UK: Rothschild's Raiders.

UK: Rothschild's Raiders. - The Allied Dunbar defectors are targeting those with the thicker wallets. Some of the thickest are behind them. Shirley Skeel.

Last Updated: 31 Aug 2010

The Allied Dunbar defectors are targeting those with the thicker wallets. Some of the thickest are behind them. Shirley Skeel.

When he comes through the door - a large, shy smile, underlining gold-rimmed spectacles, the shoulders hunched over a small mountain of paper - you wonder how on earth his competitors can tremble. So this is Mike Wilson, the founder of J Rothschild Assurance, a new life company that began as one man's obstinacy, and in no time was backed by some of the biggest names in finance - Lord Jacob Rothschild, Sir Mark Weinberg, Scottish Amicable and M and G.

How can it be? Only those who know the tumultuous, egocentric life of the insurance salesman would understand how this unimposing figure could draw such attention. Quite simply, selling is about people. You like them or you don't. Clients buy from the salesmen they like. And salesmen work for the team they like. What Wilson got so right in his 23 years in insurance - topping off a creative, workaholic nature, compliments of his test pilot father - was his attitude to people.

The point was clearly made in January, just after Wilson left Allied Dunbar as its chief executive, when he addressed a crowd of over 2,000 salesmen at Allied's annual conference in Swindon. "The whole place stood up for 10 minutes clapping," a colleague reports. "It was highly emotional. It was like going to the Proms." Now that Wilson has made his run for independence, it is his former company, the BAT-owned Allied Dunbar, that stands to lose most. For Wilson's departure came on the heels of that of Allied Dunbar's highly regarded chairman and founder Sir Mark Weinberg. Weinberg, a South African-born lawyer of daunting intelligence, twice turned the course of Britain's insurance industry. First he set up Abbey Life in 1961 and swept it to prominence on the back of unit-linked insurance plans. Then, in 1971, he launched Allied Dunbar (originally called Hambros), nurturing it on the hard-sell tactics of a commission-only sales force before selling out to BAT for £664 million in 1985. Weinberg's frustrated departure from Allied late last year was also followed by the exit of Allied ex-managing director Keith Carby. The three men joined forces to form a formidable team, backed by £25 million from Lord Jacob Rothschild's St James's Place Capital (40%) and £12.7 million from Scottish Amicable (20%).

Understandably the industry is hopping with a mix of fear and excitement. All of the 30-strong administrative team set up in the old Georgian house in Cirencester that is J Rothschild's new headquarters have defected from Allied Dunbar. And on the agenda now is the recruitment of at least 100 salesmen, ostensibly to grow to more than 700 within five years. Over 500 sales job enquiries have been received so far - and a large proportion of those from Allied. "They're the gurus of our business. They create the challenge. I just want to follow the success," explains one Allied salesman who plans to join the new company at its start in January.

Wilson and Weinberg outline no more than the broad shape of the animal to come: a company that thrives on the hard punch that only a small professional team can deliver. The clientele to be targeted are those with thicker wallets and higher expectations than most, with products including life assurance, unit trusts and pensions offered on a plate of personalised service.

As the new firm's plans congeal, back at Allied Dunbar all stations are on full alert. One salesman reports that BT has been instructed to trace all calls coming from Cirencester, the J Rothschild home base. Salesmen taking such calls are strictly warned against pillaging the ranks for J Rothschild recruits. Jobs, it is said, have already been lost for such disloyalty.

But just what the new salesmen will be walking into at J Rothschild is anyone's guess. Rivals are already dressing up the newcomer as a "cowboy" firm stuck in the days of the '60s and '70s, when silky-tongued salesmen swung out of their Jaguars in white stretch socks and crocodile shoes. The current theory doing the rounds is that the '90s will be different. Money, it is now said, makes people nervous. The shuffling customer has found his feet, and it is he, not the salesman, who now calls the shots: that means value for money and credible advice.

