Adviser profile: Martin Cawley of Devonshire Wealth Management

Martin Cawley of Devonshire Wealth Management says cashflow modelling still marks new model firms out from the majority of UK advisers.

Martin Cawley's CV:

2009–present: Devonshire Wealth Management, IFA and managing director

2001–2009: Devonshire Financial Services, IFA and partner

1992–2001: Halifax Independent Financial Advisers, IFA and partner

Martin Cawley's CV:

2009–present: Devonshire Wealth Management, IFA and managing director

2001–2009: Devonshire Financial Services, IFA and partner

1992–2001: Halifax Independent Financial Advisers, IFA and partner

New model, old model

What happens when the new model becomes the old model? Before the retail distribution review (RDR) was announced, charging a fee, rather than taking commission, was not standard.

Getting qualified, basing a business on ongoing service, and integrating technologies such as platforms and cashflow planning software were also not the norm.

Since the RDR deadline of 1 January 2013, though, fees and qualifications have been a requirement and platforms have become ubiquitous. So what is the new model? To answer, why not ask a firm New Model Adviser® last profiled in 2012?

'I was thinking this the other day,' says Martin Cawley, managing director of London-based Devonshire Wealth Management. 'We are now new model but new model has become old model. What is the future?'

The answer, which may surprise some, is not all that futuristic. Devonshire will not become a robo-adviser any time soon. Instead, Cawley says cashflow modelling still represents the distinguishing mark of firms trying to do things differently for clients.

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'We might consider it to be normal now but I think a lot of firms across the UK still do not use it,' says Cawley.

Cashflow is key

Since the firm was first profiled six years ago, it has got into cashflow modelling in a big way. The Voyant system was brought in in 2015 and is now used for the majority of clients.

Cawley loves how well it helps clients get to grips with their financial plan.

'They can be in a panic about whether they can afford to retire,' he says. 'They lean in towards the screen and say: "So if we take this net, the money lasts until we are 95?" and we say: "Yes, on this basis."

'It gives clients a lot of peace of mind and comfort. That is as important as anything else we do.'

To correct a previous statement, it is not really true that technology has nothing to do with the new new model, as Cawley sees it. Actually it is fundamental. Not because it takes the adviser out of the process (to be replaced by a robot) but because it makes those human interactions better.

'The new model is also about embracing technology,' says Cawley. 'I remember when we first subscribed to FE Analytics and I thought: "How did we ever work without this?" This is just so important to us and so powerful.'

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'It is so easy now to have a really good conversation with a client about their risk profile. You can show them how things work visually.'

A new era

Cawley’s original business partner left in 2009. He became the sole director and set about building a new model advice firm.

When we spoke to Cawley in 2012, he said the firm had been 'traditional financial services' under the previous management, but 'became new model pretty quickly' after he took over.

He made a host of changes: switching to fees, going on two platforms, and training up an IFA to full qualification, to name a few examples. Since then the firm has continued to evolve, but perhaps with less heat and noise.

Devonshire has traditionally run six model portfolios in house on an advisory basis with Morningstar. But there were concerns about the clunky nature of advisory compared with discretionary investment management.

Clients are now moving over to the newly contracted LGT Vestra model portfolio service. Cawley says the primary motive was that the process of asset allocation, fund selection, implementation and communicating it to clients took too long.

But this accounts for only 20% of clients. It already outsources 80% of investments to three discretionary fund managers (DFMs): Brooks Macdonald, Smith & Williamson, and Mountstone Partners.

For their annual fees, Devonshire Wealth clients are offered an open door policy, with most coming to the office between two and four times a year. Cawley also says they can expect direct contact with their DFM though the year.

Many IFAs would be nervous of their outsourced DFMs having too much direct contact with clients for fear they might poach the client for themselves. However, Cawley sees it completely the other way around.

Cawley says he runs the business 'with a light touch'. One vital point of contact, though, is where the client hands money over to the adviser. Although commission was banned five years ago, Cawley says the profession cannot afford to stop thinking about fees.

He says Devonshire’s ongoing fees are charged on a percentage basis, which is standard, but they are checked against an hourly charging model.

The firm counts the administration and advice hours it has put in for each client. At the end of the year, there is a conversation about whether the percentage fee should be topped up or reduced.

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'If there is something in the market they understand more than I do, like Brexit or Donald Trump’s election, I expect the DFM to ring the client,' he says.

 

Talented team

Talking of putting in the hours, Cawley enthuses about his close-knit team. 

'I don’t want to make her sound like a boxer,' Cawley says, 'but [Devonshire mortgage adviser] Claudia Alves is, pound for pound, the best employee we have. She does not take any nonsense, especially not from any mortgage lenders.'

Alves started at Devonshire Wealth as administrative support for the company secretary. She now splits her time down the middle, working half on the administration side and half as a mortgage broker.

Cawley beams with pride again talking about Nick Townsend, the company’s 'protégé'. Townsend is on a long-term training programme.

He joined as a trainee mortgage adviser 10 years ago, and is now a financial planner with his sights set on chartered status. He is also a director at the firm.

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'Nick worked in a telephone support role at AXA,' he says. 'When we needed to do something with AXA, we would say “let’s call Nick” because we liked speaking to him. He just had such a nice manner about him, all these great soft skills,' he says.

The fee bit...

The current initial fee is either 1% or an hourly-based charge. Hourly administration fees are £80 per hour and adviser time is charged at £250.

The client’s journey starts with a free, no obligation meeting, followed by research into the client’s risk appetite and a cashflow modelling questionnaire.

Most clients go through the cashflow modelling process with Devonshire Wealth in their second or third meeting.

Ongoing charges are 0.5% on clients with an outsourced discretionary portfolio. Clients in the in-house model portfolio service are charged 0.75%.

Cawley takes a pragmatic approach to these percentage charges. He would prefer if everything was done on a time-referenced basis.

'We run timesheets for pretty much all clients,' he says. 'This shows the amount of time we are spending on those clients versus the income we are receiving.

 

Cawley says ideally all clients would be charged on an hourly basis. 'We are trying to balance what clients enjoy paying and how they enjoy paying it,' he says.

'They enjoy the 0.5% or 0.75% because it is coming through the platforms. We are not having to invoice them directly so it is an efficient model.'

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'Clients are savvy. They will say: "I paid £5,000 last year, are you happy with that?" I will show them their timesheet, if it is slightly over [i.e. not covered by their percentage fee], we generally write it off.

'If it is under, they will not quibble as long as it is generally right and fair.'

The investment bit...

Clients previously on an advisory proposition are now offered a discretionary model portfolio service with Vestra. Brooks Macdonald is the largest outsourced DFM, with what Cawley describes as a ‘day one’ relationship.

The second largest DFM relationship is with Smith & Williamson, followed by Mountstone. The latter was set up by James Keane, who left Brooks Macdonald a few years ago to launch the boutique firm.

'Keane is more conviction-based,' says Cawley. 'Running a smaller company, he has a freer hand at constructing a portfolio than bigger companies do.

'He is more inclined to use passives where he feels that is relevant in keeping costs down.'

Cawley says Smith & Williamson is most inclined to build direct equities and direct collectives holdings into its portfolios.

'But all three are good managers,' he says. 'A lot comes down to how we feel the client will react to them personally.'

Twitter time...

You can follow Devonshire Wealth Management on Twitter using the handle @DevonWM.

Here are some highlights from the business's Twitter profile:

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