Jeremy Cary - Progress from within

Towards the end of 2000, Jeremy Cary, formerly managing director of Aon Private Clients, decided that he wanted to do something for himself. He teamed up with James Agnew (also ex-Aon) and Keith Hester (former sales and marketing director at Marsh and also the originator of the 606 high net worth Hiscox policy) and, pulling together their resources, looked to buy a broker rather than start from scratch.

Frustrated with working for large organisations, the three believed that their decision-making power was diluted and client focus was changing. Cary comments: "We felt, with the consolidation of the nationals in the late 1990s, that they had taken their eye off private clients and mid-market corporate business. We thought that there was a huge opportunity to build a business giving traditional value services to wealthy private clients and discerning corporate customers." After structuring a business plan, Cary says that they began putting the slide rule across brokers in London and the South-east.

The trio's first phone call was a stroke of luck. Michael Poland was a 65 year-old-broker who had set-up his business in 1974 but had become disillusioned with his management team as, although the business had been successful at keeping existing clients, it was not growing. Cary says: "We couldn't be choosy, but it (Stackhouse Poland) was well established and we had a vision for the business."

That vision has been translated into business success, with turnover growing from £1.2m in 2001 to an annualised figure of £8m today. In 2005, the broker won High Net Worth Initiative of the Year at the Insurance Age Awards (now the UK Broker Awards) for its use of relationship managers with HNW clients. This year, it has been shortlisted at the same awards in the category of Private Client Intermediary of the Year and has already been identified as a finalist for the Personal Lines Broker of the Year at the British Insurance Awards; it is also likely to feature strongly in Insurance Age's top 100 independent brokers for 2009 (due out in December). Cary says: "We know how to grow insurance brokers, especially with wealthy private clients. The key to success is distribution - who can introduce you to new business?"

One of the firm's approaches to distribution has been to set up affinity partnerships with companies in the wealth management, accountancy, legal and financial services sectors. Instead of just pitching direct to clients, SP's sales-force is involved actively in developing new relationships with these businesses across the UK. Cary says: "Professional advisers are talking to our target audience all the time. The key is to have hundreds of these as introducers, so we therefore have a team of business-to-business salespeople."

Working together

SP has established two joint ventures: Green Park Insurance Services with Piccadilly-based wealth management Alexander Associates (which has 3,000 clients); and HFM Columbus Insurance Services with an upmarket wealth-management company based in Tunbridge Wells. The white-labelled products allow SP to tap into a ready-made client base with a designated profit share.

Half of SP's client base are high net worth clients, or what Cary calls "aspirational HNWs" - those in their thirties and forties that could become partners in law firms. He says: "We deal with all kinds of high-value possessions such as fine art, superyachts and jewellery." The broker uses products from the well-known high net worth insurers, including Chubb, Zurich, Hiscox and AIG. Cary says that he respects brokers in the field such as Lark and RK Harrison. The company builds accounts, not by moving too much business but through growing them by winning new business. Neither is it afraid to try new products such as Norwich Union Distinct (for HNWs).

They do not stop at HNW, however: "Every regional broker does some high net worth. We are different, as rather than cross-selling from the boardroom to the bedroom, we do it the other way around: from the bedroom to the boardroom."

A reservoir of cross-selling opportunities for SP includes charities: many wealthy individuals become their trustees and governors. In a clever piece of marketing, SP has compiled a CD highlighting the pitfalls of buying insurance direct. The broker has an impressive list of charity clients, insuring 400 of them with turnovers of between £1m and £25m that includes the Make-a-Wish Foundation and the Rainbow Trust Children's charity through insurers such as Ecclesiastical, RSA, Zurich, Ansvar and Methodist.

According to Cary, charities are often run on a tight budget and so try to save on costs by buying an off-the-shelf insurance product for employer's and public liability. Cary says charities often forget that you need to insure for fundraisers across the UK rather than just at their premises. He believes that there is a great opportunity to "drill beneath the service" to give a comprehensive offering. The rest of SP's portfolio comprises corporate customers, which include a solicitors handily placed opposite SP's central Guildford office that bears the unnerving address of "The Billings".

