Over the last 25 years, a new generation of boutique London wealth managers have flourished, weaving together bespoke service and their own independence to create a Savile Row for wealth. As several key players target ambitious expansion, where might it lead?
Daniel Pinto, the CEO of Stanhope Capital, learned his trade as a banker in the corporate finance department of SG Warburg. In those days, before it was sold off to the Swiss in 1995, it was one of the greatest names in British merchant banking.
Pinto, who had recently completed an MBA at Harvard, got on well with his Warburg clients, many of whose businesses he helped sell. He soon found himself being invited to sit on their family boards to help decide how their newfound fortunes would be invested. That’s when he made an unexpected discovery.
The private banks, he recalls, were ‘riddled with conflict’ because of their commercial need to sell clients their own in-house investment products – regardless of whether they were the best available. That gave him an idea. It was a simple one, about a firm that wouldn’t have any products apart from the advice that it offered, and that would embrace what’s now known as ‘open architecture’ investing – an approach that gives a firm and its clients the freedom to choose the best fund managers.
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Soon Pinto set about building up a core group of three or four families by giving them his pitch: ‘You know what, we’re going to do it differently. We’re going to try to put you – and not product – at the centre of the proposition.’ That was his premise.
Now, 17 years later, it has paid off. Stanhope has grown to become a giant in the field of wealth management boutiques, boasting assets under supervision (AuS) in excess of $24 billion – of which $16 billion are assets under management (AuM).
The Portman Square headquartered firm has some 300 of the world’s wealthiest families and institutions on its books, with 140 staff and offices in six locations across Europe and the United States. Nearly half of the client assets and the US offices came with the ‘acquisition’ – Pinto’s word – of what has previously been reported as a ‘merger’ with the Forbes Family Trust at the end of 2020.
Next Stanhope is eyeing expansion into Asia, first with a big hire to its board and by bulking up in London. Then there’ll be boots on the ground ‘probably in China’ within five years, although ‘it could be sooner’. Pinto is ambitious: ‘We could double in less than a decade, I would hope,’ he chuckles. ‘Our trajectory is not just organic growth, which could be strong, but also acquisitions.’
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And then what? Several times in our conversation Pinto speculatively mentions the figure of ‘$100 billion’ in AuM. How soon would he like to get there, I ask? He doesn’t laugh this off. ‘I have no clue… I can tell you that there is every desire to do it as soon as possible,’ he says. But Stanhope is not the only boutique to have made in-roads into the world of wealth management over the last two decades.
Perhaps 20 such firms, branding themselves as either private investment offices or multifamily offices have emerged since the late 1990s, each claiming to be more aligned to the needs of ultra-high-net-worth customers and to offer a higher level of bespoke service.
In 1994, around the same time as Pinto was sitting on family boards and noticing opportunities, Alex Scott was overseeing the sale of his fourth-generation-owned family business Provincial Insurance for £350 million. He too realised the value of a wealth adviser that could embrace open architecture. Unfortunately, there was a problem: the service was not yet readily available in the UK.
‘So,’ Scott tells Spear’s, ‘I looked around the world, saw what was happening in the States in the context of family offices, and thought: that will probably work here.’
He wasn’t wrong. In 1996 Scott created Sandaire, a private investment office, to serve the interests, initially, of his own family as well as a couple of thousand employee shareholders of Provincial.
Over the following 24 years the company grew to work for multiple families who would receive the same services as Scott’s own kin: the multi-family office was born. When it was sold to Schroders at the end of 2020, Sandaire was managing £2.2 billion in client assets.
Meanwhile, the Fleming clan sold their family business, Robert Fleming & Co, to Chase Manhattan Bank for a whopping $7 billion in 2000. They then set up their own multi-family office, Fleming Family & Partners (FF&P).
‘In 2000, investment-focused family offices were really, really new things,’ recalls one veteran of FF&P’s early days. ‘Previously, family offices tended to be great landed estate offices relocated to London – they did everything from car insurance to walking the dogs.’
But FF&P was different. It focused on investing the massive family fortune – and it didn’t walk any dogs. In addition, almost immediately, it set about growing its client base beyond the Fleming family.
