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Adviser Profile: Olivia Bowen of Castlefield

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Adviser Profile: Olivia Bowen of Castlefield

Ethical investments do not always get taken seriously as a profitable strategy, but Castlefield’s Olivia Bowen is determined to help clients who would prefer not to swim in shark-infested waters.

Manchester-based Castlefield is proving ethical financial advice can be more than a niche offering. But is it just a big fish in a small pond, and would investors be better off swimming with the sharks?

Castlefield recently changed its strapline to ‘the thoughtful investor’, casting aside some of the baggage attached to terms such as ethical and green.

‘We didn’t want people to be put off by the word ethical,’ says Castlefield partner Olivia Bowen, as we chat over lunch in Manchester’s North Star cafe. ‘Some people would say, "I’m not an ethical investor or consumer, therefore I’m not going to invest ethically." But it is about more than that, so we are trying to broaden it: not water it down, but make it more accessible for the profession and potential clients.’

OLIVIA BOWEN CV

  • 2015-present LV=, member panel
  • 2014-present Real Farming Trust, chair
  • 2011 -present Castlefield, partner
  • 2010-present Ethical Investment Association, steering group member
  • 2003-2011 Gaeia, director

PROFESSIONAL MEMBERSHIPS/QUALIFICATIONS

  • Level 4 Diploma in Financial Planning

Testing the waters

Castlefield has shown there is a considerable market for thoughtful investors, so how can other firms identify a similar breed of client? ‘I think you have to ask the right questions,’ says Bowen. ‘Anybody on the planet will have a certain set of values or concerns about their children’s future, or their own health, or whatever issue you want to discuss. It’s just about people understanding this can be reflected in their finance decisions.’

It is not just younger people looking for ethical alternatives. Bowen says her client demographic is similar to any typical IFA. The clients are generally over 50 years old, and medium or high-net-worth individuals.

The regulatory demands of suitability apply to ethical investments as much as any other. Bowen says a lot of work has gone into refining the client advice process, and agreeing on a suitable charging structure.

Castlefield does not rule out handling clients of all sizes, although it typically advises clients with at least £50,000 to invest. To help clients achieve their retirement goals Bowen performs cashflow modelling, based on a simple spreadsheet.

‘There are limitations with some of the systems you buy or use online,’ says Bowen. ‘The beauty of the spreadsheet is it can reflect the necessary information on a case-by-case basis.’

FEES

For initial fees, Castlefield typically charges up to 3% for the first £100,000 of investable assets, and 1% for any amount beyond that. An investment of £200,000, for instance, would cost £4,000.

Castlefield has a minimum fee of £1,200 for new clients, although this fee is often higher, depending on complexity and the size of the case. The firm will meet clients for an hour, free of charge, prior to undertaking any paid proceedings.

Initial charges can be carried out on an hourly basis. Work is charged at £198 per hour for a partner or associate, £120 per hour for a paraplanner or senior executive, and £90 per hour for an executive or assistant.

Fixed fees are available. For setting up a new investment, this is usually between £2,500 and £5,000, and for a full financial review, between £2,500 and £6,000.

For ongoing services, Castlefield has two levels of service: comprehensive and overview. The ongoing fee for the comprehensive service is 0.8% per annum, with a minimum fee of £800. The overview proposition costs 0.6% per annum, with a minimum of £300 per annum.

Casting the net

Castlefield, owned by a charitable trust, has grown steadily. First it bought Manchester-based Gaeia in 2011 to create an advice business called Castlefield Gaeia. It then bought Barchester Green in June 2014.

The Barchester business was renamed Castlefield Advisory Partners (CAP) in October 2015. In 2016 the Gaeia clients were novated to CAP and CAP was rebranded as Castlefield. It is part of a group of companies that include Castlefield Investment Partners LLP and Castlefield Fund Partners, which is the authorised corporate director for Castlefield Funds: an umbrella open-ended investment company. The integration of the businesses caused costs to spike in 2014 and 2016.

Integrating Gaeia was straightforward, as it was based in nearby Didsbury. However, Barchester Green had been operating out of Salisbury, so in late 2014 Castlefield opened a London office to reach clients in the capital.

Client growth has been supported by taking on more staff. With competition for talented IFAs high, and with many firms put off from the supposed risks and costs of training young advisers from scratch, how did Castlefield solve the problem?

‘We want bright sparks from all walks of life,’ says Bowen, whose solution is to recruit the best people, give them a path to progression and a brand they can believe in.

Castlefield has launched an academy to bring in apprentices. The academy targets those who chose not to go to university, or could not face the associated costs. As far as staff retention goes, Castlefield has gone to great lengths to map out several career paths, including compliance, accounts, investments and advice. Each path has a progression plan built in.

School of owners

The ownership structure of the business, which seems to reflect Castlefield’s ethos of conscious capitalism, provides a further reason for staff members to stick around.

