: a life plan to involve her art.

The fee bit

Typically Magenta will charge between £1,500 and £3,500 as an initial fee for cashflow and a financial plan, 2% for implementation and 1% ongoing.

‘Julie and I discussed these [charges] a lot when we first set up,’ Betts says. ‘She had done analysis and run a business before.

‘Some of the people I speak to now are just charging a time cost or trying to work out a fixed fee, say £1,000 for the cashflow analysis,’ she says. ‘I haven’t seen their balance sheet or profit and loss but if you’re going to run a successful business and reinvest (which makes the business better and means it will be there for your clients in the future) it does have to make some money.

‘We [planners] can be quite idealistic about fees and I tend not to get into the debate about it. I believe, provided we charge fairly, and in line with the services we provide and the advice we give, our clients will be happy.’

A deeper dive

An area that could affect fees is client segmentation. Magenta’s original business proposition to the FCA contained two services: a full service and a reduced service for those no longer needing a full service or for clients’ children. But it is now looking at introducing a new service for younger accumulating clients.

The product intervention and product governance sourcebook (Prod) rules, which came into force alongside Mifid II last January, make client segmentation a regulatory priority, not just a smart business decision. Betts says she has approached segmentation in terms of the client’s knowledge and understanding.

‘About 18 months ago we brought in questions about knowledge and experience,’ she says. ‘It pushes me to ask clients questions about their relationship with money and that brings out a lot of things.

‘I find, particularly in divorce cases, it might be the first time clients are dealing with money. Or even worse, 20 years ago they used to look after [the household finances] and then they gave it all up. Now they’re in this situation again and things have moved on and they don’t know how to do anything.

‘That upsets me quite a lot. So it’s not just complexity of needs; it’s also about the depth of their understanding.’

The investment bit

Magenta outsources its investments, mainly to discretionary fund managers (DFM) Seven Investment Management, Rathbones Greenbank, EQ Investors, Time Investments and Octopus Investments.

‘We actually outsource as much as we can, including compliance,’ says Betts. ‘If there is a specialist out there, why would I try to be a specialist? We can focus on what we’re good at.’

But staff still need to be up on their investment knowledge, Betts says. ‘Clearly we need to know what we’re talking about when clients ask questions so we have the answers and can reassure them’.

Therefore, the firm’s joint investment committee meets at least every six months to discuss asset allocation (to decide whether their DFM’s strategic allocation for each risk group is what Magenta wants to use – read more in Cover Star Extra next week), suitability of risk profiles, investment managers, and any research and due diligence that needs to be done.

Betts says she has always had conversations with clients about ethical investing, but interest has ramped up recently.

‘Our world is changing, people’s attitudes are changing, young people in particular, so investment has to change,’ she says. ‘I also think the conversation the planner has has to change. It used to focus on the negatives of investing ethically, but now it is about impact.

‘I don’t know if every adviser asks their clients about ethical investing because there is no way someone has no sustainability-minded people in their client bank. But the way you phrase it is really important.’

Betts is also looking at how to make her business more sustainable, such as switching to green energy and using more recyclable materials. ‘We can all do our little bit,’ she says. ‘It’s a mindset thing.’

Here are Magenta's business and personnel figures

The Twittersphere

You can follow Gretchen on Twitter using the handle @planning_angel. Here are some choice highlights from her profile:

 

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