'Private equity puts management's toes to the fire'

The industry veteran, who started his first job as a sales manager at Standard Life as far back as 1984, says private equity has a distinctive way of operating, which, when done well, forces managers to stay at the top of their game.

Cook has plenty of experience with private investors, having been a board director at Thesis Asset Management when private equity was brought in.

The business was sold to Sanlam in 2019, which itself was acquired by Oaktree Capital Management and renamed Atomos in 2022.

"Having worked now in three firms where there's been private equity backing, I'm very familiar with that world," he says.

Cook says he believes private equity interest in wealth management will carry on for some time.

Likening the market to a lava lamp, a metaphor he says he borrowed from his friend Timebank founder Damian Davies, he says: "At first glance, when you look at a lava lamp...[it] all looks a bit random and chaotic, but there is a pattern going on.

"And that's how capital is being recycled within the wealth management market. So I suspect it will carry on for some time in one form or another."

If you look at the strength of the dollar, the difference and disparity in the price the consumers pay for a broadly similar [advice] service, that's still very attractive.

The idea is, he explains, something small starts at the bottom and gets bigger with private equity backing, and over time it rises to the top.

Then at some point there is a sale or people within the organisation leave and fall to the bottom to form their own business and so it starts again. 

He adds: "And what it leads to, I think, is a real focus in management on delivering more effective, streamlined, efficient services.

"So ultimately, it's probably a good thing for the wealth management business, because it really puts management's toes to the fire; you need to keep focused on delivering."

Looking to the near future Cook says he "can't see the interest waning too much".

This is despite the current proportionately high interest rates, which could have a negative impact on a private equity investor's debt financing strategy.

While Cook acknowledges this conundrum, he says overseas investors would still find there are large margins to be had in the UK wealth management market.

"If you look at the strength of the dollar, the difference and disparity in the price the consumers pay for a broadly similar [advice] service, I think, particularly private equity money across the pond are looking at that saying well, that's still very attractive."

He is alluding to private equity investors consolidating firms into larger businesses, which, if done well, are able to offer more services at a lower price than a small IFA might.

"So while there's a huge range, and I accept that, typically you might find a retail investment client in the UK is paying anywhere between 150 and 200 basis points all in, so platform, advice, investment, etc.

"So, an investor or consolidator is going to be thinking well, okay, if the average client is paying 1.8 and I can deliver that for 1.6 and make a profit out of that, well, then that's good.

"And typically, these private equity firms will put in a high-quality management team with experience that knows what a good proposition looks like and how they can deliver that."

Aspirations growing up seemed to be fairly limited to 'get a job'.

Cook says many traditional discretionary fund managers will recognise the need for scale in the coming years.

"If you think of the combination of capital [eyeing] the sector saying, well, we can deliver better value for clients and make a profit and the regulator saying are you delivering great value, you can see where it's going."

Though he stresses there are a lot of entrepreneurial advisers still in the market, which would not fit into this model.

Cook's own businesses are not private equity backed.

He has launched a consultancy, which he owns himself, and a data aggregation platform for advisers, which allows them to compare model portfolio services, which is owned by himself and his two business partners.

Mabel Insights, launched this week (January 15) offers like-for-like comparisons of MPSs as well as risk ratings.

It is a commercial enterprise that seeks to grow through partnerships with DFMs, which will open its doors to evermore data on their products.

Strategic Minds Consulting Limited, on the other hand, is not being proactively marketed.

Cook says he does not need to. Having worked in the industry for four decades, he has built up a vast network of contacts, which are willing to engage.

"It's actually been quite life affirming since finishing my last post in the corporate world if you like, I've had time to actually reach out to people that I haven't seen or spoken to for a while. And it has been incredible," he says.

"So many people have said I want to help just because we helped each other back in the day. Or that they're interested, or that they're really interested to know what I can do."

This includes helping IFAs and wealth managers build up a slick, efficient business.

It is something he enjoys doing, he says. "For me, the enjoyable bit is the process and the thinking and getting there.

"So if I can be involved with quite a few businesses, helping them get there, I know I can get a lot of value out of that personally and personal fulfilment and that might not be as remunerative as staying full time in an employed position as chief executive or managing director."

E + R = O

Cook, like most people, entered the industry "by accident". He had bumped into an old school friend who was working for what was then the Standard Life Assurance Company, a mutual, which he ended up joining in sales.

"Looking back I had fantastic training and development. And it's interesting to note that a lot of my peer group at that time are still very successful in the financial services community.

"And every now and again when we talk, we do reflect back on the fantastic development and training that we were given at that time and we're very lucky to have it."

He says he came from a fairly ordinary background, his father had left school at age 14 with no qualifications, so "aspirations growing up seemed to be fairly limited to 'get a job'". All he wanted was "get a house, get a family and succeed", he says.

Events plus your reaction equals the outcome, so the only bit you can control is the reaction bit.

But his upbringing taught him self-reliance and a conviction that he is the maker of his own fortune.

"Events plus your reaction equals the outcome, so the only bit you can control is the reaction bit. So stuff happens all around you all the time and the outcome sometimes you can't do anything about. But often you can."

When it comes to building a business, for Cook the sun always shines. "When you're trying to drive something forward, you know, a business unit, a team, whatever it happens to be, you get roadblocks, you get problems.

"And it's having the adaptability to say well, let's assess this calmly and logically and think how we're going to deal with it."

This involves an appreciation for different ways of thinking within the team. 

His outcomes-focused approach also spans to dealing with regulatory changes such as the Financial Conduct Authority's consumer duty, he says.

Cook has experience with having to adapt to the consumer duty as a wealth manager. He says "I feel their pain", but adds ultimately the work should lead to higher quality firms and service.

Despite the FCA's focus on value, Cook does not think it will ever go as far as to prescribe a price, even a level of acceptable price.

"What they're trying to highlight is they're saying well look, if you are charging, as a fictitious example, 250 per cent higher than the average fee for a similar service, it's right that the FCA is saying well, that's okay but you need to demonstrate why that's good value.

"So if you are delivering highly personalised services that go along with that, that is clearly disclosed and the client values it, well then that's probably going to be okay.

"But no doubt there will be a cohort in there that are thinking that's difficult."

Carmen Reichman is multi-media editor at FT Adviser