Firing lineMar 29 2023

Consumer duty levels the playing field for smaller firms

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Consumer duty levels the playing field for smaller firms
Michael Bishop, head of wealth management at WH Ireland. (Carmen Reichmen)

When Michael Bishop joined the wealth management division of WH Ireland as head of wealth management at the start of 2022, he was entering a world somewhat different to what he had been used to so far in his professional career.

Bishop joined from the giant Swiss bank UBS, where helped build a business which came to have a  team of 650 people in the firm’s UK wealth management operation, and prior to that had worked at accountancy giant PWC. 

From those relatively gilded worlds he joined WH Ireland’s wealth management unit, a business with assets under management of less than £2bn and which was loss-making.

But he says WH Ireland represents a “strong opportunity” for him, something he feels the forthcoming consumer duty regulations will help with.

Consumer duty means a move away from the old tradition of a stockbroker doing everything for the client, and enables a more institutional level of service for clients.

He says: “The consumer duty levels the playing field somewhat and should help boutique firms. The fact that we will all have to show good outcomes for clients I think helps us, and the approach we are taking, being more team-based with the financial planners and investment managers working as part of a team.

"The client still has a single point of contact of course, I think that’s very important, but I think consumer duty means a move away from the old tradition of a stockbroker doing everything for the client, and enables a more institutional level of service for clients.”

He says WH Ireland is working towards a situation where it will be normal for a client to meet their financial planner and their investment manager at the same time, with the adviser working out their long-term objectives and the investment manager implementing the strategy. He views this as part of a plan to move away from being a pure stockbroker and instead being a full service wealth manager. 

Bishop expects that a client may not wish to see their financial adviser that regularly: “Really it would be when there has been a change of circumstances; the job of the financial adviser is really to manage the change in circumstances. The investment manager then gets involved. 

"The way I think about it is, clients have an app where they can get a real-time valuation of their portfolio, and our chief investment officer sends out updates about how he sees the world. But the one thing an app can’t do is help a client whose circumstances have changed, or whose financial goals have changed. That’s where the financial planner comes in.”

Bishop began his professional career as an accountant and joined UBS in London in 2000 to provide tax advice to companies, and as the dotcom boom created a lot of newly wealthy people, this evolved into providing tax planning for the founders of those dotcom businesses.

One thing an app can’t do is help a client whose circumstances have changed, or whose financial goals have changed. That’s where the financial planner comes in.

From there, Bishop was part of a four man team that launched the UBS wealth management operation in London, where it had previously not had a presence, with the support of the Swiss parent company.

He says this was great professional experience as “the four of us had to do everything really at the start, client communications, investment management, administration, all of it, and so I am really an accidental wealth management professional.” 

By the time he left the company in 2022, the wealth management unit he had helped to co-found had 650 employees. 

While the two environments are very different from each other, Bishop says client needs tend to be similar, and in both cases he is trying to grow a business in a competitive marketplace. 

He has also taken some of the practices of the bigger firm into WH Ireland, creating the role of chief investment officer and an office headed by that person, with research staff and a separate budget.

Bishop says this is part of a plan to make the investment management unit “institutional quality”, which he says is easier as a result of consumer duty.

Cookie cutting 

The wealth management division lost money in the most recent set of WH Ireland accounts, and that was prior to the market turbulence of recent months.

He says WH Ireland came into last year “almost as much underweight to bonds as we could be” and this helped to preserve assets, but one of the long-standing goals of the firm is to reach AUM of £3bn, which requires significant growth from here. 

Much of the capacity within that chief investment office came with the acquisition of Harpsden Wealth in 2020, which added a combined £390mn of assets.

He has also hired people to work within the wealth management business, people poached from other firms. 

Bishop says that while his firm is keen to do more acquisitions, “we don’t really want to do any unless we are profitable. We have spoken to a couple of firms, but the firms in question weren’t right for us. We want firms on a similar scale to Harpsden or a little bigger; we indicate to firms that may be for sale that we are in the market, but we are not consolidators.” 

We are long-term believers in ESG despite the uncertainties of the past year.

The extent to which some of the growth will have to come from acquisition if he is to hit his £3bn target within the foreseeable future can be seen in his view that, with AUM presently around £2bn, “realistically the most a firm of that size can expect in a year is inflows of £50mn-£100mn.”

He pointedly does not place a timeframe on when he expects the £3bn target.  

In terms of achieving at least some of the growth inorganically, he says: “We have both MPS and bespoke. Our view is that lots of clients have a view of the world and for those clients, the bespoke offering works, but other clients who don’t have a world view, the models are fine for them.

"We think ESG is an area of growth for the industry, but it probably needs a universal set of definitions. We have two model portfolios in that area, but where we want to get to is that a client can tell us their preferences regarding ESG and we create a portfolio around that.

"We haven’t launched a load of new products into the market as some of our peers have, but we are long-term believers in ESG despite the uncertainties of the past year.”

Although he plays down the differences, WH Ireland is a world away from a giant such as UBS, which is a relatively new kid on the block in the UK wealth market, but had enormous scale in the rest of its business. 

But Bishop has an evident hunger to restore one of the City’s oldest firms to its former glory.   

David Thorpe is investment editor of FTAdviser