Firing lineSep 23 2021

Chris Woodhouse: 'Buying another platform seems pretty nuts'

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Chris Woodhouse: 'Buying another platform seems pretty nuts'
Chris Woodhouse, chief executive of Tilney Smith & Williamson

Chris Woodhouse, chief executive of Tilney Smith & Williamson, has presided over 12 deals as head of the business, involving large and small companies, accountants, investment managers and financial planning businesses. But he says additional platform deals are now off the agenda for the firm.

The combined Tilney Smith & Williamson employs around 300 financial planners and the same again of investment managers. It has accountancy and merger and acquisition advisory units, and the Bestinvest direct-to-client platform. The total assets under administration for the business are north of £55bn. 

But while he is keen to expand further, the one thing Woodhouse will not be doing is buying a platform.

He says: “It is something we considered; the market is interesting, but it is also difficult to grow from a standing start. And given we already have a profitable platform in Bestinvest, buying another platform seems pretty nuts.” 

Instead, plans are afoot to relaunch Bestinvest next year as part of a bid to ensure it is not "just an execution-only investment service".

Woodhouse is determined to avoid the fate of chief executives in many industries who embark on a spree of acquisitions and find, at the end of it all, that they are left with a business worth much less than the sum of its many, often expensively assembled, parts. 

The problem is particularly acute in financial services, where businesses can make deals, only to then find the staff of the acquired business leave and take valuable clients with them.

Having presided over 12 deals, ranging from small financial planning businesses to the the merger with Smith & Williamson, which completed almost exactly a year ago, Woodhouse says he believes he has cracked the conundrum that has confounded so many, and led to the destruction of vast amounts of shareholder capital.

He says: “I am acutely aware that we are a people business, and when we buy a business we are also buying a people business, and I have to try to keep everyone happy.

"One of the ways I try to do that is by inverting the usual corporate pyramid. Companies normally operate as a pyramid with the board of directors at the top, but I think we have to operate it almost the other way around, with the clients at the top, and the people who are closest to the clients next, and you work back from there.

"The guys who ran Smith & Williamson were very good about letting me speak to wealth managers in their business before the deal completed, so that I could get an understanding of the culture.”

Woodhouse is keen to emphasise that while there is a team of about 100 who work on the investment research team, there is no centralised investment proposition. He says he believes some investment managers have approached Tilney about joining the business purely because of the lack of a centralised investment proposition, as those investors want to do bespoke work with clients. 

He says he is trying to pull off the task of integrating two large businesses, “but not turning it into a sausage factory".

He adds: "The key has to be personalisation; the client has to feel they are getting a bespoke service from their financial planner. We think we are unique in terms of the scale and breadth of our offering, from the Bestinvest platform which is D2C right through to helping people sell a business if they want to, but all of that has to come with personalisation and I think that in future that is now we will be differentiated.

"In this industry, scale is very important, but lots of people are buying businesses, and I think in future, having a differentiated offering will be what matters. I think differentiation grows market share. It is also the case that in the current market conditions, it is more difficult to be a small firm.”

The one area he says the business has “punched under its weight” in is being an outsourced investment management solution for advisers. 

He says a spate of recent business development hires have been brought on board specifically to grow the company in this area of the market and more hires are imminent. 

Not new to the industry 

Woodhouse’s arrival at Tilney as chief executive in 2017 came after a career at UK motoring and financial services group the RAC. Previously, he held roles at retailers Debenhams and Homebase. 

He says the experience of running a retailer is different to running a regulated business. The RAC is essentially both, as it is regulated by the Financial Conduct Authority just as Tilney is, but also is a retail product. 

Woodhouse says the main difference is that at Homebase the focus was on selling products, whereas a regulated business is focused on providing advice. 

He adds that he began his career as a chartered accountant and worked in the City and on Wall Street, so the industry is not new to him.

The common thread that links the various roles of Woodhouse’s recent career is working for private equity owners. 

Such businesses typically have a fixed idea of how they will exit the companies they acquire, and when. Beyond saying the exit will likely be via a stock market float or a sale to another private equity business, Woodhouse says he does not believe it matters much to himself or his colleagues in the senior management team which form of exit is chosen. 

He says: “For me, the owners are just like how non-executive directors would be at a publicly listed company. In fact, that is how the private equity owners interact with us at Tilney.

"They have two non-executive director seats on the board. And they, as part of the board, approve the strategy and the budget. Of course it is the case that many private equity firms know exactly how they would like to exit and when, but I think that is much less the case when it is a company as big as Tilney.

"And the strategy we are pursuing is certainly not linked to timing. In all businesses you have to prepare a five to 10-year plan, and whenever the current owners exit, the new owners would want to see the plan – they are not going to throw everything away.” 

He is also mindful of the risk of over-paying for advice businesses, saying he has noticed, across the 12 completed deals, an “incline” in the price paid. 

Buying time 

Woodhouse says one can track this by looking at the share price movements of listed wealth management first, such as Rathbones. He says the sellers of advice businesses tend to apply the multiples at which the listed businesses trade to the advice companies they are selling. 

He says in such a market it requires “discipline” to not overpay for an acquisition. 

Tilney, in common with many other financial services businesses, faces the threat of disruption to its business model from robo-advisers and also from the rise of equity trading platforms such as Robinhood. 

Woodhouse is coy about what the relaunched version of the Bestinvest platform could look like, but implies he sees it as part of his company's solution to the issue of reaching younger investors.

He says Bestinvest must not be “just an execution-only investment service. It has to be part of our purpose to bring advice to more people – Bestinvest is about educating and coaching. And we think that as people’s affairs get more complex, they may move from Bestinvest into some of the other services we offer, though of course many will continue as Bestinvest clients.” 

David Thorpe is special projects editor at FTAdviser