Adviser profile: Stephen Girling of SG Wealth Management

After buying out his long-term partner, Stephen Girling is drawing up an interactive client experience at SG Wealth Management.

Stephen's CV

2014–present: SG Wealth Management, managing director

2001–2014: SG Wealth Management, director

1998–2001: Crossley Mackenzie IFA, consultant

1993–1998: Hogg Robinson, branch director

1989–1993: Bernard Knope & Partners, director

1984–1989: Legal & General, life and pensions inspector

1978–1984: Legal & General, trainee life inspector

Professional memberships and qualifications:

Chartered Financial Planner

Associate of the Personal Finance Society

Stephen's CV

2014–present: SG Wealth Management, managing director

2001–2014: SG Wealth Management, director

1998–2001: Crossley Mackenzie IFA, consultant

1993–1998: Hogg Robinson, branch director

1989–1993: Bernard Knope & Partners, director

1984–1989: Legal & General, life and pensions inspector

1978–1984: Legal & General, trainee life inspector

Professional memberships and qualifications:

Chartered Financial Planner

Associate of the Personal Finance Society

Running man

SG Wealth Management managing director Stephen Girling has hit the ground running, and not just during the seven London Marathons he has completed to date.

Since his last New Model Adviser® star profile appearance 10 years ago, Girling has dealt with huge change in the profession, in the shape of the retail distribution review and the pension freedoms. He has also completed an acquisition and is fresh from a management buyout (MBO).

He is now plotting the next phase of growth for his East Anglia firm, which he sees as an ‘expansion stage’. Technology, he says, will be integral to the firm’s future, particularly ensuring clients have an interactive advice experience.

‘It is a new chapter for SG Wealth Management,’ he says. ‘It will involve new technologies, new partnerships and is quite exciting for both client experience but also for the team we have.’

Revving up

I meet Girling at his office on the edge of Norwich city centre. The medieval city is known for its cathedral, boot manufacturing and, of course, Alan Partridge.

Retirees are increasingly escaping London for the riverside city, causing an increase in new property developments and yachts in the nearby harbours. Girling enjoys the area on his Triumph Sprint motorbike, which he takes out for trips – or ‘twisties’ to use Girling’s motorcyclist lingo – on Norfolk’s country lanes.

The fortunes of the city are similar to those of SG Wealth Management. Since its last cover star profile, the firm has acquired Ipswich-based IFA Stan Gaskin, in 2011, which is now located in an ‘up-and-coming’ spot on the Suffolk town’s waterfront. SG Wealth Management’s client numbers have grown to 573, assets under advice reached £217 million and its adviser numbers swelled to 11.

In August the firm completed an MBO. Girling took 100% ownership of the firm after he acquired the 38% share owned by co-founder Neil Shillito, along with minority stakes from four other shareholders.

Although Shillito has relinquished his duties and ownership of SG Wealth Management, he is set to carry on running his Downing Diversified Global Managers fund, which has earned him a Citywire A rating.

The usual suspects

During the planning for Shillito’s exit, a number of options were in the offing. But Girling tells me he never gave any thought to a bid from a consolidator.

‘Most consolidators have beaten the path to our door, as they have a number of others,’ he says. ‘When you get a number of owners in a meeting, they have all heard from the same names that are really interested in fitting your client bank into their model. That really didn’t suit what we promise our clients, which is a more holistic approach.’

Girling says he received interest from the ‘usual consolidator suspects’. Has St James’s Place (SJP) come knocking? Girling says no, even though SJP is well known in the Norwich area – perhaps because SG Wealth Management is too big for it, he tells me.

There were, however, talks with another advice firm last year, which did reach an advanced stage. However, in the end a final agreement on the terms could not be made and, once talks fell through, an MBO was the natural course, Girling said.

This MBO is being funded through Girling’s own resources, along with a three-year earnout based on the profits of the business. He adds there is also back-up funding from ‘interested individuals’ who might step up to take a stake if future revenues are hit by a downswing in markets.

The whole picture

Like many IFAs up and down the country, SG Wealth Management has been active in the defined benefit (DB) transfer market over the past few years and has four qualified transfer specialist advisers.

How does the firm stay on the right side of the regulator? Girling explains his firm never accepts enquiries from people who just want a standalone DB transfer report.

Instead he looks at the client situation as a whole, rather than just one element. And he always uses cashflow modelling for DB transfer advice.

‘Someone who is just focused on the tax-free cash to pay the mortgage off could be a recipe for problems later on,’ he says. ‘Unless they are prepared to agree to take a step away from that and look at all the pros and cons.’

For people not prepared to pay for a DB transfer report, and who would only pay for something if the advice is to transfer, ‘we would not go there’, he adds.

Another dimension for DB transfers at SG Wealth Management is the large number of former and current Aviva employees, particularly former Norwich Union workers, who are being offered ‘very generous’ cash equivalent transfer values. Sometimes these Aviva multiples are 40 to 50 times annual DB pension income instead of the normal 20-times ratio. Girling says he has advised on around 30 DB transfers for Aviva members.

