Firing lineDec 17 2020

Buying an advice firm during lockdown

Search supported by
Buying an advice firm during lockdown

For Stephen Ford, head of wealth management at WH Ireland, and his colleagues, the waves of consolidation that have swept through the advice market in recent years mattered less to them than the more immediate task of turning around their business.

The company had accrued losses of £13.5m in the two years to the end of March 2020, but by retiring legacy platforms, and removing other costs totalling more than £7m, and the sale of its Isle of Man business, the listed wealth manager returned to profit in the first quarter of this year.

In an interview with Financial Adviser, Mr Ford says that with the business heading towards profitability, he and his team were able to ponder acquisitions for the first time in years, but the deal that was subsequently done involved paying up to £7.8m for Harpsden Wealth Management, an advice business and discretionary fund house based in Henley.

Mr Ford says the advent of the Covid-19 pandemic meant the deal happened when it would not otherwise have done, and made the experience very different to anything he had experienced before, including during his long stint at rival fund house Brewin Dolphin. 

He says: “Harpsden originally came up for sale in the middle of last year and we looked at it then, but didn’t get the deal, another company did. 

“But then as the pandemic started, the other buyer pulled out and we were able to look at it again, and it came up for auction and we won it.” 

Remote working

Mr Ford says he and his colleagues then had the experience of trying to buy and integrate the business while working remotely. 

He says: “None of us expected to be doing all of the work that goes into an acquisition digitally, but the real challenge is likely to be integrating the companies together while working remotely. 

“We are very conscious that we are all in a people business, and the real challenge will be integrating everyone while working remotely, that is certainly something that is different to anything I have experience of.” 

Mr Ford is one of three executive directors at WH Ireland, and sits on the company’s board. He joined the company in 2019, having previously been head of transformation and then head of wealth management at Brewin Dolphin.

As head of transformation his role was to “modernise” the company, and improve its profitability. He became a full board director of Brewin Dolphin in 2013. 

He later worked as head of sales at City Asset Management.

He acknowledges that WH Ireland is “tiny” in comparison to the biggest wealth management companies in the market, including his old employer, but says that both from a business point of view and an investment management point of view, being slightly smaller, and being listed, has distinct advantages.

He says: “While we are not going to be a consolidator in the advice market, we may do more acquisitions in future. 

“Probably the biggest challenge that comes from buying advice businesses is keeping the people in the firm you acquire happy.” 

WH Ireland may be small but it offers a number of discretionary investment management services for professional advisers, which are managed by experienced investment managers and supported by a specialist research team. It is a relationships business.

Mr Ford adds: “The way this industry works is that, quite often, the client has the relationship with the adviser, and it can be quite personal.

“Our responsibility to firms we acquire therefore is to make WH Ireland a good place to work. 

“One other thing we can offer though, which I think makes a difference, is that as a listed business, we can offer people shares in a listed company they work for.”

Margin calls

Mr Ford says the second advantage his business may have over the larger incumbents is that the relatively small assets under management of WH Ireland means the company’s advisers and wealth managers have greater flexibility over the investments they make. 

He says: “If you work at one of the big firms, there are only so many funds you can buy, they have to be a certain size, whereas we will try to exploit that; buying funds that maybe are smaller but perform well, buying funds where the manager has capped the size of the fund in order to protect his performance.

“And we can also buy investment trusts, which some of the larger wealth management firms won’t do.”

He acknowledges that WH Ireland has not yet reached a point where it has the scale to negotiate significant discounts on the fees charged by the fund managers, or to use segregated mandates, which carry a cheaper charge as it is a separate fund managed in the same way as the retail fund it mirrors.

Mr Ford says: “When we get to the stage where we can use segregated mandates we certainly will do, and if it is possible to do that now at an earlier stage than was the case in the past, we will do so.

“Right now, we can’t be as cheap in terms of fund fees as some of the larger players with our DFM offering – quality of service and range of investment opportunities are also important.

“I would also argue that it is harder to get the really good funds at a discount. Smaller players can be more dynamic, I would say far more of the bigger players got caught out by Neil Woodford’s fund, for example, than the smaller players, and the Woodford fund had a discounted fee level for the biggest firms.” 

He says that he also expects DFM margins to fall in the years to come, as many DFMs “use advisers as distributors of their products”, but he does not think the fees charged by advisers will fall. 

For now, he is focusing on the recent acquisition and relishing future challenges.

David Thorpe is special projects editor at Financial Adviser and FTAdviser