In a new, more regulated financial landscape, UK-based Towry sees plenty of opportunity, as a recent slew of hires demonstrates.

With more than four months into the new UK regulatory landscape crafted by the Retail Distribution Review reforms, growth prospects in the mass affluent space are opening up, wealth management house Towry argues.

As the Financial Conduct Authority, the newly created regulator, continues to oversee the wealth management industry through its implementation of the RDR - which seeks to stamp out use of commissions and raise qualifications for advisors - many firms have been left with the challenge of how to adjust their business models.

However, despite any costs and changes, Towry says it believes the regulatory requirements help an industry overflowing with a “chequered past” to deliver better consumer outcomes, Andy Cowan, head of wealth advice at the firm, told this publication in a recent interview in its London offices on New Street Square.

With a clear focus on expansion within the mass affluent market, Towry has made a large number of hires since 2012, and its headcount is set to grow as a possible 20 to 25 further acquisitions and opportunities, this year alone, will work to accomplish the firm’s mission statement plan to “be the best in terms of growth”, Cowan said.

Towry has seen its share of ups and downs in recent years. On the upside, it is expanding its headcount with a series of eye-catching announcements. Hires have included, Jeremy Turrell as wealth advisor in the firm’s Bournemouth office, as well as four of Towry’s existing regional wealth advice managers, who were appointed to newly-created national roles: Jon Bowes, head of client advice, Neil Homer, head of client delivery, Andy Springall, head of client development, and Rob Chandler, head of client acquisition. Meanwhile, Andrew Fisher, chief executive of Towry, was honoured at the recent WealthBriefing awards as a leading individual in the industry.

On the downside, the firm was fined £494,000 (around $769,000) by the-then UK regulator for failing to look properly after clients’ money. Towry also lost a court case against Raymond James, the advisor group, over defections of former employees, in February 2012.

But the mood at this firm looks to be considerably brighter despite some of these issues, as the recent spate of hires attests. And this is a pretty big-hitter: Towry currently has £4.8 billion in discretionary assets under management, with 25,000 clients, 150 advisors, 650 employees, and offices in 18 locations in the UK.

New regime

As the regulator continues to tackle issues of “improved professional standards, clearer charging, and greater clarity about the type of service provided”, Towry is a firm confident in its accomplishment of all such requirements.

Cowan, who has more than 20 years’ experience in the financial sector, is head of wealth advice at Towry. He joined Aitchison & Colegrave - now Towry - in 1995, then Scotland’s largest privately-owned independent financial advisor. Cowan became a director of Aitchison & Colegrave in 2000, and led its transition from commission to fees when it joined Towry Law (the “Law” tag has been subsequently dropped) in 2004. He was previously head of Towry’s Scottish business and then head of private client for the company.  

The firm has no plans to expand on an international scale just now as it believes the UK market is awash with opportunity. Cowan said that the mass affluent market, the middle market, which is the key client segment the firm is aimed at, is estimated to be about £1 trillion (around $1.5 trillion), and “is one of the fastest growing markets bar none”.

While there are concerns about slow UK economic growth, the mass-affluent market is estimated to double in ten years, and this, Cowan explains, means that Towry “has a lot of market share to take and a lot of growth to make here in the UK”.

With an increasing trend in banks such as AXA, Aviva, Santander, and now Clysedale Bank Australia pulling out of the mass affluent, space, gaps are opening up where such clients will require service, and these, Cowan said, are "the type of clients that will go to Towry”.

Clients and attrition rates

The firm has a strong client concentration in the southeast of the country; Towry is becoming more specific about its client base, and even “more specific about the types of clients that will benefit most from Towry’s proposition - broadly defined as mass affluent clients”, said Cowan.

Typically, Towry clients will likely hold between £100,000 and £5 million worth of investable assets.

The firm prides itself on a low attrition rate, which sits at a total of between 7 and 8 per cent, with only 1 per cent deemed as unhappy with the firm. Towry’s executive committee tracks the firm’s attrition rate on a weekly basis.

Structure and fees

Towry’s structure offers clients an initial exploratory discussion - what the firm calls “onboarding” - in order to carve a bespoke service to each client’s needs.

Hailing itself as a “purely time-charged firm”, Towry invoices clients on an hourly fee basis, according to their personal requirements and management plans.

“I don’t know any other firm who has made that infrastructural leap and that cultural leap and the massive behavioural change, in a company, to bring advisors to the point that they offer purely time-charged advice,” said Cowan.

Under the skin

Although the RDR has been in effect since the start of the year, the industry expected “immediate change”, according to Cowan, who says that the regulator needs to be given “time to get under the skin of what is actually going on, so it can get into action”.

While most firms face scrutiny amidst the regulatory changes, Towry’s structural amendments are minimal, as the firm’s client service offering and advisor fee model is in line with regulatory standards.

“Our dialogue with the FCA is positive and helping us to ensure the best possible client outcomes. There are no major changes required to our business infrastructure or proposition to comply fully with the RDR,” said Cowan.

Towry believes that the industry has to get to grips with the changing issue borne out of the regulatory implementation and "re-establish trust" within the industry as a whole.

“I think what we need to do as an industry is to re-establish trust, with consumers and with people in this industry, because people still think they’re going to be sold something or that the advisor is going to be in a volume-related remuneration,” said Cowan.

Although Towry faced regulatory issues with the FSA last year, the firm accepts that it will be under the spotlight for some time.

“Yes, there were technical breaches and it is right that we are still under the magnifying glass, and we will continue to be under magnifying glass - that is right and proper. We’re not perfect, sometimes things happen and we rush to correct them,” said Cowan.