Adviser profile: Ermin Fosse Financial Management

James Hollway and Nigel Barthorp are turning a lifelong partnership into a business that will carry on without them at Ermin Fosse

For two people who have known each other for 30 years, 25 of which were spent working shoulder to shoulder as IFAs in Cirencester, Ermin Fosse partners Nigel Barthorp and James Hollway are still fiercely individual.

Where Hollway might jump, Barthorp will pull back. Hollway says he delights in new things, while Barthorp plays the anchor role. And while Barthorp looks every bit the country gent, his office festooned with pictures of wildlife and a retired shooting dog snoozing on the carpet, Hollway plays guitar and has joined a singing troupe called Natural Voices.

‘Costa Coffee is paying me £150 to sing at its vending machine sales conference. I’m selling out,’ he says.

Barthorp and Hollway met 30 years ago when they joined the same business, Kellands, on the same day. That business laid the foundation for the modern iteration of Ermin Fosse.

Barthorp had arrived from Allied Dunbar. Kellands represented his first apprehensive step into the ‘big wide world’ after five years at Allied’s structured ‘boarding school’ style environment. ‘But how James got there I have absolutely no idea.’ 

For two people who have known each other for 30 years, 25 of which were spent working shoulder to shoulder as IFAs in Cirencester, Ermin Fosse partners Nigel Barthorp and James Hollway are still fiercely individual.

Where Hollway might jump, Barthorp will pull back. Hollway says he delights in new things, while Barthorp plays the anchor role. And while Barthorp looks every bit the country gent, his office festooned with pictures of wildlife and a retired shooting dog snoozing on the carpet, Hollway plays guitar and has joined a singing troupe called Natural Voices.

‘Costa Coffee is paying me £150 to sing at its vending machine sales conference. I’m selling out,’ he says.

Barthorp and Hollway met 30 years ago when they joined the same business, Kellands, on the same day. That business laid the foundation for the modern iteration of Ermin Fosse.

Barthorp had arrived from Allied Dunbar. Kellands represented his first apprehensive step into the ‘big wide world’ after five years at Allied’s structured ‘boarding school’ style environment. ‘But how James got there I have absolutely no idea.’ 

Running parallel

The pair worked as self-employed advisers for Kellands in Cirencester for around 20 years. In 2001, Barthorp (pictured) and Hollway set up a directly authorised limited liability partnership, Kellands Cotswolds LLP, ‘taking on all the commercial risk,’ but kept the name of Kellands, which it still paid for back-office support.

Then in 2017 it brought the support in house and rebranded. Ending a 30-year relationship with Steven Kelland was ‘painful’ they say.

The business was renamed Ermin Fosse, after the two Roman roads, the Fosse Way and the Ermin Way, which connect in Cirencester. It was apt to name the firm after a crossroads: ‘It’s useful to distinguish between Nigel and me,’ says Hollway. ‘I was quite keen to get away, I like something new. Whereas one of the anchoring strengths, thank god, was Nigel who has to be persuaded the facts all stack up before making a decision.’

Hollway describes it as ‘a real growing up’ moment, but the move may not have happened were it not for agitation from the firm’s two younger advisers, chartered financial planner Daniel Boden, and chartered and certified financial planner James de Lisle Wells, who is also a partner. They were unhappy professional connections were referring clients to different Kellands offices. 

The partners now plan to further ‘nuance the way revenue is divided up. A salary, which might be slightly less than we are taking at the moment, will be put into a general pot and divided up as profit according to a profit share definition’, Hollway says. Barthorp says the main objective of restructuring the ownership is to shift value to the LLP, and away from individual advisers.

It also creates an incentive to share work between partners. Next they will define how much of the LLP each adviser owns. It will allow new partners to join, who can be offered partial ownership via a share in the LLP.

Business nous

Recruitment of a practice manager is the biggest issue right now for the 2018 New Model Adviser® Top 100 business. ‘Once we have a practice manager in place it will make succession look more realistic,’ says Barthorp.

They want a practice manager to create and oversee processes and procedures and, according to the job specification, ‘act as an integrator between the partners and the rest of the team’. 

More business owners appear to be employing business managers who are not advisers to run their businesses. Barthorp joins several New Model Adviser® cover stars who have spotted the business sense in this, as the day-to-day running of a business is not necessarily an adviser’s greatest talent.

Ermin Fosse’s practice manager role follows the creation of a client relationship manager (CRM) in 2017. The CRM role ‘is pretty diverse’, the partners say.

The firm currently employs two CRMs – Hollway’s daughter Lucy King, and Emily Loveridge. They work closely alongside the advisers, processing business, preparing annual client planning meetings and being the first point of contact for clients if they have any questions.

‘It enables us to do more,’ says Hollway. ‘And what fascinated me was what it did for morale. When I talked about an administration job, I thought: “what a dreary thing to do”. OK, it is dreary in some ways but it now also has the client relationship element.’

He describes the CRM role as ‘one of the first steps to succession’. ‘If the client has a greater relationship with the company, the business will have the value rather than me.’

Staff all included working with clients as one of their favourite things about working at Ermin Fosse.

But recruitment is a challenge. Support staff have typically come from the nearest financial services hubs such as Swindon, where companies such as Zurich have offices. And it would be impossible to miss the largest factor for a Cirencester-based IFA: the national administration headquarters of wealth advice giant St James’s Place, ‘our bigger brethren down the road’.

‘It has just built two enormous office blocks and needs people to go in those, so it does soak up a lot of the talent,’ says Barthorp.