"People are very sensitive. I've had customers say, 'We didn't like it when he turned up in the flash car,'" grumbles one rival company director, citing rumours that at least one Allied Dunbar executive had been lured to J Rothschild by the promise of a Bentley. The director claims a great respect for Sir Mark Weinberg, but he suggests the glossy, direct-selling techniques that previously won Sir Mark success have had their day. "It's a tired formula. I wonder if he's actually changed at all in 30 years."

Such charges are bounced ignominiously out the door at J Rothschild. Sir Mark, gravelly-voiced and emanating the calm of a street-wise magistrate, replies simply that quality customer service is exactly what they are aiming for, albeit, for an upmarket clientele. He readily acknowledges the likely success of the new fashion sweeping the industry - the search for the so-called "warm customer base": a euphemism for the captive and supposedly loyal clientele of large institutions like banks. The lust to wave insurance policies before these thousands of potential customers can be seen in TSB's move into life assurance, the Lloyds Abbey Life venture and more recently the link-ups of Abbey National/Scottish Mutual and NatWest/Clerical Medical.

Weinberg predicts that these alliances could in time gobble up 70% of the life assurance market. "But that still leaves a high proportion of people - particularly those beyond the income range where they are buying packages - who are purchasing financial advice and looking at how to spread their earnings. That demands a personal relationship like you get with your lawyer or accountant."

J Rothschild plans to sidestep neatly into this niche by means of a small experienced salesforce, motivated by the offer of equity shares in their company. The sniffy polish of the J Rothschild name, and the handy connections that will inevitably come out of Jacob Rothschild's humble circle of friends, will also give the company an "old school" leg-up: something it will undoubtedly need in a market flush with 270 competitors. "Ten years ago selling insurance was as difficult as falling off a log," says Goldman Sach's analyst Brian Warren. "Now they're all out there desperately digging for the business." The story of the birth of this new brat of the insurance world still draws blushes, coming as it did out of some unwanted attentions in BAT's and Allied Dunbar's matrimonial bed. Mike Wilson's departure from Allied Dunbar is said to have been sparked by the failure of parent company BAT to agree terms for a link-up with Barclays. The deal would have firmed Allied's future, providing a "warm" customer base of 2,500 bank clients. Both Wilson and his managing director, Keith Carby, walked out when the deal fell through, feeling miffed that they could not steer the company as they saw fit.

Possibly both would have left in any case. Since Sir James Goldsmith's aborted assault on BAT in 1989, life had changed at Allied Dunbar. BAT had been stripped back and was under pressure from the City to prove it was adding value to its subsidiaries. "Suddenly Mike was going to more and more meetings with BAT rather than spending time on sales and the vision of the company," one ex-director reports.

Allied Dunbar chairman Mark Weinberg, too, was under pressure. Earlier, to avoid a conflict of interest, he had resigned from both the BAT board and his seat at J Rothschild Holdings, the starship firm of his long-time friend Lord Rothschild, who was allied to the "enemy" Goldsmith camp. At the time, BAT chairman Patrick Sheehy bluntly told Weinberg if he was going to resign from the BAT board he should forfeit his Allied Dunbar chair, too. Weinberg refused: he would not, he said, abandon his troops. "After that I was a non-person as far as BAT was concerned," Sir Mark, 60, recalls. "There was no sourness, but it was a rather unsatisfactory way to finish up a 28-year career." By October last year Sir Mark had had enough. He sent a letter of resignation to Sheehy and joined Lord Rothschild's group.

Mike Wilson meantime set up office in Cirencester. A one-time clerk, he had sealed his own fate to Weinberg's twice before, by joining both Abbey Life and Allied Dunbar. ("When I first joined Mark I was petrified of writing cheques in case they bounced. Three years later I had a penthouse flat.") Weinberg offered to back Wilson's new venture with £25 million from Lord Rothschild's St James's Place Capital. Keith Carby joined them, and soon after Skandia Life's talented ex-chairman Paul Bradshaw was recruited to design the group's products.

