The source of his analogies are of no surprise when you delve a little deeper into Instone’s background.
Instone left the British Army in 2003 where he had been an officer in the Household Cavalry Regiment, the Life Guards, and began working for an international advisory firm – a short lived employment which Instone said he quit having “not been too impressed” by the status quo.
High risk territories
At this point Instone decided he would lean on his Army experience to shape the next stage of his career, and set about providing financial advice to western expatriates in places where others were not operating – high risk countries such as Iraq, Afghanistan and Somalia. He also decided early on that he wanted to bring the UK model of financial advice to the international market – the embryo of an idea which would become more key to the business as it grew in later years.
To get the business off the ground, Instone looked for a sponsor and found Abbey Alliance, a UK advisory firm willing to support him while he took his qualifications, and to pay for the company’s initial licences and start-up costs. Abbey Expatriate Services was formed, with Instone as its managing dircetor and main IFA.
Building a client book in the hostile countries was relatively easy says Instone, given there was very little in the way of competition, and people were attracted by the UK model. The firm grew steadily and Instone was joined by John Viney – also a former British Army Officer, also with the Household Cavalry Regiment but as part of the Blues and Royals – the company’s current chief operating officer and Instone’s “number two”.
Despite the business going well, in 2006 something changed and Instone began to consider moving the model into the mainstream.
“I went to an international conference and was struck by how different it was from the conferences I had been used to in the UK,” says Instone.
“At the UK conferences you are surrounded by nice people – all advisers you’d be willing to take advice from yourself. When you go to an international conference however, they are full of people you would never want to take advice from. It is very ‘cottage industry’, there is a huge amount of animosity between different groups, you find out many of the companies are masquerading as one thing when they’re actually something else – and some are even involved with financial crime, including tax evasion and money laundering. There are basically a lot of disenfranchised financial advisers, working for under-capitalised, unprofessional firms.”
Perhaps surprisingly, this encouraged Instone to consider expanding into the mainstream international market, but not necessarily because of an overwhelming concern for the clients, although that was clearly part of it, but because he felt the advisers too could benefit from a new approach.
“At this time we had already begun to consider diversifying away from the high risk work – initially into Europe,” explains Instone.
Pushing for reform
This decision coincided with a management buyout to form today’s company, AES International, and AES becoming UK regulated and authorised and receiving its custody licence. It also coincided with the introduction of the Markets in Financial Instruments Directive (MiFID) which was implemented in Europe in 2007.
Instone says MiFD allowed AES to position itself as a cross-border specialist in Europe, as the firm held the requisite licence.
During this period, AES began to promote more heavily the idea of introducing positive change to the industry, encouraging advisers to take a long-term view of their business model and how they service their clients.
A modern campaign
Naturally, Instone sees the idea through a former officer’s eyes, describing the more widespread model “of yesterday” and the model he hopes to encourage in the future, in military terms.
“Historically, a general would sit at the back pushing forward hundreds of soldiers in long lines that clash with each other – that would be the old, direct distribution model and the most prevalent in the international advisory marketplace today,” he says.
“In comparison, the modern army has very small teeth – i.e. the infantry, which only forms 10% of the total force – but a large tail supporting it, engineers, artillery, airforce and so on. But by operating as a team, that small unit can get better results than throwing hundreds of people at machine gun posts.”
Applying this analogy to AES International, Instone says his model has been to provide advisers working for him with the tools necessary to do their job professionally and with the right incentives.
An adviser working directly for AES as one of its “in office” advisers can expect to receive the company’s full support including access to an advanced platform service as well as licences, back office support, compliance, specialist technical support and up-to-date training. This will also include a salary and holiday pay – all of which is part of Instone’s drive to refocus the adviser away from the short term goal of front-end commission and towards building a sustainable business.
AES also offers advisers more independent options, including as an “out of office” adviser and an “appointed representative”. An appointed representative will have full control of their own independent business, but can still benefit from access to all AES services such as its platform and back office support.
Regardless of how an adviser joins, Instone says the key requirement from AES’ point of view is that the adviser subscribes fully to the concept of positive change, which encapsulates professionalism, sustainability and always working in the client’s best interest.
Instone’s “Bradley Wiggins over Lance Armstrong” approach and open criticism of what he sees as a flawed status quo, has attracted its share of animosity, with some rivals accusing AES of double standards and of claiming to be “whiter than white” when, in their eyes, it simply isn’t.
“Challenging the status quo and being a more evolved business is definitely going to upset other organisations,” Instone says.
“Some organisations have been built on smoke and mirrors, hiding gross commission payments from their advisers for example, and lying to clients about cost. We have set ourselves up differently and have been rapidly growing as a consequence.”
Instone highlights AES’ second mention in the Sunday Times’ annual Fast Track 100 list of the UK’s fastest growing companies as evidence for its steady, some may argue inexorable, rise.
This year, the company moved from the 11th fastest growing company to the fourth fastest growing. The firm also achieved a gold standard in the much coveted Investors in People award.
Instone does not deny there are sometimes problems within his organisation – although he does not concede AES is claiming to be something it is not.
“Yes we have problems, we have advisers do things we don’t want them to do, but we try our very best to monitor them, deal with them and treat everybody fairly,” he says. “But it’s not particularly challenging to be whiter than our competitors.”
As a UK-based firm, AES has to face the full impact of the Retail Distribution Review – parts of which came into force at the beginning of this month. Instone is sanguine about this, explaining that the RDR is exactly the type of positive change he hopes to bring to the international industry and that being a full part of it is in fact an opportunity – helping to put AES at the forefront of the move to a professional advice industry.
For the future, aside from continuing in his quest to bring about positive change, Instone says AES will be looking to broaden its reach in the Middle East, adding to its Qatar and Dubai offices with one in Saudi Arabia and also expanding