CompaniesJun 22 2016

Firing Line: Thomas Salter

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

Netwealth is not your traditional discretionary wealth management service, according to its co-founder and former JP Morgan director, Thomas Salter.

Not many DFMs can boast of the financial backing of some of the industry’s most influential figures, including Jupiter Asset Management’s Edward Bonham-Carter and Sir Harvey McGrath, former chairman of Man Group and Prudential.

Merryn Somerset Webb, editor of MoneyWeek who also writes for the personal finance section of Financial Adviser’s sister publication the Financial Times, is also among the line-up of 29 angel investors who have injected just over £6.5m into the business.

Mr Salter said: “For us, it is very good to have this sort of backing, not just from a financial point of view, but from the perspective that these are very seasoned financial grandees. Our investors are backing a business that is trying to change wealth management.”

The change Mr Salter speaks of alludes to the firm’s adoption of technology, which, he claims, will bring the critical elements of traditional wealth management offerings into the 21st century and streamline the investment process.

The brave new world of financial services which has benefited from the evolution of the digital platform has seen DFMs come under mounting pressure for greater transparency over fees, and to reduce the cost of investing.

Discretionary portfolios are nigh on impossible to compare for anyone who is not an analyst, and should have the same transparency requirements as mutual funds, according to financial services consultancy firm the Lang Cat’s 2015 research into the suitability and due diligence of outsourcing investment solutions.

Transaction charges, for example, vary widely. Some managers, such as Netwealth, include the levy in the overall cost, while others charge a flat fee or a percentage fee.

Mr Salter said: “If managers are charging a hefty trading fee for a discretionary portfolio, there is an inherent problem there. If managers are making a lot of money with these charges, then surely there is an encouragement to trade?”

Netwealth operates an ad valorem charging structure – levying a percentage charge based on the value of assets under management.

The firm’s all-in annual fees start at 0.65 per cent for investments of £50,000, falling to 0.50 per cent for £250,000 and 0.35 per cent for £500,000 and above.

The levy covers investment management, all trading charges, custodial, administrative and all reporting costs, as well as VAT. The cost of advice is charged separately.

Mr Salter said the fees come to about a third of what its pricier rivals levy, adding: “Technology can offer you the scalability and the efficiency to run on this charging model and free up any human reaction for what it is really important for.”

Investors can go to the DFM directly and have the option of hiring the services of one of the firm’s qualified advisers at the cost of £125 per hour.

Mr Salter said the company endeavours to partner with other adviser firms, adding: “We want to be a DFM on their panel and in return provide them with some of the investment planning tools that would enhance their client relationship.”

The wealth manager, which was formed in 2015 by ex-Goldman Sachs partner Charlotte Ransom and Mr Salter but launched in May, targets professionals and those who are well-versed in investments but are restricted by their employment contract from managing personal portfolios.

It offers seven model portfolios, which utilise digital investment tools to help investors plan for a variety of financial goals, such as retirement.

Mr Salter said: “We are not ‘robo’ at all, from an investment perspective. We use technology, that is an enabler, but we are a financial services business, we are a wealth management business and we have humans doing all of the management in the portfolios – people value the human touch.”

The responsibilities traditionally given to individuals in the role of chief investment officer are divided between Gerard Lyon, previously of Swiss Bank and Standard Chartered, and Iain Barnes, formerly of UBS Asset Management and Schroders, Mr Salter said.

Mr Lyon, who was the chief economic adviser to Conservative MP Boris Johnson during his tenure as London Mayor, is responsible for Netwealth’s macroeconomic outlook and strategy, and is a member of the investment committee.

Meanwhile, Mr Barnes, who managed multi-asset portfolios totalling £2bn in his previous positions at UBS, has been tasked to look at the ‘nitty gritty’ of portfolio construction.

Netwealth aims to make investments a family affair by allowing investors to invite their spouse, children, siblings and friends to their network – with each individual retaining their own portfolio.

Under the service, called Netwealth Network, fees are calculated on the homogenised investment amount in the network.

Mr Salter said: “The service was born out of us wanting to help our own families, and it is a powerful tool to help people cross generationally.

“Investors are able to invite up to seven people into the network and they all get the cumulative benefits, in terms of satisfying the minimum investment requirement, and unlocks the cheapest fee rates to those making small investments.”

Myron Jobson is a features writer at Financial Adviser

Thomas Salter’s career ladder

2015-present

Founder and chief operating officer

Netwealth Investments

2013-2015

Partner

Decura IM LLP

2004-2013

Managing director

JP Morgan

2000-2002

Associate

Goldman Sachs

1998-2000

Associate

JP Morgan