Simon Hillenbrand, Head of Retail at Henderson Global Investors, Tells Neil Martin That the Adviser Contact Job Has Changed
It’s tempting, when thinking about the impact of RDR, to focus our attention solely on the dramatic changes that the new regime has brought about for IFAs. But we shouldn’t forget that the investment houses themselves have had to cope with exactly the same seismic shifts.
So it was good to meet with Simon Hillenbrand, Head of Retail at Henderson Global Investors, for some valuable insights into how the post-RDR situation looks from the point of view of one of the UK’s largest investment houses. And conversely, how he sees advisers changing the ways they view the investment houses themselves.
A Longer Process
Hillenbrand feels that, with less than two years under our belts since RDR was introduced, we are still in the very early stages of a continually developing situation. “I think if we go back two years,” he says, “obviously at that time we had RDR approaching at pace, and we found that certainly lots of people thought they were ready to get going, when maybe they weren’t.”
“There was that strange period at the end of 2012, remember, when everyone was getting into shape – especially getting their exams sorted out – and we were all waiting to see what RDR was going to look like and what RDR was going to mean to people? Well, two years on we’re still at a really early stage it feels to me.”
The Challenge from Passives
For Henderson, RDR has meant having to change the way that the investment house deals with IFAs: “I think it’s fair to say that fund management groups like ourselves have to fight a lot harder for market share. Because it’s a lot more competitive now”
“One of the things we picked up on quite early in the process was the phenomenon of product substitution when product portfolios were being built by IFAs. Product substitution meant that a lot more passive product was coming into the portfolios, with the result that the active funds which we manufacture and distribute became a much smaller part of portfolios.”
“Post RDR, in summary, I see a lot of IFAs who’ve obviously re-thought and reinvented themselves, they’ve always been good at that. They clearly want different things from the fund management groups.”
“When IFAs work with us now, a lot of them what to hear more than just how our Japanese Equity fund is doing – they really want to know more about the Japanese market. That’s because some of them are a lot more technical now. Those who took their exams and are now starting to focus heavily on investments are much more interested in what we can add to their process, rather than just wanting us to come and talk to them about funds.”
Advisers Rethinking Their Models
Another challenge has come from the changed way that advisers create their models, he says. “The way that advisers have had to segment their client bases to build their new models, post-RDR, has allowed them to think about what they need from fund management groups – including wanting solutions.”
“We worked on that idea early on in the process, and we decided to offer a multi-asset range. But it might turn out that they don’t actually want to do investments at all, but to give it all to discretionary managers instead. Which means that, if you are us, you need to be working very closely with the discretionary managers themselves to ensure that our funds get onto those buy lists.”
Changing The Pitch
Hillenbrand says that one of the biggest changes is having to be very receptive to the needs of IFAs. Rather than just turning up at their offices and running through the funds, Henderson’s people now have to build close relationships and become part of the process.
“How we work with these guys now is about consultation. We talk to them about what sort of product they need from us, as opposed to just turning up in their offices with a new fund. That old style doesn’t really cut the mustard any more, because they want to talk about what we can do for them.”
Asked if he considers IFAs more professional in their outlook than some years ago, he answers carefully. “I think they’ve had to focus on what they’re good at. Generalist IFAs are perhaps fewer on the ground.”
“In the old days it was more straightforward. Pre-RDR, you’d have a situation where an IFA would just do all investment business, all pensions business, all protection business, all mortgage business, and so forth. But since RDR a lot of them have had to think, well, do I really want to do investment business any more?”
“It’s not quite as clearly defined as it used to be. There are different touch points within single IFA firms now, and that has been quite an interesting development.”
It’s also possible that Henderson funds will feature in two or three different contexts. If they’ve referred some of their some of their clients to DFMs, then there may be Henderson Fixed Income, or European fund in the client portfolios. There may be other clients of that IFA who hold multi-manager funds for example – perhaps the small clients.”
More Changes To Come
As for the future, Hillenbrand believes that there is much more change to come. “While we’re not quite two years into life post RDR, I still think RDR produced quite a number of unintended consequences, and I still think some of those are still to play out.”
“We are obviously more heavily regulated now, which is not unexpected, given the experience everyone has had over the last few years. That is a challenge for everybody, but it is something that arguably needs to happen in order for the industry to regain the trust of the public. At least we are heading in the right direction.”
“What I do know that, from our point of view, we have to absolutely focus on the basics – providing great performance and setting out our stall as a provider of active funds. So, while we have to outperform, we are also spending a lot of time thinking about and executing on our service proposition.”
As evidence of Henderson’s new approach, Hillenbrand points to a company rebranding; a new website; and generally putting their fund managers out there, allowing people to follow their progress and thoughts. It’s about providing quality content for all their customers, he says. [Neil, I have reworded this a bit. Okay?]
He concludes that although this might be a demanding time for houses like Henderson, therein lies the opportunity: “It’s about talking to IFAs, making sure we’re providing what they need, rather than trying to second guess, and build product that isn’t needed, or isn’t used. All in all, I think it’s a really exciting period for fund management houses who have a broad stable of capabilities.”
Hillenbrand started his career in property and qualified as a chartered surveyor [when? Sounds like late 1980s?]- perhaps, as he admits, not at the best of times. “It was pretty much in the teeth of a very severe bear market for pretty much everything. And I took a view that I didn’t really want to do that for the rest of my life, and so I took a bit of time out.”
He made his break in the City whilst temping at Morgan Grenfell, and soon found himself in a permanent position. He was there for six years, ending up at Sales Manager for the South West, a large territory which included the Channel Isles. He moved to Invesco Perpetual in 2000, and by 2002 he had left to join New Star.
“New Star was all very exciting and very young, and going places, and that was great fun. In 2007 I was made the managing director of UK retail sales, which was a post I held until 2009 when we were bought by Henderson. I’ve worked here pretty much since then.”
So what does Mr Hillenbrand like to do in his spare time? (if he has any, of course?). Now, I’ll admit that the answer came as some surprise. He spends every spare minute on the beach, he says, grinding out the waves on his favourite Cornish surfing spots.
Given the demands of his job, of course, and the demands of his young family, his surfing opportunities are relatively limited. And yes, he admits, “I am nothing like you’ll ever see on a board. I can stand up and ride stuff, and if it’s quite big, and I’m lucky, I can get those waves. It’s very good for emptying your head, because obviously you have to be in the moment. Because the sea is a very serious place, you can’t afford to think about many other things when you’re doing that.”
So when you’re next on a Cornish beach and a man runs past with his board searching for the next ‘Macker’, it may just be Hillenbrand, clearing his mind before next thinking about how he can improve Henderson’s offering to the IFA community.