Growth strategy

Until December 2005, the management trio, who have equal equity stakes, had grown the broker organically. However, having established a firm foundation and generating significant income to pay off most of the debt from the original management buy-in, it has since bought four brokers in the South-east. The approach has been measured and the company is extremely careful when integrating acquisitions. One such purchase was the Stevenage-based £5m premium healthcare broker, Healthcare Management, made to expand its cross-selling opportunities.

Although it owned a small healthcare book already, this move allowed SP to tap into around 20 insurers. The latest deal, completed in June, was for David Fangen, which included sister broker W Burch and Son. The broker shares a similar client base to SP and Fangen has joined the board alongside Mark Shand, director of W Burch. Fangen, who was the majority shareholder and managing director of David Fangen Holdings at the time, said that "SP has exactly the same business ethic as our own."

There are significant challenges to overcome when buying a business. The hard work starts long before with the complications of due diligence, lawyers, bank loans and sometimes even the costs of banks charging you to perform due diligence on yourselves. Cary says that the cultural fit needs to be right but also worked at. He says: "It is like a marriage. You need an appropriate level of courtship; our deal with David Fangen took 12 months. It was a great feeling when we completed and cracked open the champagne."

Once the deal finalises then the integration can begin, although it is a then a question of 'steady as she goes'. Cary comments: "When you buy a broker, all you are buying is the goodwill of the staff and clients. You need to protect this so we don't rattle and change things; we'd rather say it is business as usual. Therefore, clients feel they are still dealing with the original firm. Then, over a period of time, we introduce change by talking to and educating both clients and our staff and introduce SP to letterheads. We are blenders of businesses, not consolidators." He adds: "Once the earn-out period has been reached then it is easier to make changes."

SP is keen to create the best environment for its staff. Like any broker, SP wants to be the employer of choice and so it ensures that every member of staff is appropriately incentivised with a combination of financial rewards and a 'work hard, play hard' ethic. An employee benefits package (see PB, May 2008, pp. 22-28) is compared regularly to its peers and is something that Cary believes is paramount to attracting and keeping the best staff. He also thinks that developing a social arena can introduce a bit of friendly competition, bringing the best out of people.

Despite ambitions to grow to £15m turnover within five years, Cary is relaxed about his firm's geographic footprint, stating that "technology is the death of geography". So far, all of its acquisitions have been in London and South-east and he is keen for this to continue. Cary says: "Although we will insure across the UK, we have no plans to move out of the South-east. If we did, they (the offices) would become harder to manage and would suffer from absent-landlord syndrome. While the cat is away, the mice do play."

Market futures

As the broking and insurance sector evolves at an ever-faster pace, Cary is thoughtful about how the market will look in five years' time: "What is still unknown is why insurers are buying brokers. I don't know what their endgame is but this could end up in a tied-agent model, or otherwise I can't see the logic in it. Why would the French insurers (Axa and Groupama) want one strategy in France and another here?"

Despite the obvious threats to the traditional broker model, Cary believes that his broker will still be providing exceptional client service with insurers aligned to their strategy.

In challenging economic times, it must be a fillip to have clients with plenty of money stashed away for a rainy day whose priorities include making sure that they are out hunting on the Glorious 12th. However, even SP has not been immune, with a couple of its small corporate clients going under. This is inevitable in such a widespread decline but SP has the right qualities to keep clients close and happy and, with investment in its staff and acquisitions in the pipeline, SP has the right management team to keep the business growing for many years to come and win even more awards.

STACKHOUSE POLAND

Stackhouse Poland was set up by Michael Poland, part of the Poland dynasty that has at roots at Lloyd's stretching back to the 19th century. Originally called Cannon Rogers Insurance Brokers in 1974, it was bought by Poland's engineering insurance company Ajax Insurance in 1983 (Ajax is now owned by Allianz). In 1985 the broker changed its name to Poland and then again in 1990 with the acquisition of Thomas P. Stackhouse - a Quaker insurance company specialising in charity business - and Houghton Sanderson, which had corporate clients.

Following the acquisitions of RHB Insurance, JC Richards, Healthcare Management and David Fangen since the management buyout in 2001, the broker has offices in London, Stevenage and High Wycombe and its headquarters in Guildford.