Last week, we got exclusive access to some of the leading figures in wealth management at our Wealth Manager Conference and Awards ceremony.
One thing was clear, the pressure the industry finds itself under shows no sign of easing any time soon. Fees, income generation and, of course, regulation were among the challenges they listed.
In the more relaxed atmosphere of our conference, wealth managers told us what is really on their minds. While there is plenty to fret about, we also found lots of optimism out there, too.
Here’s what eight wealth bosses told us.
Peter Dalgliesh, managing director, Parmenion Investment Management
‘Big UK opportunity’
Dalgliesh expressed no concern over recruiting talent, saying the firm has been able to find high calibre individuals with relevant banking experience.
The biggest challenge for him is building model portfolios that will withstand market volatility, especially in the short term. ‘The hardest thing right now is central bank uncertainty, which extends into liquidity, and it comes down to whether we are at the end of market manipulation and how we navigate through it,’ he said.
The platform, which has been part of Aberdeen Standard Investments since 2016, has more than £5 billion of assets under management on behalf of some 1,300 advisers representing 54,000 clients.
Dalgliesh sees big opportunities in the UK.
‘We have no crystal ball to predict what happens in politics but there is significant value in world-leading companies trading at a discount,’ he said. ‘There are also opportunities in emerging markets and also the US, but you have to be selective there.’
Colin McInnes, managing partner, Quartet Capital
‘The most interesting time in my career’
Quartet Capital’s managing partner was in a cheerful mood when we encountered him, seeing opportunities where others perhaps see pitfalls. ‘This is the most interesting time I’ve run money in a long time,’ he said. ‘There is a very interesting political background here and in the US. Economies are starting to roll over.’
McInnes also described the aging population as an exciting challenge, pointing out that clients are healthier for longer, which means they need wealth services for more years.
However, the lack of wealth talent is an issue for him. He points out that increased competition, as rivals ramp up recruiting, has turned hiring into a lengthy process.
‘We have to spend more time looking, and the hiring process takes longer than it used to,’ he said. Although competent in many areas, ‘millennials are struggling with interpersonal skills and social interaction because their skillset and lifestyle is much more digital,’ he added.
Gareth Deacon, portfolio manager, Blackfinch Investments
About a year ago, Deacon (pictured below) and Alex Sumner left Hargreave Hale to join Blackfinch Investments in Gloucester in order to set up a model portfolio service. Deacon said the most pronounced challenged the duo faced during that time was building a product that would stand out in a very crowded space.
‘We spent four to five months just talking to advisers about what they liked and what they didn’t like and trying to build a proposition that would stick out,’ he said.
Having soft launched in July, the proposition was officially open to clients in January.
‘In our case what is a challenge also becomes an opportunity,’ Deacon said, ‘because if you manage to build a proposition that is different to what is already out there, then you make noise and get the attention of IFAs.’
He said they felt lucky to have had the support of the specialist tax efficient investments firm, as well as a group to consult. ‘We both previously worked with advisers, so we drew on them for consultation to make sure we build a portfolio service that would stand out. We talk to advisers to identify where there’s a gap in the market.’
Ruthven Gemmell, executive chairman, Murray Asset Management
‘Ten years ago I was chairing the practitioner panel of the Financial Conduct Authority, and even then the recurring theme was the one-size fits all regulation, which is not particularly proportionate for small firms,’ Gemmell said.
While he partly understands the reasons behind this, he added that it is a sign of failure for regulators to keep regulating because it means they did not get it right the first time.
He sees immense opportunities in wealth management now as the industry is dealing with the baby boomer generation, which is coming to retirement.
‘Baby boomers had the benefit of getting mortgages when they were a lot cheaper; they have seen property prices rise and their assets grow. A lot of them are coming to the end of their working lives and need planning for their children who are facing very different circumstances,’ he said.
Keith Edwards, CEO, Casterbridge Wealth
‘Small and beautiful’
Winner of the South West regional star award at Thursday’s event, the chief executive of the Salisbury-based wealth boutique said the rise of vertical integration has opened up opportunities for his firm, suggesting small is beautiful. ‘No one else wants to do what we do. It’s hard.’
Edwards added: ‘It may well be a smaller market, but the average client size of over £500k with mixed assets collectives active/passive with some direct equity exposure in a portfolio that is consistent for clients with similar risk profiles and objectives, but no portfolio being identical.
'As I said, it’s hard to do, but professionally rewarding and, in our opinion, the right thing to do.’
Finding the right people to deliver such services remains a challenge for Edwards, however. He said those who can combine strong interpersonal skills and technical competence are not easy to come across.
Lester Petch, CEO, TAM Asset Management
With TAM Asset Management planning to expand into Europe, our conference was an opportune time to catch up with the firm’s chief executive, Lester Petch, ahead of Brexit.
Given the drive to build a continental presence, how the UK’s departure from the Europe affects business is expected to pose a challenge. Another is the reaction to a torrid few months in the markets, with Petch predicting clients ‘might go a bit quiet for the next quarter or so’.
On the flipside, Brexit is also seen as granting the business a ‘chance to develop’, but only so long as they ‘embrace the change’ – the firm now having gone through fast track regulation.
‘Whether there’s a hard/soft Brexit – we’re taking the European theatre as a market to now embrace,’ he said.
With regards to regulation, he said the expansion of the Senior Managers and Certification Regime to the investment industry comes at an inconvenience amid the commotion of Brexit, but he views it more as a drain on money and time than a major concern.
Petch also identified ‘opportunities that are threats to other people’ in the Sipp industry in particular, with rival businesses facing major legal cases and compensation claims.
David Pegler, founder, Brighton Capital Management
Geopolitical issues are not a major worry for Brighton Capital Management founder David Pegler, who thinks concerns over day-to-day events tend to be inflated – though this can knock investor confidence.
He said: ‘Obviously there’s been market uncertainty that’s around [but] sometimes the press makes a bit more of that and that frightens people.
‘There will be opportunities whatever comes out of these circumstances at the moment that are going on globally with trade wars, and Trump and China and Brexit and all of these things.’
In his view, the costs imposed by increased regulation are creating a ‘tougher time for the industry’, while a widely-held view among ETF providers that market returns are likely to decrease in the next five years would also hurt bottom lines.
After three years, his company has grown to the point where it is becoming harder to find new clients, leading it to look at launching joint ventures with other businesses, such as tax-focused law firms.
‘One of the advantages of setting our own business up is that we feel like entrepreneurs,’ he said.
Mike Roberts, managing director, PortfolioMetrix UK
‘AI and machine learning’
PortfolioMetrix UK managing director Mike Roberts sounded largely unphased by rising costs, instead arguing that value is where the industry should be focusing.
Regulation is seen more as a burden in terms of the amount of work that is dedicated to keeping up with the latest requirements, with the industry having rapidly gone through several rounds of rule changes and facing more on the horizon.
‘I guess a slight worry is we might be putting a lot of effort into the way we lay out these statements only for them to be changed within a year’s time,’ he said.
Recruitment is another tricky area, partly down to the fact that the firm prefers to hire young and train graduates up from scratch.
‘It’s quite a hit and miss process – we see a lot of people that aren’t right, and we’re lucky enough to have put the effort in to have found really great quality people.
In terms of opportunities, Roberts believes the industry has yet to fully benefit from the possibilities created by AI and machine learning – which he sees as likely to augment, rather than replace advisers.