All 50 of Castlefield group’s employees have been given shares in the business, and 51.4% of the group is owned by current and former employees. Employee benefit trusts account for a further 18.4%, and a charitable foundation owns 24.9%. The remaining stake in the business is client-owned. This ownership structure marks the company out as different, and shows ethical business, in a practical sense, goes beyond recycling and providing fair-trade tea, coffee and milk in the office (all things Castlefield does).

The ethical sector in the UK has space to grow. Changing attitudes towards climate change and its effect on investments, have put Castlefield in a strong position.

At this juncture, some readers might be thinking, ‘what about Donald Trump?’ The US President considers climate change reports to be ‘fake news’.

‘I don’t think he can ruin the world,’ says Bowen. She does accept we are unlikely to see any green initiatives from the White House for the next four years.

Trump does not represent the US’s wider view, where there is momentum for renewables and greener investments. As evidence of this, there was a 95% increase in solar energy use in 2016, according to Greentech Media Research and the Solar Energy Industries Association.

The Environmental Defense Fund recently reported renewable energy accounted for 64% of new electricity generation capacity installed in the US each year. It is a growing market with big prospects.

Castlefield keeps it in-house so clients can trust its ethical service

Owing to its ethical investment angle, Castlefield handles most investments in house, but will outsource to a discretionary fund manager (DFM) where appropriate. The firm often outsources (to use the term loosely) to Castlefield Discretionary Investment Management (Castlefield DIM), which is part of Castlefield group.

Bowen emphasises advisers are not paid for using Castlefield DIM’s services. ‘That would influence our decisions, and we don’t want that,’ she says. Staff members are shareholders in the business, and Bowen accepts the value of the business increases when Castlefield DIM is used.

There is no abundance of ethical specialists, and Bowen further justifies the decision to outsource to the business arm by explaining Castlefield DIM has delivered on performance and has been cost-effective.

For in-house investments Castlefield primarily uses the Aviva, Novia Financial and AJ Bell platforms. It uses FE Analytics for assessing a client’s risk tolerance, which offers model portfolios, available on wraps or direct from Castlefield. These are more frequently used for clients with less than £250,000 to invest.

There are nine model portfolios on offer, with low, medium and higher risk options available for balanced, income and growth portfolios.

Model portfolios can be problematic if individual ethical requirements need to be met. Castlefield explains to clients all funds are subjected to a screening process, and if they are in the model portfolio, Castlefield is content the fund is truly committed to the ethical sector.

‘We want fund managers that are engaging and being responsible shareholders,’ says Bowen. ‘We make it clear to clients there are limitations to how perfect a portfolio can be, but most clients understand they are at least supporting the movement of ethical investments, and that’s really important. The more funds there are under management, the more clout the industry has.’

Although critics of ethical investment expect lower returns from the sector, Bowen says fund performance over the past five years has outperformed the ARC Steady Growth index.

With oil prices rising last year, 2016 was a harder year for ethical funds to outperform, although Bowen is confident ethical funds will outperform in the long term. One of the funds she picks out to watch is the Henderson Global Care Growth fund.

Rocking the boat

Some advice firms will be considering introducing an ethical proposition, or expanding an existing one. ‘There’s no reason not to do it, and it can give you a unique selling point,’ says Bowen.

‘It means your clients will be more loyal to you, and it’s a good way of building rapport, because you’re sharing similar concerns.

‘You can also show you’re different from the norm. You’re not just looking at the price-earnings ratio and historic fund performance, you’re thinking about the future.’

Advisers who want to up their ethical game can attend Ethical Investors Association (EIA) events. Bowen is on the steering group for the EIA, which offers free attendance to first sessions. ‘For the sake of six hours or so, once or twice a year, you’ll pick up information you can’t easily get elsewhere,’ says Bowen. ‘I’ve only ever worked in the ethical sector, and I still learn huge amounts.’

Castlefield’s story is approaching a new and exciting chapter. Bowen says the next thing on the agenda is to fine-tune the proposition, offering a simpler service to run alongside its holistic offering. The firm aims to help promote engagement with ethical investments to the rest of the UK market and beyond, through involvement in the EIA, Good Money Week, and other similar initiatives.

Ethical investment may have a greater reach than you might think. Castlefield’s positioning as the thoughtful investor is a welcome and clever move, and could provide a signpost for where the profession is heading in the long term. In the meantime, the firm looks set to keep profiting from an underserved market.

FIVE TOP TIPS

  1. Ask your clients whether the effect money has on the world matters to them.
  2. Always fully engage in meetings with both clients and colleagues.
  3. Do not be afraid to challenge the status quo.
  4. Encourage colleagues to spend time on their wider interests, to help them develop.
  5. Remember the business case for investing with environmental, social and governance principles is irrefutable.

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