Strategy & Operations » Leadership & Management » AJ Bell CFO on value of relationship building

In a challenging environment, having a strong relationship with various parts of the business can be hugely valuable to a finance leader. For Michael Summersgill, CFO of AJ Bell, the provider of online investment platforms and stockbroking services, 13 years in the firm has prepared him well for the uncertainties created by coronavirus.

During the pandemic and the lockdown, AJ Bell has performed well with high volumes of activity for much of its services, attributed to a number of factors. Summersgill says it is partly down to clients considering their options in a period of uncertainty, especially when they have more time on their hands.

Summersgill also says that AJ Bell’s solid growth, to a point where it has over £50bn of assets under management and over 260,000 customers, is as much to do with long term shifts in pension provision, initially the core focus of the firm. “There’s been that shift from defined benefit to defined contribution pension schemes and people understand employers can’t carry the can, governments don’t want to carry the can, so there’s a need for greater individual responsibility when it comes to saving for the future,” says Summersgill. “

The result is that the share price of AJ Bell, founded by Andy Bell and Nicholas Littlefair in Manchester in 1995, has more than doubled the level at which it was floated 18 months ago – giving it a market value of around £1.6bn at the start of July. In the last full year results to 30 September 2019, pre-tax profit rose 33 percent to £37.7m on revenue up 17 percent to £104.9m.

“You may see significant economic corrections and full economic cycles playing out, but the impact on our growth might be less extreme than you’d think. The strong heritage of our business on the pension side means we stand to benefit from what is a very long-term trend, a lot of pension money is pouring into the platform market, whether we’re in a recession or period of strong economic growth,” he says.

AJ Bell’s platform provides access to SIPPs (self-invested personal pensions) ISAs (Individual Savings Accounts) and Dealing accounts which Summersgill says chimes with greater appetite for online access for customers keen to take control of their assets.

Clients having greater access, through mobile, iPad or laptop, has meant that the firm was able to interact more effectively with them, once the coronavirus began to impact in February. “The significant market correction in March had an impact on us in terms of operational resilience because customer trading volumes go up, but there’s a negative financial impact coming down the road because customer asset values have fallen and that hits our earnings.

“We then asked: What does that do to earnings for this year and next, are we in the realms of an upgrade because of additional trading revenue, or a downgrade because of falling asset values?  Those things are pulling in different directions in our business”

In the event, the firm performed very well in the last few months. “We’ve seen a significant increase in engagement from our customers, we’ve seen an increase in trading volumes and a significant increase in new customers coming to the platform. It has forced people to think about their finances and they’ve had the time to do something about it,” he says.

“We said, we’ve got a resilient business model, we’re going to trade profitably during this period, that’s not the concern. It was all about, what else do we need to do to keep operating our full service and how will this all impact earnings over the long term?” says Summersgill.

In the lead up to lockdown the group’s executive management board met daily to thrash through these concerns, easing the frequency of meetings as the conditions gradually improved. Although a decision was taken to transfer 90 percent of staff to remote working, the head office in Manchester was kept open for some staff. “We were classed as essential workers because of the nature of what we provide to our customers, we have to be able to give them daily access to their money should they need to make withdrawals, access to buy and sell in the market should they want to adjust their portfolios,” he adds.

Critical to delivering the plan was mutual trust between senior staff, based on the fact that a number had worked together a long time, says Summersgill.  “I can’t recall an incident where people were criticising day to day recommendations, it was all about agreeing relevant facts, and deciding what we were going to do to get through this,” he says.

Relationship building

Summersgill himself can attest to the importance of forging strong links. He joined AJ Bell in 2007 after working in small accountancy firms in the north west, where he originates from, after studying economics at the University of Sheffield.

Despite an offer to join PwC he decided to join fast growing AJ Bell, a £12m revenue firm specialising in pensions administration, “You could see it was already an established success story,” he says.

