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Heartwood – From The Ground Up

Mark Rockliffe, Head of Intermediary Sales at Heartwood, tells Neil Martin that rethinking strategy from scratch is the key to a successful team

You might say that football’s loss has been Heartwood’s gain. Mark Rockliffe, Head of Intermediary Sales at Heartwood, freely admits that being a footballer was his first career choice – closely followed by bank manager.

The football dream died quite early, though, when compaMark Rockliffe smallerred to a certain celebrity chef who had the same ambitions. “I like to think I’m slightly better than he is,” says Rockliffe, “And I can kick with both feet too – I don’t have to turn around in a circle!”

It’s a typical Rockliffe tongue-in-cheek comment, to which he quickly adds: “I realised very quickly that either I wasn’t actually dedicated enough to it, or not good enough, or probably a combination of both. And I basically thought ‘you know what I’m going to do? I’m going to join a bank.’”

As it turned out, he didn’t join a bank. But, even though Rockliffe might have been frustrated in his two first career choices, he appears to be comfortable scoring goals for Heartwood.

Full Circle

The company has a track record that now stretches back over 25 years, and it currently has over £2bn funds under management. It has grown, it says, largely on the back of word-of-mouth referrals and personal attention to its clients’ needs. Heartwood is particularly proud of the fact that many of its clients are City professionals themselves – including bosses of investment banks and multinational companies, and partners of private-equity firms and hedge funds. In 2013, it became a wholly-owned subsidiary of Handelsbanken.

Rockliffe, who joined Heartwood in 2011, now spends his day working with IFAs and advisers across the sector. His main brief, he says, is to develop a tailored investment management proposition for independent financial planning firms. His focus is on building and managing intermediary distribution channels.

Having worked with IFAs since the age of 19, he says it’s good to see that, in many ways, the IFA industry has come full circle. “Many of the core skills talked about today around the role of advice and the importance of advice were in evidence among the really good advisors I was talking to when I was in my early 20s. ”

A Different Perspective

Rockliffe agrees that his career path was perhaps a little untypical. Unlike most people who cross the divide from insurance into the asset management business, Rockliffe came straight into asset management as a sales director, following x years as an IFA.

That gave him a unique perspective on the business. Describing the asset management industry as “quite insular”, Rockliffe believes too much value is placed on the product. Controversially, perhaps, Rockliffe considers that the value of asset managers can be overstated, although he recognises their strong intellectual capital. Rather than product pushing to IFAs, Rockliffe believes there is a different approach, one that he has been developing at Heartwood.

Focus on the Business Model

Heartwood’s approach is very simple: IFAs need to focus on advice in their business model. According to Rockliffe,

“That’s how IFAs will win and succeed. If you look at all the consumer research, it says that in terms of engagement with this industry as a total, it needs and values advice and planning support.”

Underpinning this approach is the need for robust institutional management. “And that’s why I joined Heartwood,” says Rockliffe.

On joining three years ago, Rockliffe faced a number of challenges. A major hurdle was that the Heartwood brand was unknown in the IFA market. Its client-base was made up of highly sophisticated, knowledgeable and discerning private clients. Looking in from the outside, Rockliffe found that he could take a very credible investment proposition that had been built for a discerning investor, and could now deliver that proposition for any investor.

Taking Care of the Client

He believes that Heartwood can offer smaller clients the same service as enjoyed by their larger clients:

“Okay, the fee structure needs to differ. But if IFAs are going to outsource, they have got a number of fiduciary responsibilities they have to retain.”

One of those responsibilities is to make sure that the customer gets the journey that they have signed up for. Rockliffe says,

“Just because the adviser outsources to an investment manager, a Discretionary Fund Manager (DFM) for example, it doesn’t mean the adviser is relieved from their responsibilities, either from a regulatory perspective or a business model perspective.”

DFMs Encroaching

The big advantage for Heartwood, says Rockliffe, is that it arrived late to the Retail Distribution Review (RDR) party. “We had a huge advantage in the IFA arena,” he says, ”we could start with a blank piece of paper.”

Pre-RDR, there was pressure on IFAs to outsource quickly to investment managers. Rockliffe’s approach was different:

“We went to a number of firms, and said, look, we think your business model needs a certain core component for the future, and we don’t think that IFAs are big enough, or well-resourced enough, to deliver their own investment management.”

Rockcliffe agrees that a lot of the discretionary market has been very successful and describes some of them as “brilliant businesses”. However, he believes many of them have effectively undermined the IFA business model:

“Not by design, I’m absolutely sure of that. However, they have said ‘we’ll take your client on board for you’, and then they have ended up doing everything, crossing over into the area of providing advice.”

The Opportunity

From Rockcliffe’s perspective, Heartwood was fortuitously placed in building a business “in a post-RDR world.”

“That’s what I’m really passionate about. Can you genuinely find firms that win and compete on the quality of their advice? If you can find those firms, and if they are well organised and well capitalized, then they are the likely winners.”

Rockcliffe believes these are the “acquiring firms of the future.”  Heartwood acts as their silent partner in managing money, which Rockcliffe estimates is about 30 to 40% of their total assets.

Heartwood’s strategy has been to target quality IFA firms and ones with which they can build relationships. Rockliffe hates the word ‘strategic partnership’ and likes to describe it as having ‘skin in each other’s game’, a form of co-dependence that works between Heartwood and the IFA.

Finally, Rockliffe admits that it’s been a long journey for him personally, from what he himself describes as a “…not particularly nice suburb of Brighton…”, to sales positions within a number of leading companies and now helping to formulate Heartwood’s approach to the IFA community. Perhaps he would have been wasted on the football pitch, or sitting behind that bank manager’s desk?

 

 

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