Adviser profile: Philip Hanley of Philip James Financial Services

Philip Hanley has become one of the most-reviewed advisers on VouchedFor by offering ethical investing at Philip James Financial Services

Anyone who thinks life insurance salespeople cannot adapt to new ways should speak to Philip Hanley, director of Philip James Financial Services.

Before going independent in 2006, Hanley spent 24 years working for life companies. These included Allied Dunbar, whose hard-sell techniques and upfront commissions earned it the nickname Allied Crowbar.

But now with his own advice firm, Hanley has become a champion of the small IFA and a staunch proponent of low fees, ongoing service and ethical investing.

In the past few years, Philip James has seen increasing demand for ethical funds. These now represent 15% of assets under advice and 30% of new investments.

This links to changes in technology and demographics. Hanley’s strong reliance on internet marketing, via sites such as VouchedFor, tends to attract younger, more ethically minded clientele, he says.

Hanley, who was among the top five most-reviewed advisers on VouchedFor last year, believes IFAs who ignore ethical investing, or worse push clients away from it, do so at their peril.

‘A lot more clients want ethical investing, especially the millennial generation,’ he says. ‘But advisers often tell me they try to talk clients out of ethical investment because it complicates things for them and they have to do extra research. They perceive that it’s higher risk, but that’s a lack of understanding.’

There is increasing evidence ethical funds do not underperform non-ethical badged funds; and the market has matured to offer more diversified options.

‘Besides, clients investing in ethical funds are more forgiving if [performance suffers], because it’s not just about returns, they feel their money is in a good place,’ adds Hanley.

Anyone who thinks life insurance salespeople cannot adapt to new ways should speak to Philip Hanley, director of Philip James Financial Services.

Before going independent in 2006, Hanley spent 24 years working for life companies. These included Allied Dunbar, whose hard-sell techniques and upfront commissions earned it the nickname Allied Crowbar.

But now with his own advice firm, Hanley has become a champion of the small IFA and a staunch proponent of low fees, ongoing service and ethical investing.

In the past few years, Philip James has seen increasing demand for ethical funds. These now represent 15% of assets under advice and 30% of new investments.

This links to changes in technology and demographics. Hanley’s strong reliance on internet marketing, via sites such as VouchedFor, tends to attract younger, more ethically minded clientele, he says.

Hanley, who was among the top five most-reviewed advisers on VouchedFor last year, believes IFAs who ignore ethical investing, or worse push clients away from it, do so at their peril.

‘A lot more clients want ethical investing, especially the millennial generation,’ he says. ‘But advisers often tell me they try to talk clients out of ethical investment because it complicates things for them and they have to do extra research. They perceive that it’s higher risk, but that’s a lack of understanding.’

There is increasing evidence ethical funds do not underperform non-ethical badged funds; and the market has matured to offer more diversified options.

‘Besides, clients investing in ethical funds are more forgiving if [performance suffers], because it’s not just about returns, they feel their money is in a good place,’ adds Hanley.

Keeping it simple

For the past 12 years, Hanley has worked from home in a stylish, purpose-built office in the front garden of his house in the Cotswolds. The room has a relaxed ambience with rangy sofas, movie posters on the walls and a mainly 1970s vinyl collection in regular use.

In 2006, Hanley joined national IFA Positive Solutions. But after five years, he says he felt he could run a business more effectively and with safer compliance himself.

Positive Solutions had a high number of complaints at one point in its history, including some relating to troubled investments Arch Cru and Keydata. However, Hanley has never invested in such products and never had any complaints, due to ‘keeping it simple, even then,’ he says.

He incorporated Philip James Financial Services (using his first and middle names) and went directly authorised in 2011.

Since then, he has taken on one other fully authorised adviser; one client service manager and protection-only adviser; one compliance manager and paraplanner; and one administrator.

Hanley still takes pride in keeping his model as simple as possible. ‘We started from scratch with the True Potential back-office system, which enabled us all to work remotely, with no office overheads, and paper free,’ he says. ‘We also keep administrative costs down by outsourcing investment.

‘We get many new enquiries through VouchedFor and people Googling around. We have a smart, up-to-date website. I keep a high profile through opinionated weekly blogs, which I email to clients. I tweet and post on LinkedIn daily. The blog emails have been one of the most effective marketing tools as people often reply to them.’

Hanley says one way to maintain VouchedFor success is to contact a few clients each day asking them to review him on the site. ‘Each month, I get four or five reviews and it keeps me up the rankings,’ he says.

The firm gets three or four new clients a month and now counts nearly 600 households as active clients; 300 of which are Hanley’s. These have helped propel the firm to a £559,000 profit and 68% margin in the financial year to August.

Hanley and his wife Amanda own the company 75%/25%. He will not disclose his remuneration but says that, minus a reasonable percentage left in the business each year, the profit figure gives a good indication of what he pays himself.

Reaching capacity

These tidy sums come at the price of a tough working schedule, however, with Hanley keeping 10 or 12 appointments a week. ‘There’s a lot you can do through technology such as FaceTime. But that is still twice what some advisers do, and it means I work more than 60 hours a week,’ he says. ‘But I enjoy meeting people, so it is fun for me.

‘Working from home means I can work harder. I was always here when my four children – now aged 28, 25, 20 and 15 – were growing up. With nearly 600 clients, we are close to full capacity and may need another adviser soon, but I’m also always looking at streamlining operations, for example by reducing the number of platforms we use.’

