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Adviser Profile: Simon Redhead of Wealth Solutions

Simon Redhead tactics are paying off with a hat trick of deals to grow Wealth Solutions.

Adviser Profile: Simon Redhead of Wealth Solutions

Simon Redhead tactics are paying off with a hat trick of deals to grow Wealth Solutions.

Simon Redhead, managing director of Edgbaston-based Wealth Solutions and a former semi-professional footballer, is keeping several balls in the air at once with a string of acquisitions that are moving him towards his goal of £2 million turnover.

Redhead is fast becoming somewhat of a mover and shaker in the Midlands advice market and has moved quickly to score a hat-trick of acquisitions, which have led to the firm moving three times in seven years. His current digs, a large whitewashed Georgian townhouse, are big enough to contain a team double the current size, which is exactly what could happen in a planned deal to acquire an advice firm the same size as Wealth Solutions.

Wealth Solutions has acquired one small company and two books of business that added £33 million under advice. It is currently negotiating a fourth deal and is due to sign an agreement imminently, says Redhead.

He cannot name the company yet due to a non-disclosure agreement but says it is much bigger, with £50 million under advice to add to Wealth Solutions’ current £80 million. He believes it also has more client assets that the firm’s adviser has not yet accessed, and could add as many again.

Transfer tactics

Like any football manager, Redhead has to make sure his purchases can deliver the goods and must deal with sometimes tricky client transfers.

He says the key to reducing risk in acquisitions is to deal with like-minded individuals who want to stay in the business.

‘It could have been a risk but, having got to know the principals in each case, I knew it wasn’t,’ says Redhead. ‘We are not just looking to get funds under advice – the owners and key staff are integral to the transition.

‘We are buying older businesses, so we can create efficiencies. Many companies want to move towards a 1% model but find it difficult.

'Because of our ongoing service model, which is based on financial planning not investment performance, we have found very little resistance from acquired clients moving up to our ongoing fee of 1%. The main thing they want to know is whether there will be continuity of service. That is why the principals’ relationship with their clients is key and needs to be culturally similar to ours.’

Another big risk is integrating client information into the back office accurately. ‘We don’t have the same back office as the current acquisition and a lot of the information is in filing cabinets, so there is due diligence going on as to how that will work,’ says Redhead.

The acquisition is likely to boost active clients from 500 to 750 and eventually 1,200, says Redhead, but it also has 8,000 non-active clients to add to Wealth Solutions’ 2,000. ‘We will class these as "light touch" reactive clients, though we will try to move them to an ongoing service,’ he says.

However, he regards the biggest challenge as that of working out how newly acquired staff will fit into the existing organisation.

Redhead is keen on organic growth too, but that alone is not fast enough to suit his ambitions. ‘We work incredibly hard networking and developing professional relationships,’ he says. ‘But acquisition gives you that immediate boost.’

On top of all this, Wealth Solutions opened its own accountancy arm in July and plans to have a legal branch by September.

SIMON REDHEAD CV

CAREER

  • 2008-present Wealth Solutions (UK), managing director
  • 2000-2008 Wealth Management (UK), director
  • 1994-2000 Nationwide Building Society, financial adviser

PROFESSIONAL MEMBERSHIPS/QUALIFICATIONS

  • Certified financial planner

Growing proposition

Redhead founded Wealth Solutions in May 2008 after leaving his previous firm Wealth Management. He started with 75 top clients and around £25 million in assets under advice and has since built that to 500 clients with £80 million.

He opposes excluding clients based on their wealth and has three main propositions:

  • annual review, charged at 0.5%, usually for those with less than £50,000;
  • comprehensive planning, charged at 1% a year;
  • tailored, charged depending on requirements but usually for clients with more than £1 million.

Most clients use the comprehensive service, which offers cashflow modelling, one face-to-face meeting a year, unlimited access to advisers and administrators, at least one annual statement, valuations and newsletters.

Redhead is constantly looking to add more services, hence the recent introduction of Wealth Solutions Accountancy and the planned addition of Wealth Solutions Legal.

He is setting these up via joint ventures with existing practitioners. ‘It’s not expensive to do. It just takes time and commitment,’ says Redhead. ‘But we are planning for the next 20 years.

‘We take control of the branding so we can cater for our clients’ accounting and legal needs under one brand. But using the joint venture structure means we don’t have the costs and staff resources that we would if we set it up from scratch.’

Redhead believes it makes sense for advisers to offer accountancy and legal services, despite the different skills involved, because advisers possess better business models and commercial know-how. ‘We are on a level with accountants in terms of the way we run our business. In fact, we are better at selling our services and meeting new clients,’ he says.

‘Solicitors are generally poor at running businesses. They focus too much on individual partners rather than the wider business. They also see we have become more professional and have realised they can get good quality clients from financial advisers.’

Close communication over outsourced portfolios

Wealth Solutions uses outsourced model portfolios from Margetts Fund Management, from which it has negotiated a ‘significant discount’ for its clients, and from Investec Wealth & Investment. It has around £25 million with Margetts and £7 million with Investec.

The firm has also used full discretionary fund management services from Rathbones, Investec, Brown Shipley and Morgan Stanley, and uses Vanguard portfolios for those who prefer a passive investment solution.

‘We have regular client meetings and seminars with Margetts,’ says Redhead. ‘We like the access to information they provide and their weekly diary, which covers their market views and investment decisions. They are local, which also helps.

‘Margetts’ investment committee sets asset allocation and selects funds; and we have a monthly meeting where they explain their choices. They have around 20 funds in each model and there are usually one or two changes each quarter.’

Asset allocation changes

In the past few months Margetts has increased its exposure to cash. It has also reduced exposure to US equities and increased it to European equities. ‘They felt the US market was due a pull-back and that there was better value in European blue chips,’ says Redhead.