A glance at the firm’s website reveals a familiar pattern in the advice profession, with all four financial planner roles filled by men and three women working in support roles.

‘Tell me about it,’ says Barthorp, ‘we are desperate for women advisers to be honest.’

But Barthorp says a specific challenge is that entrepreneurial women advisers prefer to create and run their own businesses rather than joining a partnership like theirs.

‘We might have to nurture someone from within the firm,’ says Barthorp. ‘I feel sorry for women clients looking for women advisers because it is lacking.’

Giving something back

Barthorp compares today’s advice market to the short-lived consolidation among estate agents in the 1980s. ‘There were lots of smaller advice businesses much closer to the society in which they operated. Now you have these consolidators backed by private equity, I do not believe they care terribly about the clients. They are just looking at the revenue.’

There have been a flurry of acquisitions in the past 18 months but Barthorp predicts the market ‘will revert to smaller, privately owned businesses, and it would be nice not to sell for a sovereign’.

With no plans to sell up, Ermin Fosse is in the very early stages of planning its next big thing: a philanthropy venture.

Ermin Fosse wants a facility to help clients give to good causes while retaining some control over how the money is spent.

‘They are just people who want to discreetly make a difference in their chosen area,’ says Barthorp. ‘It’s not that easy, though. It has to be viable and the costs can be quite onerous. We have to find a way of making it cheap and work. But if we can, it would be brilliant.’

Ermin Fosse raised over £9,000 for the Invesco Perpetual Snowdon challenge, supporting the Youth Adventure Trust. It has sponsored Cirencester Rugby Club for 25 years and this year is fundraising £10,000 for Gloucestershire Young Carers. This year team members will also tackle the Three Peaks Challenge, climbing Ben Nevis, Scafell Pike and Snowdon in one day.

There is a connecting line to be drawn between the advisers’ personal ethos and the business’ approach. Barthorp’s son is a conservationist in Namibia and his stunning photographs of African wildlife provide the view from Barthorp’s desk.

‘I had a client here yesterday, a poor woman whose husband has really bad Alzheimer’s. He is not very old, so she asked what she should be doing with her life,’ says Barthorp. ‘I said: “for god’s sake, go and see Africa”. It is a mission for me that we should explore the world.’

The fee bit

Ermin Fosse charges a pounds and pence initial project fee based on complexity, a percentage-based implementation fee and a percentage-based ongoing fee.

Fixed-project fees range from £200, for a review of an existing portfolio, to £2,500 for a financial salary pension analysis, full financial plan and recommendation.

Should the project result in a recommendation, the fixed-project fee will be replaced by the implementation fee. The implementation fee will not be lower than the project fee.

Implementation fees are on a sliding scale, starting at 3% for investments up to £100,000 to 1% for investments greater than £500,000. Anything above £1 million is by negotiation.

Ongoing fees range from 1% for less than £100,000 to 0.65% for between £750,000 and £1.5 million.

Though ‘some discretion is possible where we believe the clients’ future needs are likely to meet our criteria’, says Barthorp, ‘we tend not to be too rigid about it, though the young advisers tend to be more rigid than we are,’ he adds.

As is their business consultant Brett Davidson, founder of FP Advance, who is ‘a right old fusspot’.

Indeed, client numbers reduced in 2018 because the firm identified clients with ‘small amounts of money and there was no way we could deliver a planning process for them based on the fees they were paying.’ Those clients have been referred to a telephone-only based advice firm in Northampton called Investor Profile.

‘And there are good reasons for rigidity,’ says Barthorp. ‘How can you deliver if you are too liberal with your fee structure?

‘The level of regulation and reporting is so significant you do not have the time. If you are going to deliver a good service to people you have to restrict your accessibility, sadly.’

Some higher earners who do not have large sums to invest are still prepared to pay a fee, Barthorp says.

The investment bit...

Ermin Fosse outsources investment to Bristol-based discretionary fund manager (DFM) Alpha Portfolio Management. Around £72 million of client assets are with the DFM.

Alpha runs the firm’s model portfolios through the Transact and Nucleus platforms. For clients who need more bespoke portfolios, it uses Smith & Williamson and Tatton Investment Management, and ‘off-platform’ investment managers Ruffer, Brewin Dolphin and EFG Harris Allday for diversification or access to direct equities, for example.

When Ermin Fosse began using Alpha it agreed to pay the DFM itself to compensate for the small amount of client assets, but has maintained its £1,000 per month payment, which lowers the DFM’s fee to clients.

‘Not only does it give us the ability to talk with it and influence it but it says to the clients: “we think managing your money is so important, we will make a contribution towards doing that well”,’ Barthorp says.

Hollway adds: ‘We set an advised model up and saw what a nightmare that was, so we found a DFM prepared to do the job we wanted to do.’ This included allowing Ermin Fosse to diverge from the DFM’s global asset allocation views ‘then we could leave the risk allocation, fund choices, risk-mapping and so on to them’. The firm reviews portfolio asset allocations five times a year.

The active versus passive debate divides the two partners. ‘The cost of managing the money is a big issue,’ says Hollway, ‘and the active managers are just not getting that plot yet.’

‘We might not agree on this,’ responds Barthorp. ‘The markets in the past two or three years have been very passive biased, but where is the growth in the future?’

De Lisle Wells is also a passive proponent and the firm is meeting Dimensional Fund Advisors in the coming weeks. Hollway says the debate is ‘one of the useful tensions in the building’.

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