‘Last year was the perfect storm for Aviva,’ he says. ‘It was very keen to get a lot of that [DB] liability off its books so it was giving generous multiples.’

These large multiples not only prompted a lot of Aviva employees into early retirement, but also boosted the local Norwich economy, Girling says.

‘With the size of the transfers, and often these people don’t have any intention to retire away from Norwich, that will mean a lot of local businesses will do nicely in the coming years with the amount of money coming [from these transfers].’

However, just as in other parts of the UK, these transfers do have a darker side. Girling tells me he has seen ‘at least one’ advice firm in Norwich that had an A-board outside its office encouraging Aviva pension members to come in and speak to them about transferring.

‘[That advertising] does suggest it got commoditised, and that it was as easy as coming in and signing up rather than looking in more detail at the pros and cons,’ he says.

Tapping into apps

For the next phase of the firm’s growth, adopting new technology will be key, Girling says. SG Wealth Management is currently moving from Adviser Office to Intelliflo for its back-office and fact-find functions.

Girling says this is exciting because Intelliflo’s open architecture structure will allow for integration with other third-party money apps, allowing for a more interactive experience with clients.

Having interactive cashflow planning sessions will also be key, particularly for engaging with a new generation of clients. To achieve this, the firm is providing Microsoft Surface tablets for its advisers.

‘The newer generation is expecting far more tools and facilities on any device, and with 24/7 access,’ he says. ‘We are looking to embrace the tools that allow for more interaction with those millennials and others we haven’t needed to deliver before.’

He is also hoping to expand the team’s numbers and is looking to recruit at least one more paraplanner, as well as a compliance director and IT project manager.

Legacy options

Looking ahead, Girling says he is also open to making another acquisition if there are any advisers looking to retire and who want to manage their own exit route.

On his own succession planning, he says: ‘One of the things I have to make sure works, just as it did with Neil’s [Shillito] departure, is a structured way to leave. Rather than me sitting here at 85 and saying: “I still think I am worth something to the company”, I don’t think so. You have to make sure there is succession planning.’

Part of this is looking at an employee benefit scheme, which would allow staff to take a stake in the business, thus creating incentives for employees, as well as deterring departures.

‘For some owners it is all about them and their situation,’ says Girling. ‘That has not been my approach. I have always wanted [employees] to feel that when we have success, everyone should benefit from it if they contribute.

‘It would be nice to look at a structure so that those who are working long term in the business could have some sort of stake, in the shape of some sort of employee benefit scheme.’

The fee bit...

For a client with £250,000 to invest, SG Wealth Management does not charge for the first meeting, which includes a fact-find.

Its initial advice fee is different for each individual client, ranging from £750 to £4,000 depending on the complexity. For a client with £250,000 who has three pension pots and some ISA money, an initial fee would be around £1,500 for a financial planning recommendation (including fact-find, cashflow modelling and review of their existing holdings).

If the client agrees to implement the financial plan, there is an additional administration fee of £150 per pot of money to do the paperwork. This is based on the hourly cost of the work.

For ongoing fees, SG Wealth Management has two services. One is its financial planning review service, which is suitable for clients with £250,000 and more. For this service, the firm charges 75 basis points (bps), which would include an annual review as well as contact points through the year. On top of this it charges 20 bps for its discretionary fund management (DFM) service plus VAT.

Its other tier is its wealth management service, for clients with £500,000 or more to invest. These clients are charged 150 bps for ongoing advice and the DFM.

For DB transfers, there is a non-contingent flat fee for a suitability report, the same as for regular service clients. But if the client goes ahead with the transfer, there is a higher implementation cost of around 1%, which recognises the high cost of professional indemnity insurance and the risk of taking the work on.

The investment bit...

SG Wealth Management exclusively uses active funds. Girling says ‘good fund managers’ can add value over time because they are actively picking good companies rather than exposing clients to everything.

‘We have always been believers that, with the right selection of expert fund managers, correct investment selection adds to the overall return,’ he says. ‘It doesn’t follow in any given period. But if you are asking a UK equity manager to select 50 stocks from the thousands quoted on the stock market and back that with rationale, you are more likely to go in a positive direction.

‘Whereas if you are in a FTSE tracker, you will mainly be exposed to oil and energy stocks, and could be at the whims of whatever happens in the marketplace.’

SG Wealth Management has its own discretionary permissions and the majority of clients have model portfolios run on a discretionary basis. Girling says one of the benefits of having discretionary permissions is being able to pick some of the smaller fund managers he likes over some of the big names.

‘We haven’t been scared to go after some of the lesser-known fund names, including GAM,’ says Girling. ‘I think that is an advantage of being a discretionary manager.

‘You don’t have to sell a particular fund or name to your clients. There have been some non-high street names we have looked at.’

Twitter!

You can follow Stephen and the team on Twitter using the handle @SGWealthMGMT. Here are select highlights from their feed:

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