Session after session of caffeine-fed brainstorming followed at Sir Mark's Wiltshire country home. The plan which finally emerged fell in place with fateful simplicity. Scottish Amicable - top of their list of choices of an administrator for their paperwork and manager of their unit trusts - agreed to come on board, buying 20% of the equity for £12.7 million. "Mike Wilson says it was one of the best cold calls he ever made," laughs Scottish Amicable managing director Roy Nicholson.

In October, the prestigious M and G also agreed to act as a fund manager. Added to the Bishopsgate Unit Trust Group which J Rothschild bought from St James's Place Capital, this gave clients a choice of three fund managers. Weinberg, Wilson and Carby took 17% of the J Rothschild equity and 23% was reserved for the firm's staff.

Ironically, in June, Allied Dunbar made a blunder that played right into their new rival's hands. Furious that this new upstart planned to cream off its most experienced people, Allied called its top 150 executives to a meeting in Swindon. They were told they had one week to sign a new contract that would require them to give four to 12 months' notice and agree not to recruit any of their former salesmen for a further period if they did go.

"I said I didn't want to sign," recalls Richard Shakeshaft, now an executive director for Rothschild. "And five of us felt the same way." All five walked out and within weeks Rothschild was announcing its new regional directors - the same five who had cold-shouldered Allied.

Critics and supporters alike are now waiting for the final and most crucial cog to fall in place: the salesmen. Wilson's aim is to have a small, but highly productive team, averaging commissions of perhaps £50,000 a year compared to £13,000-£25,000 elsewhere. The companies most vulnerable to poaching are Allied Dunbar and Abbey Life. Allied has sought to tie down its salesmen with new contracts that bar departing staff for a year from selling any rival policy to recent past clients.

So will the salesmen come? Mike Wilson believes so. He strongly denies rumours that hefty commissions are on offer: "We'll be paying the industry average or even 10% below. And no golden hellos, no soft loans." But he says that salesmen earning £100,000 plus a year in commission could well find their bonus J Rothschild shares worth £250,000 in five years when the company hopes to float. While some in the industry pooh pooh this figure, one salesman insists that, in any case, what matters most is the self-motivation that can be derived from a firm. "That's what I like about the new challenge. I think the motivation is going to be far greater."

Much of the J Rothschild blueprint is still confidential, but managing director Keith Carby stresses a few broad principles. Discipline is one. Strong branding is another. Without the trainee salesmen underfoot testing the client's patience, J Rothschild hopes to achieve a name for quality. It also plans to have "checks and controls" to ensure its salesmen do not "ambush" prospective clients with calls and that they act ethically at all times.

As part of this, J Rothschild will not have the usual layer of managers who lust after sales because they take a cut of their men's commissions. Salesmen love the idea, but competitors are wary. "Without the managers I don't know if these people can give the supervision that is needed. These top salesmen are very aggressive," says one.

Lastly and most importantly, Carby and Wilson (and everyone in the business) stress marketing and distribution. Little is divulged here, other than muttered remarks about a data base in Bristol, plus strong hints that down the line J Rothschild too will seek a "warm customer base".

Speak to the competitors and they say the whole thing smells of a short-term money-making exercise. "The salesmen could be extremely motivated for five years and then they may want to cash in," comments Alan Wilson, managing director of Skandia Life. Alan Frost, head of Abbey Life, says the big question is whether there will be room for any niche players in the '90s. If J Rothschild hopes to get into the competitive up-market arena, he says, they will be in a "pretty rarified atmosphere" where clients already have their own good ideas as to where to put their cash.

Yet none of this talk seems to spoil the mood at J Rothschild. Sir Mark is said to "have his buzz back", Mike Wilson is exhausting even the onlookers, and Keith Carby is in his element, hounding his new team to unexplored heights. Says Weinberg, "If we can recruit 500 to 700 really good salesmen we can build a company half the size of Allied Dunbar without paying much. Once we meet that target we will succeed." The guru's confidence, as always, is undiminished.

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