Back then AJ Bell, in which institutional investor Invesco initially acquired a quarter of the firm rising to 42 percent, was aiming for an IPO which meant raising the quality of budgeting, forecasting and public disclosure, “making sure that the information presented to institutional shareholders was plc quality,” says Summersgill.

Although the firm stayed private until 2018,  there was plenty to keep him focused. “It just felt like the business was going places and that was going to bring opportunity,” says Summersgill. Made group accountant after six months in, he worked on the acquisition of what would become the firm’s stockbroking arm, and then became financial controller in 2010, “a natural progression,” he describes the move.

But the following year being made group CFO was the chance to finesse the finance function, having been appointed company secretary earlier in the year. A big move given he was still in his twenties, “a sink or swim type scenario” he says, but one cushioned by having had plenty of boardroom exposure. “I had that visibility and I was able to showcase what I could do,” he says.

A critical aspect of the appointment was that Summersgill had to broaden out the CFO role to reflect the needs of the growing business. “The first big change in 2014 was when I started to take on some operational responsibilities, and by 2016, all the operational responsibilities plus IT and HR,” he says.

The group’s ERP system was modified and an internal forecasting model improved. Under Summersgill the finance function was to also undergo a ramping up of the ability to capture and exploit data. “We have a huge amount of data on our customers, but it’s something we’ve not fully realised the potential of yet,” he says.

One area he says finance has brought to the firm a lot of improvement is business partnering with stakeholders across the business, in customer insights, pricing models, forecasting and investment decisions.

“It means different things to different parts of the business. In for example digital marketing, you can easily dial up or dial down the amount you’re spending and get very quick feedback on effectiveness,” he says.

Finance is also working closely with IT and operations  on productivity. “We’re looking at productivity levels and how we can improve that over time, through for example investment in automation,” adds Summersgill.

Going public

The decision to undertake an IPO in December 2018, was partly driven by a desire to improve the business’s brand profile and build trust with customers. “If people have their life savings with a firm they’re going to want to know that they’re going to be there when they wake up and log on to see how their portfolio is performing, so we started to think in terms of brand recognition,” says Summersgill.

Although it was a private company, AJ Bell’s ownership by  a number of institutional investors at this stage meant it was operating as a quasi plc, “I was getting used to that environment¸ we were producing plc standard accounts following our  conversion to IFRS,” he says.

In order to get a rounded view ahead of the IPO Summersgill attended an executive course at French business school INSEAD, countering any limitations caused by spending so long in one firm. That said, Summersgill says every one of his 13 years at AJ Bell has meant a new set of experiences.

His longevity also meant he was well placed to guide new investors ahead of the flotation. “They want to understand the financial performance of the business, but also the market, the strategy, relevant regulations and the key competition. So longevity is very valuable when talking to shareholders,” he adds.

AJ Bell is now well placed to navigate the post-coronavirus environment. “We decided early on we weren’t going to furlough any staff, and that there were no grounds for tapping into government schemes because we were going to operate profitably throughout,” says Summersgill.

“Once we were happy we could look after our people and our customers, giving them a full service throughout, we were able to spend a bit of time thinking about our community, what we could do to support various local charities and efforts to best respond to Covid-19.

“So Andy and I gave up three months of our salary, other directors and senior managers did the same. With contributions from all over the business, and from customers as well, we raised around £380,000.

“With that money we were able to do things like support local food banks, as their usual donations had broken down but the demand for their services had gone through the roof, and we also gave tablets to NHS hospitals and care homes so patients could stay in touch with their families.

“Clearly there is a PR benefit and we’re not going to pretend that’s lost on us, but bear in mind this isn’t corporate money, this is the money of the staff and customers that we’ve put in a fund and we’re doing this because we believe it’s the right thing to do,” says Summergill.

He says it talks more to the culture in the business than it does of thinking of the brand in the long term. “People who work in the business think this is an important thing to do. We thought, we’re in a strong position, we’re ready to help the community. This for me is ESG in action, the buzzword of the capital markets these days,” he adds.

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