How differences between wealth managers and advisers are disappearing Friday 04 Sep 2015

How differences between wealth managers and advisers are disappearing

There has been no let-up for Saunderson House on the growth front since its investment director Chris Sexton graced the cover of Wealth Manager in 2010.

Equally, the business has seen a fair amount of change, including a new management team plus the decision to launch a discretionary service by the end of this year.

Looking ahead, Sexton expects that regulation and technology spending will cause M&A activity in the sector to continue apace. When you throw in greater transparency, the investment director suggests that the historic differences between wealth managers, financial advisers and stockbrokers are starting to disappear.

How has the business changed since you were a cover star?

‘We’ve invested quite a lot in the business; the management has changed and upgraded. We’ve invested in marketing and business development, a lot in operations and IT. There has been a lot going on underneath the headlines to make us fit for the next decade.’

How has the wealth management sector changed?

‘We have seen a lot of consolidation. I think that is probably set to continue because regulatory pressures and technology are forcing the consolidation. It is forcing a lot more transparency in relation to investment philosophy, track record and performance reporting. That results in a lot more cost as they all require bigger investments.

‘Clients will want more in the future as well, in terms of being able to see valuations and receive things in electronic form.

‘The retail distribution review (RDR) is probably the other big change. Trail commission has also been a factor in driving consolidation and making fund costs much more visible. It has removed whole swathes of IFAs who were living on trail commission and I don’t think the regulator is finished with this yet.’

What does the future hold for your business and the broader industry?

‘In terms of the business, we are just continuing with organic growth. Our core client base is lawyers and accountants, but there is no reason why we can’t service other areas of the market. We have a fee-based model, which has served us well and we are going to continue with that.

‘In the future we see a low growth, low interest rate and low return world which is going to focus people more on performance and differentiating their product and actually deliver returns above benchmarks and the industry.

‘From newspapers you just get a non-stop flow of news about the Bank of England downgrading their inflation expectations. We see a shallow growth path heading forwards. There are lots of quite complicated economic discussions about why that is, but the expectation of growth returning and concerns about interest rates going up do not seem to be materialising. Recently we had very weak commodity prices. That’s indicative of a low cost, low inflation pressure world.

‘I think there is going to be a lot more focus on technology and there will be fewer players in the industry. There will be a lot more of a focus on transparency of process and investment performance, fees and what the wealth manager is providing for those fees. It will be a more normally structured industry, much more consolidated.

‘The differences that existed in the past between wealth managers, IFAs and stockbrokers are increasingly disappearing and you will get a much more flat structure, much more comparable in what they are offering and what they are charging for it as well.’

What were your best and worst investment calls?

‘We ended the profile piece [in 2010] saying we will start buying Europe. We didn’t actually buy it until two years later, in 2012. It has done really well since then. We’ve added to it further and for that first purchase we got in at quite a good level. 

‘It has worked really quite well. Some of the things we said about Europe at the time in terms of the eurozone seeing quantitative easing (QE) and being restructured I think have come to pass.

‘2011 was a pretty lousy year for markets, we did not really foresee that coming. We had sold gilts and bought corporate bonds, but the right thing to do was to buy gilts and sell corporate bonds.’

 

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