Adviser profile: John Moore is back onto the fairway

John Moore has worked hard helping to steer Nucleus towards its next phase of growth while co-directing Aberdeen-based Central Investment. But his commitment is set to pay off.

Moore has had a hectic time over the last few months juggling three roles as director of Aberdeen-based IFA firm Central Investment Services; chairman of the IFA advisory board for wrap Nucleus; and chairman of Nucleus IFA Company (NIFAC) which holds 45% of Nucleus shares on behalf of its IFA subscribers.

Moore has been closely involved in the recent Nucleus rights issue – negotiating with Sanlam, which owns 42.5% of Nucleus, over the raising of £15 million. The money will be used to pay off the wrap provider’s debts, increase regulatory capital and ultimately boost its client base.

‘One of the reasons some bigger firms have not gone with Nucleus is the perception of a relatively weak balance sheet, and this will be improved now that the £15 million has been raised,’ he says.

Nucleus work has taken up 50% of his time over the last four months. However, Moore says that has been justifiable to Central, which was one of the founding members of the wrap when it started as a project in 2003 and launched in 2006.

‘Nucleus is hugely important for Central Investment,’ says Moore. ‘It is the biggest risk in our company. I’ve been involved from the start. It would be hugely embarrassing if Nucleus was not to deliver a first class service to our clients. So it’s very worthwhile maintaining an interest. Plus we have a 1% founding share in Nucleus and our share of the 45% owned by NIFAC. The value of that is increasing. Going forward, our shareholding in Nucleus could be worth as much as the shareholding in the company.’

The making of Central Investment

John Bremner founded Central Insurance, as it was then, in 1973 and remained managing director until retirement in 2008. Moore got to know Bremner while working as
a consultant for Friends Provident and Standard Life in the 1990s and accepted an offer to join the company in 1997.

Around that time the company demerged its commercial insurance and pension and investments business and Moore became an IFA for the latter, which was named Central Investment Services.

Over 25 years, the business had grown steadily into one of Scotland’s largest IFAs on the back of strong relationships with local professional firms. Part of Moore’s task was to improve the profile of the company and maintain and reinvigorate some of those relationships.

‘Central has naturally progressed by adding around £20,000 of recurring income each year per adviser over the last 10 years. Our recurring income this year is about £1.8 million. We have 10 advisers and two of those are new, so they are just starting to build up their recurring income streams. Because our recurring income now meets our fixed costs, we survived the downturn well as we weren’t relying on new business.’

Management buy-out

The next big challenge was Bremner’s retirement. He owned 65% of the business and the balance was divided between directors Graham Cobban and Grant Ronald; and two directors of Central Insurance. Moore explains: ‘That culminated in a full management buy-out in March 2008. I’m now one of seven directors who have an equal shareholding. Graham and Grant each got a pay-out and the seven put in £250,000 each together with a bank loan.’

Following Bremner’s retirement, Cobban became managing director.

The retirement was the catalyst for the MBO, says Moore, but ‘something would have had to happen’ as the firm’s high income producers were keen to get a stake in the business. ‘It worked out very well. There were times when we thought it wasn’t going to happen because John had also been approached by [a large national IFA]. But we wouldn’t have worked for them.

‘The seven directors were all senior advisers at the time. Our intention is to get new advisers up to a minimum level of fee income and then give them the option to buy into the business.’

Moore admits that having so many directors can slow down decision making. But, he adds: ‘We needed to keep everybody. We needed the security of income to justify the loan.’

Nucleus's baptism of fire

Moore admits that, with hindsight, the Nucleus wrap probably launched too early. But it is now working well, he says.

‘There were periods in the first year when service levels were not great. Some were slow in adopting it due to this poor experience. Now service levels are good – probably better than most other companies.

‘Nucleus chief executive David Ferguson is a firm believer in IFAs. Any conflict has been more between Sanlam and the IFAs rather than management and IFAs. But when things weren’t working as they should in the early days, management got a roasting from the advisers. That is why David is the only one of the management team from the early days still there.’

Recently the Nucleus advisory board developed a one-page disclosure document which they say will meet the FSA’s new requirements on wraps.

‘We want clients to understand what they are reading and make it far more concise so they will read it,’ says Moore.

Going it alone

Some have questioned why Nucleus is not working with the UK Platform Group – comprising Skandia Investment Solutions, Fidelity FundsNetwork, Cofunds, Hargreaves Lansdown and Standard Life – which is also devising a disclosure document. 'That group is self-appointed, provider-led, dictating what clients should have and conflicted against IFAs,' says Moore. 'We think IFAs are the best people to determine [the disclosure]. I’m not saying our one-page document is the finished article, but it’s designed to start that debate.

‘We’ve had all these red herrings from the UK Platform Group. For example, Skandia has been scathing, suggesting that IFAs have a conflict of interest if they have an equity holding in the platform, but I would counter that. I find that conflicts disappear if everyone knows about them. Our clients know we have a small holding in Nucleus. The benefit for clients is that we have some influence over development, control over pricing and that should lead to a better proposition for them. The UK Platform Group is conflicted because they want to retain control over that distribution.

