Ed Fairey took a colourful road to financial advice but his firm, Fairey Associates, has made all the right moves to this week achieve chartered status.
Ed Fairey went through a period in his life that was, by his own admission, ‘a right old pickle’. But the pieces are now clicking together and he is imposing a fierce logic on his financial planning business, Fairey Associates.
Much like a jumble of Rubik’s cubes, while all planning firms have the same components, it takes extra effort to line them up properly.
ED FAIREY CV
- 2008–present Fairey Associates, managing director
- 2005–2008 Helm Godfrey, IFA
- 2002–2004 C Hoare & Co, operations
- 2001–2002 Cazenove, operations
- 1998–2000 Walker Crips, stockbroker
- 1993–1995 Killik & Co, compliance officer
- 1992 Midland Bank, operations
Chartered Financial Planner
Advanced Diploma in Financial Planning
Certificate in Financial Planning
Certificate in Long Term Care
Certificate in Mortgage Planning
Diploma in Financial Planning
- BSc (Hons) Economics
Take the logic applied to research and analysis. For example, in the wrap market, as well as analysis conducted by paraplanners and analysts, Fairey Associates surveys the entire business, asking a series of probing questions about the providers: what are their response times? Their admin? How accurate is the information they provide?
‘We harness the whole community from reception to managing director,’ says Fairey, adding with a reference to a completely different kind of game, ‘Why wouldn’t we? Phone a friend or ask the audience? Ask the audience is always more powerful; it’s always better.’
Fairey Associates applies a minimum charge of £1,000 for creating a financial plan. For new clients, it charges an initial fee of up to 3.5% to implement the plan. This also applies to transactional clients: non-active clients looking for a one-off service.
‘When you meet a new client there is a huge amount of upfront work to be done. That needs to be paid for,’ says Fairey.
Many would say 3.5% is very high for an initial charge but Fairey says it is an upper limit.
‘We charge up to 3.5%,’ says Fairey. ‘The rule of thumb is that the starting point is around 1%.
‘But, for example, we recently advised a client with 20 different pensions (from 40 years’ work) worth £100,000 in total so this was charged at 3.5% as it was a huge amount of work. We have the ability to flex up to 3.5% when the workload is substantially more but the average initial fee across the firm is around 2%.’
Ongoing fees are 1%. For that clients can expect responses within 48 working hours, tax packs and advice on investment management switching, moving money from personal portfolios, or dealing with emergencies. Clients also receive a formal annual review meeting.
In Fairey’s personal life, he was not always at the top of his game. In what he describes as his ‘misspent youth’ Fairey left home, moved into a squat and lived a somewhat wayward lifestyle.
‘I got myself into a right old pickle and mum and dad said: "You better go and get yourself a decent job,"’ he says. Fairey’s uncle worked at Midland Bank (now part of HSBC) so he packed up, moved to London and got a job in the bank’s operations department.
Moving on to work at Killik & Co, Fairey quickly rose through the ranks to become compliance officer. Deciding he wanted to be a private client stockbroker, he went to Aberystwyth University and achieved a first class honours degree in business and economics. This opened doors to jobs at blue-chip stockbrokers.
However, investing money did not satisfy him. ‘It’s not enough,’ says Fairey, ‘protection and tax – there’s much more that goes into making sure people are making optimal decisions with their financial affairs. So I started to broaden out and get all the other qualifications.’
This led to a stint at Helm Godfrey before he set up Fairey Associates in 2008. This week the firm is celebrating chartered status.
The eBay ethos
The 44-year old managing director, who, incidentally, is about the same age as the Rubik’s cube, has a penchant for online auction site eBay’s democratic and measurable customer service approach. It is a model Fairey wants to learn from.
‘eBay has democratised the buying process with a voting system that measures the things that are important,’ says Fairey. Having a democratic, or rather, meritocratic, approach to the internal workings of his business is another way he thinks it can deliver something better for the client.
In Fairey Associates’ main office in Chelmsford, Essex, and in its seven other offices across the south and east, Fairey’s teams are closely monitored so workflow is transparent, and managers are efficient and fair, he says.
There are monetary staff incentives. Fairey Associates will pay for all staff to take two Chartered Insurance Institute exams a year if they wish to and double their profit-related bonus if they pass. However, Fairey hopes the ability of staff to see their own and others’ performance encourages them to be the best and democratises the measures for success. ‘It’s game theory; when you’re constantly measured you can make sure you’re constantly on top,’ he says.
Passives only ‘part of the answer’ as Fairey offers colour-coded in-house portfolios
Fairey Associates runs fives styles of portfolios in-house, each of which have five risk grades. These are the hybrid portfolio, which includes active and passive funds; pure passive; pure active; and both light and dark green ethical.
The light green portfolio contains ethical funds but also, for example, passive trackers, so the asset allocation is broad and diversified. Dark green ethical, meanwhile, is predominantly a traditional equity/bond portfolio, because it is constrained by containing purely ethical funds.
