With a career spanning six decades, Paul Etheridge is not short on achievements. A quiet and unassuming man but one who is clearly passionate about financial planning, he took perhaps the industry’s biggest step in a lifetime to form the Institute of Financial Planning (IFP) in 1987, and support it financially. Since launching, it has transformed how clients receive financial advice in the UK. “I was uncomfortable with the way things were going and so I felt strongly that I, and a few others, needed to do something significant to help improve the quality of advice being given to members of the public in the UK,” explains Etheridge. So he used the financial resources from the Prestwood Group of Companies to establish the IFP to enable financial planners to come together, learn from and support each other.
Etheridge started his career at the age of 16, training in general insurance with the Royal Insurance Company. Despite being impressed by his employer’s desire for high standards, Etheridge decided to leave. “Unfortunately the cost of travelling 25 miles each way to and from work each day was eating into my income. I needed more money to make ends meet. Eventually I handed in my resignation with the intention of applying for a short service commission in the army. Three days later at a meeting with my manager I was told that ‘by pure chance’ a vacancy had arisen in the Royal’s head office investment department, and, if I passed the interview, my salary would be doubled. He described this as a wonderful opportunity, so I moved to Liverpool to work. In those days the department was split between Liverpool and London.”
Despite learning a lot in the following few years, Etheridge moved on and joined the Towry Law insurance broking group, based in London. “In due course I was appointed Managing Director of the Midlands company office,” he says. “I was responsible to the Hon Cecil Law, the founder of Towry Law. Cecil was very able and I learned to greatly respect him. He made no bones about telling staff that if they achieved what was expected of them they would do very well financially, but if they didn’t meet expectations they would not remain with the company. I spent seven years at Towry Law, but didn’t want to be based in London. I left amicably along with two others, and we started Prestwood to give comprehensive advice to clients. Initially, we worked out of a mobile home.”
In 1975 Prestwood launched as a comprehensive financial planning service. In a bid to make the process less labour intensive, Etheridge teamed up with a software developer, called Philip Congrave, to develop the first lifelong cashflow modelling software in 1984, thus providing a tool to help advisers offer a comprehensive lifelong financial planning service.
The Prestwood advisory business uses the cashflow software to provide a fee-based financial planning service, a model that Etheridge is a great advocate of. “We wanted to be fee-based from the outset when we started 40 years ago. I can remember only one objection to fees in all of the years of being fee-based.”
Prestwood charges an hourly fee, with a minimum fee to be paid monthly for the firm’s financial planning services. While some are doubtful of the model, Etheridge says that by getting results, the clients they are seeking will be swayed. “People say to me that clients won't pay fees but I’ve proved that is not the case. What matters is that they are given excellent value for money. Clients have to see the value in what they're going to get for their money and if they see that value then they will pay happily for it.”
Etheridge emphasises the importance of looking to the future. He does not believe in having review meetings. “All our client meetings are planning meetings. We always look forwards not backwards.” He does however believe in demonstrating value, providing a full breakdown of charges that clients have paid him for his advice in every meeting. These charges reflect the total fees charged to the client over the entire time of the financial planning relationship. Over the 40 years since starting Prestwood, he continues to see a few clients to this day and keeps up-to-date technically to maintain his CFPTM
designation and membership. Etheridge holds strong views on financial planning, based on years of evidence garnered from talking to hundreds of advisers and clients. One of his main concerns is around fees and profitability. He explains that planners need to work backwards to work out how much to charge: they need to consider how much they want to earn and how many hours each year they want to work, and take into account the staff, platform, premises and other associated costs. If you put all that into the mix, then planners can work out their hourly rate. Depending on the amount of time a planner thinks a certain piece of client work will take (that comes with experience), the planner can give any given client a good idea of cost to them.