The firm, since 2014 part of Stonehage Fleming, now has £13.7 billion in AuM. The turn of the millennium also saw the launch of Lord North Street, a private investment office co-founded by former lawyer and banker William Drake and Adam Wethered, the latter a 24-year veteran of JP Morgan who had run its private bank and institutional client business across Europe and the Middle East.
When Wethered told the Financial Times that their ambition was to ‘make money for our clients’, the paper opined: ‘This may sound obvious but he contrasts it to “some of the more voracious institutions that will try to make money out of their clients as their first approach”.’
When it merged with Sandaire in 2014, Lord North Street was looking after an estimated £1 billion of client assets. Other firms came thick and fast. Among the most important remains Partners Capital, founded in 2001 by Stan Miranda, a former chairman of management consultant Bain & Company.
Partners was set up to look after the private wealth of just 77 private equity professionals. Things moved on quickly and now it manages an astonishing $35 billion of client assets.
Then came Capital Generation Partners, founded in 2003. First, ‘CapGen’ invested the wealth of the billionaire Saïd family whose self-made head, Wafic, had been a confidante of Margaret Thatcher and gave his name to Oxford University’s business school. Quickly founders Khaled Saïd, Ian Barnard and Charlotte Thorne made CapGen a commercial proposition by opening it up to other families in 2007. Today that firm manages some $3 billion for 22 clients.
Collectively the above firms – plus a few more I’ll mention later on – now manage in the region of $80 billion, mainly for ultrahigh-net-worth individuals, but also institutions. Compared with the AuMs of the wealth-management arms of UBS ($2.6 trillion) or Goldman Sachs ($558 billion) this is a drop in the ocean. But what a drop it is, and as every plumber knows – where’s there’s a drop, the flood awaits.
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Stanhope Capital began, recalls Daniel Pinto, ‘very much as the anti-private bank’. ‘That was the vision initially. Everything you dislike about private banks… we tried to do the opposite.’ That meant that as well as not having products to sell, Stanhope insisted on an ‘alignment of interest’ between staff and clients.
To this day the firm’s 18 partners are obliged to invest the majority of their liquid net worth in Stanhope portfolios alongside clients. ‘It doesn’t guarantee per se that we always make the right decisions,’ he says, ‘because you can make mistakes even when you invest your own money, but it puts the discussions with clients at a very different level. We are in it together.’
The third founding principle of the firm was that it should take a holistic approach to wealth management – breaking free of the ‘silo’ culture Pinto saw in banking – to bring greater opportunities for wealth creation, not simply preservation, to clients. Julien Sevaux, who co-founded Stanhope alongside Pinto, left the firm in 2017 and set up his own private investment office, Eighteen48 Partners, with two other ex-Stanhope partners Tarek AbuZayyad and Edward Clive in 2019.
Sevaux describes the launch of Stanhope, named after the Mayfair street where the office was based, as part of ‘stage one’ in the development of London’s ecosystem of wealth management boutiques. The firm was set up ‘to be kind of an alternative to the banks in wealth management’, he recalls.
‘That coincided with significant wealth creation and a more professional approach [by] families and entrepreneurs to managing their own wealth.’ In other words, it came at a time when owners of private capital were becoming more sophisticated and realising that they could benefit from a much more bespoke service altogether.
Max Thowless-Reeves, an ex-UBS banker and founding partner of boutique private investment office Sorbus Partners, sees the emergence of the boutiques as part of a broader shift in the business of money. ‘The finance industry goes through waves of aggregation and disaggregation,’ says Thowless-Reeves, who set up Sorbus in 2012 in Staffordshire.
He compares the rise of boutiques to the appearance of hedge funds in the Nineties – or as he puts it, ‘basically “prop trading” [proprietary trading] desks of the banks that wanted access to greater freedoms: less control, more money’.
‘The talent leaves because they don’t need the restrictions; they can do that work separately and actually have better relationships with small numbers of clients.’ But he believes the banks haven’t helped themselves either: ‘The boom you’ve seen in private investment offices is again because of that sort of funnelling of clients towards big private banks.