‘We apply a top-down strategy and we reference sources such as Standard Life’s MyFolio range or Citywire manager ratings to arrive at sensible strategic asset allocations,’ says Fairey.
An investment committee then makes tactical shifts away from those within a tolerance and votes on weightings within an asset class.
Although not an active management die-hard, Fairey does have some doubts about the popularity of passives with advisers. ‘The rise of passives is there to make room for the 1% ongoing adviser charge largely,’ he says. ‘In a bull market such as the one we’ve had from 2008 to today, why wouldn’t you go passive? But if the market is moving downwards or sideways, a passive is not very helpful. Passives are part of the answer not the whole answer, they’re not a panacea.’
Surprisingly, given this assessment, Fairey Associates has around 79% of assets allocated to passives, such as Vanguard trackers, which Fairey says have a progressive price reduction policy and can be ‘ludicrously’ cheap.
The company also remains invested in the Standard Life Global Absolute Return Strategies (Gars) fund, despite recent poor returns, because it continues to reduce volatility in the portfolio.
Setting the standard
For his own two cents, Fairey likes Standard Life’s wrap proposition and has done since 2007, praising its ‘super clean’ share classes, its move to factor-grade pricing before the rest of the market and its excellent consumer service.
‘They complete 98% of all money requests within 48 hours and if they do make the odd mistake they do crazy things like send the client a bunch of flowers,’ he says. ‘They’re just an incredibly well-run business.’
He hastily adds he has no allegiances to providers. ‘Independence is all about finding the best solution for the client, not just flogging them the best that you have to flog,’ he says. ‘Asking a tied salesman to change proposition is like asking a turkey to vote for Christmas. It’s just not going to happen.’
A typical client for Fairey is anyone wanting advice who is willing to pay a fee. He does cater to high-net-worth individuals but says focusing on these clients alone is ‘arguing over too small a piece of the pie’. ‘I don’t think it is a good business strategy because poor people get rich and rich people get poor,’ he says. The average client portfolio size is £150,000 to £200,000 and, for Fairey’s personal client bank, £450,000 to £500,000.
This open door policy means quick growth. The business takes on around 250 new clients a year and last year took £65 million of new assets.
To handle this growth, Fairey Associates is constantly recruiting, and hired three new advisers last month, bringing the total to 20. Upward mobility at the company is fostered by Fairey’s rationalised democracy. One level seven qualified 30-year old adviser, Ivar Sala, started as a receptionist. ‘He’s Estonian and he did it in three years in his second language,’ says Fairey. ‘I love that.’
Fairey admits rapid growth could lead to errors. ‘A potential downside is that human nature makes you say: "OK, we’ve got a game here. I’ve got to get as many numbers on the board as possible," and you just chuck stuff through, making mistakes all over the shop.’ To tackle this he has implemented a feedback system that goes directly to the person dealing with the client or query.
As well as advising on £300 million of pensions and investments, Fairey Associates also advises on wills, lasting power of attorney, trusts and general insurance. Plans for the future include an accountancy offering and possibly discretionary permissions. He is also digging deeper with existing clients.
Wills are an example of an area that allows Fairey to reach new clients: by fostering relationships with clients’ children and grandchildren. Another way he harnesses the next generation is by encouraging his clients to leave money to their children in gifts and trusts.
He also encourages clients to leave money to charities, pointing out that making a bequest to a charity in a will is inheritance tax-exempt. There should be some £3 million going to charities from just one of Fairey’s own clients this year.
Planting the seed
Fairey will no doubt rely on insight from his fellow director and wife, Jennifer Hughes, who is a chartered accountant. He describes her as the yang to his yin and admits his other half is the only one of the pair to have actually solved a Rubik’s cube.
His own charity venture stems from his hobby. A keen gardener (with 35,000 tonnes of compost and 41,000 bulbs planted in the North Essex garden he shares with his wife, four kids, four chickens, three horses, a dog and a cat), Fairey and his neighbour will be opening their gardens through the national garden trust on 12 and 13 May next year. He is also donating £3,000 to £4,000 to the trust through the business.
Never one to leave a field unfurrowed, the company’s marketing material will appear around all the gardens in the Essex area, from which Fairey is hoping to scoop up some new clients.
Having recently hired former Sesame commercial director Andrew Bedford to work on the firm’s marketing and publicity, Fairey is keen to improve the ‘communication and connectivity with professional services businesses in Essex and across the south east’. To that end, he is planning to launch an app so clients can communicate with the firm easier, monitor spending and engage in some form of cashflow forecast.
Constant change and growth means, according to Fairey, the business can be ahead of the game when it comes to things such as new regulation. ‘A business in growth is about constant change,’ says Fairey. ‘And when change is what you do, there is no change.'
FIVE TOP TIPS
- Invest in quality staff.
- Always focus on the best outcomes for the client.
- Focus on the long haul, not short-term fads.
- Keep learning and adding qualifications.
- Marry/live with a chartered accountant!