"I, and many other IFP members, have a real will for this merger to succeed and I would implore every person out there to get behind the merger and contribute to ensure its success"
“Most advisers don't start off on the right foot at all,” he says. Etheridge has spoken in seven countries about financial planning over the last 40 years, discussing with advisers why they continue to have unprofitable clients. This is mainly because advisers need to have better criteria on which to decide whether to take on a new client, he explains. “In discussion it often appears that almost the only criterion advisers had was that the prospect was breathing at the time.” From where his business is based in the West Midlands, “within a 20 mile radius there are five million people living and working,” he says, making the point that there are, and always will be, plenty of high quality clients for everyone. But some planners start off advising people who are thought to be profitable, or at least might be in the future, and these planners end up with a mix of clients who they like, but for various reasons, aren’t profitable. This is partly due to a lack of regular analysis by the planner, he says, emphasising the importance of maintaining an ongoing relationship with the client. In his business all appointments for planning meetings are made one year ahead, at the previous planning meeting. Every client always has a date in the diary for their next planning meeting. This demonstrates to them the promise that their service will be ongoing.
A higher plan
Prior to becoming member number one of the IFP in 1987, Etheridge had been a member of the International Association for Financial Planning, but found a reluctance from UK advisers to join as it was perceived to be an American institute. He called a meeting to discuss the formation of a UK institute, and found that there was more interest in the idea than he had anticipated. A working committee was immediately formed to take the idea forward. Initial donations were dropped into waste paper bins as attendees left that meeting. Prestwood provided subsequent financial support, topped up by those willing to pay in advance for lifelong membership. The IFP developed a strong community spirit over the years, with members forming bonds and lifelong professional relationships. In 1995 the IFP became the awarding body for the CFP designation.
1975–Present: Founder and Chairman of the Prestwood Group of companies, including Prestwood Software
2000–2005: PIA Rules Committee and PIA and FSA Small Business Practitioner Panels
1967–1975: Towry Law – MD of Midlands company office
1956–1968: Royal Insurance
1960– Present; Territorial army
Etheridge continues to plan ahead and tries to identify issues that will be faced by financial planners. “Looking forward it is important that we get the message out there that dealing with wealth is not just about dealing with money and numbers; it is also about relationships,” he says. He has plenty of ideas and views on how he would like to see the CISI move financial planning forward. These include reinstating some training courses that were previously run by the IFP, to help advisers and wealth managers become financial planners and then move on to become CFP professionals. “I, and many other IFP members, have a real will for this merger to succeed and I would implore every person out there to get behind the merger and contribute to ensure its success.”
He believes the CISI’s network of branches around the country can help to encourage the growth of CFP professionals through offering after branch discussions over meals or post-session drinks that would foster good relationships. He is also a vocal advocate of the importance of paraplanning and puts much of his own success down to his paraplanner and son, Richard Etheridge, a key member of his team. “There are three parties in our working relationship: the client, the planner and the paraplanner. Paraplanners and planners need to work together for the best client outcome. Everyone has different skills and those skills should complement each other for the benefit of the client.”
Etheridge holds concerns that many exam structures in the UK are not about showing individuals how to do financial planning, but about imparting technical knowledge and testing that knowledge. He believes that the CISI and IFP merger can continue to show its members how to actually do financial planning. “This year's Financial Planning Conference will be a watershed for financial planning members to see if we can keep the spirit and friendship that we worked so long and hard to foster.”
Outside of work, Paul has a wide variety of interests. He joined the Territorial Army in the 1960s and harbours a love of cars. “I bought a Bentley Continental GTI although I have to say in haste that I only kept it 18 months because I only did about 1,300 miles in it. I have gone back to my old Bentley that is 20 years old and is my favourite car.” Perhaps it is fitting to his views on financial planning to have chosen a vehicle of sufficient quality that it still keeps him moving after two decades.
This article was originally published in the September print edition of The Review. The print edition is available to all members who opt in to receive it, except student members. All eligible members who would like to receive future editions in the post should log in to MyCISI, click on My Account/Communications and set their preference to 'Yes'.