Boutique English firm Index Fund Advisors was recently named as the country’s top financial planning business by an industry publication. Its principals, Noel Farelly and Les Phillips, as their company name suggests, are anti-active management but their service offering has been rated above benchmark.
On the outskirts of Sutton Coldfield, just off the A454 near Little Aston Hospital (take the left fork marked ‘Private Residents Only’). lies the 2006 UK financial planning practice of the year. “Please park in front of the offices – a space will be reserved for you at every meeting,” so Index Fund Advisors promises on its website, which also provides a handy map for the directionally-challenged. Good parking might not be an integral part of the six-step financial planning process but by paying attention to such details Index Fund Advisors marked itself out as the best British advisory business, according to UK publication New Model Advisor. Index Fund Advisors’ two principals, Noel Farelly and Les Phillips, have hung their business model on close relationships with their clients and describe this as “the most important facet of our business”. “The result of this approach is that almost all of our clients come to us by referral – when we get referrals, we feel that our relationship with you is right,” the pair state on their website. Index Fund Advisors, however, is very selective with its clients and indeed has compiled an ‘Ideal Customer Profile’, which not surprisingly would filter out a large part of the population: its clients must earn more than £100,000 a year or have over £500,000 of investible assets. This deliberate focus on the high net worth client is of course a world-wide phenomenon in financial planning but Farelly and Phillips have put some very firm limits on the number of clients they will service. The business currently caters to 48 clients and will accept another 48 “who meet our Ideal Customer Profile, and then cease all marketing and recruitment”. It is a bold strategy that Farelly and Phillips say is a distinguishing feature of their business. As well, the pair claim their fee-only service offering and ‘Strategic Advisor Panel’ (essentially its alliances for estate planning and tax services) set them apart from the norm. The two are passionate in their fee-only stance and claim it enables them to treat clients “like people rather than as tasks to be processed through the company”. As opposed to the rest of the ‘commission-based’ industry which Farelly and Phillips say includes “the vast majority of IFAs” as well as the usual suspects such as banks, insurance companies, stockbrokers and investment banks. “They have sold their soul; it is impossible to retain any objectivity if there is commission contingent on advice-giving or the sale of a financial product. “The commission-based pay structure of the industry sets up a conflict of interest. The traditional model of commission based compensation invites advisor abuse, with their customers as their victims.” Farelly and Phillips certainly don’t pull any punches and probably haven’t won many friends in the broader UK industry. Their purism even extends to using the word ‘customer’ instead of ‘client’. ‘Client’, so it says on the Index Fund Advisors website, is derived from the Latin word ‘cliens’ which, in Roman times, was used to describe someone who was dependent on another citizen. Therefore ‘client’ “is an inappropriate word to describe the person the professional serves in today’s marketplace”. This staunch attitude is naturally reflected in its investment philosophy – the business’ name provides a bit of a clue here – which toes the Dimensional Fund Advisors’ line. Dimensional, the US-based manager which has a few supporters in Australia, takes a passive approach to investing backed up with high-level academic research. Advisers who use Dimensional tend to be fee-only types like Farelly and Phillips and also are usually highly sceptical of the claims of active funds managers. “We have taken Nobel Prize-winning academic research that has identified the dimensions of stock returns that consistently outperform major global market indices, and created low risk, cost efficient portfolios that entrepreneurs can utilise to preserve and maintain their wealth,” Farelly and Phillips say. Index Fund Advisors feeds its clients into one of 10 model portfolios dominated by Dimensional funds. The first part of the Index Fund Advisors model portfolio selection process, though, depends firstly on an Australian innovation – the risk-profiling questionnaire created by FinaMetrica (the firm formerly known as ProQuest). For a fee-schedule ranging from 50 bps to 1 per cent of assets Index Fund Advisors provides the usual admin, reporting and plan production services one would expect. As well, however, the practice offers its clients unlimited phone/email support and unlimited face-to-face meetings (hence the need for good parking). More unusually the firm also offers a service guarantee. “If the customer is not completely satisfied with the services performed by Index Fund Advisors Limited, we will either refund the price, or accept a portion of said price that reflects the customer’s level of satisfaction,” the website says. And what’s more when disgruntled clients arrive to get their refund they will have a top-notch carpark waiting for them at Index Fund Advisors’ luxury offices at Little Aston Hall (just off the A454). Name: Noel Farelly and Les Phillips Business name and location: Index Fund Advisors – 35, Little Aston Hall, Little Aston; Sutton Coldfield B74 3BH – near Birmingham, UK. Dealer name or self-licensed: licensed by the Financial Services Authority in the UK Area of speciality: wealthy entreprenuers, high-net worth (at least £500,000 of investible assets Relevant qualifications: Farelly – Chartered Financial Planner; Associate of the Chartered Institute of Banking, an Associate of the Personal Finance Society, a Fellow of the Institute of Financial Planning, and also holds the Investment Management Certificate: Phillips – Certified Financial Planner, specialist pensions qualification and an FSA authorised pensions specialist Number of clients: 48 Method of fee collection: fee-only, ranging from .5 (for balances over £10 million) to 1 per cent of assets under management Investment platforms used: Abbey National Wrap Investment research used: Dimensional Fund Advisors
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