The Margetts low-to-medium risk Providence Strategy portfolio outperformed the IA Mixed Investments 20%-60% Shares benchmark in 2012 and 2013, but underperformed it last year and in 2015 to the end of June.

‘The underperformance in 2014 was due to the underweight position to fixed interest, which performed strongly especially in the second half of the year,’ says Redhead. ‘The deficit has now narrowed and the performance is in line with the IA sector and likely to move ahead if gilt yields remain the same or increase.’

Wealth Solutions has also been happy with Investec’s performance, says Redhead. ‘Having used Investec for discretionary fund management portfolios, we wanted to use them [for model portfolios too]. They also select asset allocation and funds but have regular meetings with us so we can understand what is going on and why.

‘Investec is a global company with a significant research department. It supplements our investment approach, and it uses some passive instruments and some alternatives and hedges.’

  • ACTIVE FUNDS: 70%
  • PASSIVE FUNDS: 30%

Auto-enrolment ambitions

Despite doing a relatively large amount of business, Wealth Solutions has just four advisers. All are certified financial planners and Redhead says he wants to become personally chartered within two years.

‘You always want to be at the top of your game and chartered is a watermark,’ he says. ‘The company we are acquiring is chartered, so that will enable us to achieve corporate chartered status.’

If you think all this would leave Redhead breathless, then think again because he has spotted yet another opportunity, in the auto-enrolment market.

The firm has already switched its focus slightly more towards group business. The ratio of individual to employer clients was around 70:30 but is now 60:40.

‘We have done a lot of marketing and have staged about 35 companies with auto-enrolment schemes, with a similar amount in the pipeline,’ says Redhead. ‘The strategy has been to provide pension advice that sits alongside accountants’ payroll functions. We send brochures to accountants, then create dual-branded marketing with them.

‘We were already active in the corporate space and felt we could make money from advising in workplace pensions. The spin-offs in other group business are also attractive.’

Time management

In addition to his already intense level of activity, Redhead is an equity holder and silent partner in Hunters Midland estate agents, and an assistant manager at Conference North football team Solihull Moors.

‘The football is a release from work and I have a manager who takes on most of the responsibilities,’ says Redhead, who used to play semi-professionally for Bromsgrove Rovers, Redditch United, Solihull Moors, Alvechurch FC and Studley FC. ‘I was also previously manager of Redditch United, but I had to give it up as it was taking up a day and a half a week.’

He says he is always aware of the dangers of doing too much. ‘Hunters is only about one day a month,’ he says. ‘The football takes up Saturdays and two nights a week. If I were doing too much, I would simply stop something, as I did with Redditch. We have a lot going on at Wealth Solutions too, but we are a good, well-organised team.’

To keep it that way, Redhead pays close attention to rewarding and motivating staff. He and his wife own 100% of the company but he plans to dilute some of that and distribute it among key staff.

Wealth Solutions runs a scheme that enables key employees to receive and purchase shares. It also has a profit-share scheme, through which staff receive a percentage of profits after 12 months’ service providing they hit certain standards. ‘We will calculate it according to their seniority and their value to the company in terms of fulfilment of agreed roles,’ says Redhead.

BUSINESS FIGURES

Watching the bottom line

Wealth Solutions has run profit margins of around 50% for several years. Redhead says the key to maintaining this is to analyse management information regularly.

‘We have weekly meetings, so we understand our business pipeline,’ he says. ‘That helps to control costs and income. Increasing your recurring income also helps by supplying predictable cashflow.’

Despite his ambitious nature, Redhead does not set numerical targets more than two years ahead. ‘With so much going on, it would be folly,’ he says. ‘All I know is that in the next two years we target turnover of £2 million. Turnover has increased. We have kept similar margins. The challenge will be to continue that.’

He also plans to tap the thousands of workplace scheme members who have joined the auto-enrolment pensions his firm helped to set up.

‘We need a direct-to-consumer proposition so we can engage with those several thousand auto-enrolment members that we can’t service face-to-face,’ says Redhead. ‘That is a weakness in the business, so I would like to have something in the next 12 months.’

Keeping a balance

This may be a little too ambitious even for Redhead, who accepts he will need to consolidate after the current deal before expanding further.

‘Because the new firm is so much bigger, integration will be a challenge and could take two or three years,’ he says. ‘We have to do that properly before moving onto the next one. ‘

Wealth Solutions will continue to grow organically and by recruitment, however. It is currently looking for an experienced paraplanner, has offered some internships and recently took on two graduates. It also had one intern for 12 months in the third year of his financial services degree at Coventry University.

‘He just passed with a first and is now travelling the world before coming back to join us,’ says Redhead. ‘We have another one now. They have worked extremely well.’

Despite being incredibly busy, Redhead is happy with his work-life balance. ‘My son is 11 and plays academy football for Wolves,’ he says. ‘I have the flexibility to spend time watching him and my eight-year-old daughter Isabelle, who is active in gymnastics and horse riding. You have to make family time.’

He says there are lessons that can be transferred from managing football to business and back: ‘It is about people in both those areas: how you conduct yourself and how you speak to people.’

Redhead says he does not need an exit strategy and sums up his life and future thus: ‘My three passions are family, work and football. I love what I do and the people I work with. I can’t imagine selling the business. I need a lot going on in my life. I don’t relax by sitting on a beach or reading a book, so life in retirement for me would look the same as it does now.’

Five top tips

  1. Your staff are your most important resource.
  2. Turnover is vanity; profit is sanity.
  3. Appreciate everything your colleagues do for the business.
  4. Celebrate your success.
  5. Exceed your customers’ expectations.

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