‘You could argue that historically in UK financial services, the product providers have colluded with IFAs to the clients’ detriment. You’ve no idea what rebates and kick-backs are going on between these companies. Is that lack of transparency fair for the client? Nucleus is trying to align us with clients to squeeze the providers and fund managers.

Maintaining independence

‘In terms of an IFA being able to call themselves independent, you have to prove you’re using a particular platform, product or funds for the right reasons and ensure you have the clients’ interests at heart.’

Moore also disputes whether IFAs that use two or more wraps will be any more independent than those that only use one. ‘We also have funds with other platforms, but I think that wraps will become a commodity, like stakeholder pensions or investment bonds.

They’re all doing exactly the same thing. So I don’t think it will be an issue as long as you ensure access to the whole market of investments. Provider-led wraps will have more of a problem because they have a vested interest in controlling which funds are used.'

Team snapshot

(Front to back): John Moore, director; Jonathan Craig, financial planner; Sharon Adan, pensions and investments administrator; Duncan McNeil, pensions and investments administrator

Breakdown of the business

Central’s business is split between 75% private client and 25% corporate work. It does some protection and mortgages but the majority of individual business is single premium investments. ‘Between 10% and 20% is on a pure fee basis,’ says Moore. ‘But most of our business is "defined payment" – an agreed fee which we take out of the client account on the wrap. It’s a matter of semantics as to whether you call that fee or commission. But it is agreed remuneration.’

The firm charges between 1% and 3% as an initial fee, depending on the amount invested, plus 0.5% annual. It has around £90 million of its total £500 million client assets invested on Nucleus.

Shaking up model portfolios

Central is currently changing its model portfolios to move with the times. Previously it used a rigid stochastic modelling process for asset allocation. Now it is building portfolios of multi- asset funds which will add flexibility and allow fund managers to set allocation.

Moore says this should enable them to avoid bubbles such as the one we saw in commercial property three years ago; or other special situations such as the artificially low gilt yields caused by quantitative easing.

Growth boosted by location

Central’s location in Aberdeen has been an important factor in its growth. ‘You assume Aberdeen is all oil,’ says Moore. ‘But Aberdonians are quick to remind you that, long before the oil industry, it was the wealthiest city in Scotland through farming and fishing. These are both still massive industries in the area and we have many fishing and farming as well as oil-related clients.’

Not satisfied with this though, Moore says he wants the firm to be the top IFA in Scotland and has set a target to boost funds under management to £750 million by 2013. To this end Central opened an office in Glasgow this year and, once the debt from the MBO has been paid off in two years or so, hopes to be able to acquire a firm in Edinburgh. ‘We feel there is a lack of good quality provincial IFAs,’ says Moore. 'The nationals like Towry Law are taking over. RDR is not going to help that in the shorter term. Being seen to be more professional will help recruitment, but it will take time.'

Central also wants to take on more advisers. 'We need another three or four people to get to the £750 million,’ says Moore. ‘We are targeting successful advisers in national firms who don’t have an equity interest in the company.’

The firm has a mature client bank of 18,000 including all group scheme members and about 3,000 active individual clients. Client segmentation is therefore a pressing challenge. ‘I have 250 active clients and I want to get it below 100 so that we can offer a better service,’ says Moore. This will involve taking on more advisers and support staff and tightening up the investment proposition so that those clients with less to invest have to pay an extra fee if they want a face to face meeting.

Eyeing the corporate market

Another area of expansion could be corporate wraps. Central uses the Staffcare system for its group benefits solutions and wants to link Staffcare into Nucleus. ‘That will allow us to have our standard corporate pension, and a Nucleus pension alongside it giving directors and more sophisticated investors a wider investment choice if they want. In the longer term we hope Nucleus will support such things as payroll functionality to effectively create a corporate wrap.

‘Costs are likely to come down with auto-enrolment. We want to differentiate ourselves by having a robust investment proposition to run alongside a fully flexible benefits package. Corporate wraps haven’t taken off as an idea yet because they are too expensive and not many firms have focused on the investment proposition to justify the higher fee. But that’s where I see our employee benefits going.’

Time out

There has been precious little free time for Moore recently but now work on the rights issue is complete he is looking forward to spending more time on the golf course and with his family. The Moores own a caravan on the west coast of Scotland and keep a motor boat at Castle Sween on Loch Sween, off the Sound of Jura. Moore’s wife, Claire, and children, Rhona (nine) and Andrew (seven), spend the summer out there while he joins them on weekends and for two weeks’ leave.

‘They love it there – the freedom,’ says Moore. ‘It’s the middle of nowhere and they can go to the shops without mum and dad, out on their bikes, down to the beach or the old ruined castle. They love putting on their wetsuits and going out to water ski or just jumping off the pontoon. That’s what I did growing up. My goal next year is to have three weeks off!’

Five top tips

• Listen to the client to fully understand their needs
• Manage the client’s expectations and be realistic
• Prepare your business for the future by moving to fees and recurring income
• Be ruthless with client segmentation and ensure that all your clients are profitable
• Develop your own knowledge and that of your staff through training

CV: John Moore

Career

• 1994-97 Friends Provident, broker consultant
• 1997-99 Standard Life, broker consultant
• 1999-present Central Investment Services, IFA (director since 2008)

Qualifications

• AFPC
• Dip PFS