Perky Slade's last stand

At 62, David Slade has amassed a comprehensive knowledge of broking and has seen it all first-hand. From working for national brokers to holding the underwriting pen, to starting his own firm - then selling it - then buying it back, Slade has had a roller coaster of a career; and one which is not over yet. He is currently the chair of the Faculty of Insurance Broking, a market forum for brokers, set-up under the umbrella of the Chartered Insurance Institute. After some illustrious achievements he does have an exit in mind - handing the firm over to its staff - but not before one last battle to grow the business substantially.

Humble beginnings

After leaving school at 16, Slade started his career at Royal Exchange Insurance before joining Hog Robinson, the largest broker in the Midlands at the time. After a spell as sales manager at the Birmingham office of Walker Young - despite being told he "didn't speak with the right accent for sales" - he co-founded Perkins Slade in 1970, in order to tap into a large market of industrial and manufacturing companies.

Early in the firm's life, founders David Slade and David Perkins were given the underwriting pen of behemoth Generali and the firm built up a large book of business including property, accident, liability and marine. In fact at that time underwriting became the dominant side of the business, employing around 100 people.

However, things came unstuck when Slade and Perkins fell out and County Underwriting, as it was called, was sold to Generali. Slade then concentrated on traditional broking and, between 1983 and 1988, Perkins Slade grew between 700% and 800%, an era Slade unsurprisingly describes as: "A wonderful, wonderful time." He is also extremely grateful to Margaret Thatcher for the way she helped grow the economy during the period. Slade adds that it held 30 customers that were on the unlisted securities market - a market set-up by the London Stock Exchange in 1980 for the trading of shares of small to medium-sized companies that did not qualify for a full listing - it was discontinued in 1996.

In 1989, Slade sold the business to the Birmingham Midshires Building Society (now a subsidiary of HBOS). However, he quickly became "disillusioned" with the new ownership and felt there was "no sense of direction". Profits fell and Slade bought the business back within several years. During the 1990s, several acquisitions were added to the business in Hampshire and the West Country.

The future direction of the business was in serious doubt when, in 2002, Slade's fellow shareholders decided they wanted to turn their shares into cash. Perkins Slade was on the verge of a deal with national broker Jardine Lloyd Thompson but it was never completed. Instead, Slade called upon an old friend Ron Forrest, formerly chief executive of Aon, to become chairman. Slade and Forrest bought out the shares between them using an umbrella company Perkins Slade Forrest Holdings in January 2003. Slade describes this as one of the best moves he ever made. He says: "We complement each other extremely well - my experience is of starting a company, whilst his is being a worldwide chief executive of a massive organisation."

He adds: "We are determined to remain independent and we have been introducing share option schemes and trusts for staff. By the time Ron and I disappear over the horizon, it should be owned in the majority by shareholders. The executive directors already have significant shares in the business."

Following the change of ownership, Forrest and Slade have not looked back. It is now the biggest independent broker in the West Midlands, though this position has been aided by the acquisition of Beddis and Partners by Oval.

In terms of future acquisitions, Slade admits he will not be able to match the venture capitalist backed consolidators but reflects: "Not everybody wants top buck. Some brokers are more concerned about their staff and customers than their bank account. We present a different kind of transaction to the consolidators that need to keep growing through acquisition - I don't need to keep growing in that way." Slade believes one of the reasons the acquirers have been so successful is because so many brokers have grown through self-finance, like his own.

He says: "I admire them - Philip Hodson, Peter Cullum and the others are brilliant businessmen who borrow money at a hugely discounted rate, invest it in high turnover businesses and will one day sell it to some investor in the market for a big profit." He continues: "That's far too clever for me. I have to stick to being an insurance broker."

Acquisition strategy

Last year, Slade bought fellow Birmingham-based broker Stanford and Wood, bringing Slade's gross written premium above £50m. He enthuses: "It has been like putting your hand into a personally-made glove."

He continues: "We want to find other companies to acquire, ideally in Hampshire to fit in with our Petersfield office (which is led by Andrew Smythe hired from the Funk Gruppe, a large German broker), or in and around the fringes of London."

Slade wants to grow both the top and bottom lines of the business and improve the net margin from its existing 12% to between 15% and 20% before he retires. He says: "We have to attract more clients. We are growing organically - every year we are adding between £750,000 and £1m commission and fee earnings. By 2009, I want to increase Perkins Slade by 50% of its current size, so selective acquisitions will form part of that approach." Slade would prefer not to borrow capital and says he wants the business to be driven by the demands of customers rather than financiers. Customer retention is enviable at around 96% to 97%, Slade claims.