Hanley has come a long way since his life company days. But to anyone who suggests insurance salespeople can never change their ways, he says: ‘Nonsense. 50% or more of IFAs were once life insurance salespeople. Besides I have come to realise that the Allied Dunbars of this world, for all their faults, did a lot of things right. Simple can be good.’

Keeping in touch

One thing Hanley does miss about working for larger organisations was getting together with colleagues regularly. To fill this gap, he started, and still runs, a group called ‘By an adviser for advisers’. Around 70 directly authorised advisers are invited, mostly from small firms, and 25 to 30 of them attend three to four meetings a year regularly.

‘It’s been very popular,’ says Hanley. ‘Meetings comprise a talk from a provider, plus an adviser forum on common issues such as charging and pension transfers.’

Despite his hectic schedule, Hanley still finds time to run and swim every day and indulge his passions of music, cinema and holidays. Amazingly, he even manages to do the school run every afternoon.

It only works because he can set his own hours, he says. ‘The small adviser is an important part of the profession,’ adds Hanley. ‘But to survive, you need to embrace social media and evolving technology. It will take over more of the ongoing advice process. Face-to-face is more important for initial advice, but the client can then be monitored and serviced using technology. Hybrid servicing – for example, with clients handling their own ISA top-ups – is the future.’

As for the long term, Hanley initially wanted to build the business for sale within around 12 years but he has since changed his mind. ‘I don’t think there are many buyers offering good value,’ he says. ‘Many deals involve hiking fees for clients [from 0.5% to 1%]. So I would need to find a like-minded buyer who had the clients’ interests at heart [and would not hike fees].

‘Instead, I will probably carry on for another 10 years at least. Since the retail distribution review [RDR], financial advisers are more sought-after as there are fewer of us. Being directly authorised has been far more fulfilling than I thought it would be and less stressful than being part of a larger organisation.’ Not only can people change, it can make them happier too.

The fee bit

Philip James has a straightforward charging structure of initial advice at 3% for new investments or 1% for transfers. Ongoing advice is charged at 0.5%. For larger investments of, say, £1 million or more, the firm may negotiate.

So a new client with £100,000 to invest could pay £3,500 in their first year.

‘We might be a bit more expensive up front compared with some, but we are very cost effective and efficient in the long term,’ says Hanley.

One could argue 3% initial incentivises short-termism, but the firm’s 74% recurring income suggests it is not relying on initial fees to stay afloat.

New clients typically have three meetings or more. Ongoing clients are offered at least a yearly review, a client portal with real-time valuations, weekly emails with blogs, and unlimited contact. This works out at around £175 per hour to provide the ongoing service, says Hanley. The average recurring income per active client is £1,075.

‘Many advisers overcomplicate their service to justify 1% fees and have lower profit margins than we do,’ he says. ‘Different service levels, a tiered charging structure, and keeping tabs on who qualifies for what all add complication and administration.

‘Many firms also feel they need in-house model portfolios and employ an investment adviser to justify that 1%. That doesn’t give better value than outsourcing to a large institution that does all the research and management for you. It is difficult to add extra value and, when the regulator focuses on advice costs, it will look at those with a 1% charge most closely. For someone with £1 million, you have to work very hard to justify £10,000 of fees every year.’

Hanley says if the profession moves away from percentage fees, it will be due to regulation rather than consumer pressure.

‘Advisers must take financial responsibility for the advice we give, so we must charge a fee accordingly,’ he says. ‘The liability increases according to the size of investment you take on.’

The investment bit

When Hanley started Philip James in 2011, he initially used mainly multi-manager and multi-asset funds. However, he now uses outsourced model portfolio services (MPS) for around 80% of new business; and multi-asset funds and ethical funds for the remaining 20%.

‘MPS offer such good value now, they tend to be our default option for new clients and on review if it is good value to move,’ he says.

For non-ethical funds, the firm uses True Potential Portfolios for investments up to £100,000. ‘They perform well, are good value and have a spread of investments,’ says Hanley.

For larger investments, it uses MPS from Tatton Investment Management and Smith & Williamson.

‘We like Smith & Williamson as it keeps costs down by including investment trusts,’ says Hanley. ‘Tatton’s fee is about half the norm at 0.15% including VAT, so it is good value and performing well.’

For ethical investors with smaller amounts, Hanley handpicks four or five funds using research from Trustnet and manager meetings.

For larger ethical investments, he uses model portfolios such as EQ Investors’ Positive Impact portfolios and Tatton Ethical Portfolios.

‘Ethical investment is a specialist area for EQ,’ he says. ‘It is more expensive than Tatton but better for clients who are interested in understanding where their money goes and want a broader spread of ethical funds. It matches the portfolios to the UN’s sustainability goals.

‘The ethical funds I tend to pick for smaller investors include the Janus Henderson Global Sustainable Equity fund; Jupiter Ecology; Liontrust Sustainable Future Global Growth; the Columbia Threadneedle UK Social Bond fund; and Kames Ethical Corporate Bond.’

Philip James became a member of the Ethical Investment Association and the UK Sustainable Investment and Finance Association three years ago. ‘We advertise those memberships in places like VouchedFor and that sets us apart,’ says Hanley.

The Twittersphere

You can follow Philip on Twitter using the handle @philipjhanley. Here are select highlights from his feed:

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