Perkins Slade's niche sports offering has also been thriving. It has a civil liability program incorporating employers' liability, public liability and directors' and officers' for 300 government bodies of amateur sport, including the Lawn Tennis Association through the Central Council of Physical Recreation. Slade says his company acted for 70% of British medal winners at this year's Commonwealth Games in Melbourne. Royal and SunAlliance, which has a large Birmingham office alongside most of the major insurers, is the dominant underwriter for the book. Wayne Robertson is director of sports, which accounts for 30% of Perkins Slade's business. Slade has noticed an increase in competition in the sports sector from other brokers but says: "I'm not losing any sleep over the nationals targeting it."

Winning international clients

The majority of business is medium to large-sized corporate clients and, as the nationals struggle with job cuts, pay freezes and restructuring costs, Perkins Slade is taking advantage. For example, Slade says Perkins Slade has won 80 international clients in the past 12 months, working in conjunction with overseas brokers. Slade says this involves a lot of travel. There are also opportunities to recruit staff from the nationals and take their clients. He says: "We can achieve deals for customers that our international competitors can't touch because we are closer to underwriters and customers."

Another market that Slade is keen to tap into is the credit insurance market, as he wants to develop new areas for his client base. Therefore, he has recruited Sally del Principe to set up Perkins Slade's credit insurance division. He says: "This is going to be a significant contributor and we are looking at other areas with a view to making a similar investment." Meanwhile, 10% of Perkins Slade's book is high net worth.

Slade, who has strong relationships with all the insurers, is not surprised by the recent announcement from insurers Royal and SunAlliance and Axa that hundreds of jobs are to be cut. He comments: "The industry has changed more in the past six years than the past 150 years. Axa can't justify keeping the branches open (it is closing five offices) - this is totally logical from a business point of view. At the General Insurance Standards Council, we estimated there were around 25,000 firms doing insurance broking. Now I would be surprised if there were 2500. In addition, electronic trading has helped make the world a different place."

However, he is not surprised that insurers such as Brit and Hiscox have been opening more regional offices to introduce themselves into the market.

Slade says the "industry beats itself up continually" and blames, in part, the sensational weekly press of the insurance industry for contributing to this by only "ever giving the negative headlines when there is so much positive about what insurance brokers and the industry does." He comments: "Brokers have to explain to their customers that their services are only remotely aligned to the insurance products they might recommend. Their services go way beyond that, and the irony of the situation is their remuneration is geared to the commission."

This is a subject that Slade feels strongly about, with 60% to 70% of Perkins Slade's corporate book run on a fee basis. He says: "Anything over £10,000 of commission is fees - and we can be measured against the delivery of those services." He continues: "We have been on fees for 20 years, it is being honest with clients, saying to clients we are making £150,000 commission on your premium - we can't possibly justify that. We don't do £150,000 worth of work, we do £50,000 of work so we can charge them a fee of £60,000 to £70,000 but not £150,000. It's immoral and there is no justification for it." Slade believes the current debate about commission disclosure is a red herring, citing that for his sport policies many of his clients would not be able to receive the cover in the first place without the special arrangements that Perkins Slade has negotiated.

The commission disclosure argument has heated up since the regulation of the sector by the Financial Services Authority, and Slade has mixed feelings about its introduction. He says: "It is a fact of life and has helped with the controls and checks over the business. The FSA has overcooked it but at least it has begun to turn down the gas." However, he says: "There must be a better alternative to satisfying both the customers and the regulators. For example, the customers think we are mad because of the amount of paperwork we send them. We want to reduce this paper mountain."

Attracting young talent

Slade is also passionate about attracting young talent to the industry. He says: "Most young people either don't know what broking is or think it is a paper pushing, dull and boring job." Also, recruitment is being hampered by huge redundancy programs in the industry. He says the CII's Pathways document is a great aid and provides a clear guide to broking for young school leavers and graduates. His most recent project - the Faculty of Insurance Broking - takes up around three to four weeks a year. It has 6000 individual members and he wants as many firms to be associated with the faculty as possible.

He says: "This should be driven forward as the centre of excellence for insurance broking. It would be great to reach the point where every broker had to be a CII member." He continues: "We are driving into the CII a set of exams and training programs aimed at insurance brokers and we issue regular newsletters."

Over the years, Slade has been on the board of the Chamber of Commerce, chairman of the Prince's Trust, and is actively involved in Birmingham Forward, which promotes the interests of the city. When he retires at 65, in three years time, he says he wants to do "something else", though is not quite sure what. However, he says: "Although I'm 62, my mind me tells I'm 42."

He reflects: "I've seen a lot of businesses ruined by staying on too long and a lot of businesses ruined by people leaving too early. It depends how the cards fall - on one's health, one's mental capacity, and one's enthusiasm. At the moment, I'm as enthusiastic and passionate about the business as I was in 1970 when I started it." Such is his enthusiasm, it is hard to believe that in five years time that Slade will not be involved in the industry in some capacity.

CV

1970 Co-founded Perkins Slade

1967 Sales manager, Walker Young

1964 Hogg Robinson

1961 Royal Exchange Insurance.