The big private banks have essentially been unable to prevent themselves from behaving in a way which maximises their own interests above that of the client.’ Another of the younger firms in the boutique field, Lincoln Private Investment Office, was founded in London in 2014 by Ross Elder, whose career has included stints at James Capel and Berenberg Bank.
Elder says Lincoln ‘absolutely tried to emulate’ the trio of Partners Capital, Stanhope Capital and Lord North Street as firms, but adds firms like his have moved the sector forward ‘in terms of transparency and alignment’. He sees his firm’s model, the ‘private investment office’, as an evolution of what has gone before.
‘So taking the best of those business models, but genuinely treating the clients as individuals, building things individually for them, having structure that’s properly aligned, not having huge numbers of external shareholders looking for their own returns, and actually focusing on clients, delivering investment performance and being much more nimble, dynamic and sophisticated.’
While Elder says the term ‘private investment office’ (PIO) was first used at Lord North Street, he insists that Lincoln is the first firm to use it in its name. What differentiates these self-styled PIOs from the cohort of independents that went before them seems to be more of a hair-shirt attitude to scale and commercialism. This is something that puts them on a different trajectory to the likes of Stanhope or Partners.
‘I don’t think they should be built for scale,’ says Elder. ‘We’ve no interest in being the biggest – we’ve absolute interest in being the best. Whenever we’re making a decision, it’s about what will be best for our clients. It’s not about how do we get the next person in.’
‘What does scale mean?’ asks ThowlessReeves. ‘It means standardisation, it means imposing process.’ This leads to the imposition of model portfolios and greater risk management collars, he says. The costly processes then lead to bigger fees.
Julien Sevaux, whose new firm broke through the 1 billion euro AuM barrier last year, agrees that there’s a limit to how big a ‘boutique’ can go – but he is far from dogmatic.
For some firms, ‘size has been the enemy – the enemy of return,’ says Sevaux. ‘You want to find a size where you feel you can operate and still generate outstanding returns for your clients.’
He reckons ‘five-plus’ billion would be about right for Eighteen48. Still, that would see them increasing AuM fivefold. Another who sees advantages in scale is Ian Barnard, CEO and founding partner of CapGen, whose ultra-wealthy clients include the Heineken family. He has ambitious targets to markedly increase the size of the firm’s assets under management.
‘As so often,’ he says, ‘we are following the US, where tens of billions is the new normal.’ ‘I think “boutique” with an association of size is going to stop being what defines boutique,’ he adds. ‘What characterises the private investment office is less it being small than it being unconflicted – not having a balance sheet and not having in-house product.’
He believes enlargement is ‘the destiny of us as a firm, and I suspect the industry, because clients are hugely reassured by size. If you can take away the temptations that come from a balance sheet and from having your own product, you’ve made yourself distinctive.’ But where are the limits of expansion? If ever ‘people within the firm or clients were feeling anonymous,’ he says, that would be a signal.
Barnard accepts that growth is a massive challenge, but he believes that expansion will help win larger mandates and new clients, as well as to attract and retain the right talent.
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Where Stanhope or Stonehage Fleming have met the challenges of the future with acquisitions (the latter acquired the investment management activities of Cavendish Asset Management in 2020) and firms such as CapGen have ambitious targets for organic growth, others are finding new routes for survival in an increasingly challenging environment.
Last December Sandaire, founded by Alex Scott, was acquired by the FTSE 100-listed asset manager Schroders and merged into its wealth management subsidiary Cazenove Capital – a major development in the world of boutiques. Scott tells me that he came to the conclusion at the end of 2019 that selling the firm to a larger entity was the best way forward. ‘It was increasingly challenging from all sorts of perspectives,’ he says.
Costs of operation were continuing to climb – ‘there’s a big requirement for IT… a big requirement for high-quality personnel’ – and, as a client, he was aware of the ‘ever-expanding list of things that wealthy families with complex affairs need’ in order to make their lives run smoothly.
‘You put those two things together and a conversation with Schroders seemed to be a logical course.’ It was, as one industry observer notes, ‘a huge endorsement to Schroders that he felt it was a suitable home, because he would have thought of his clients first – and of course, he is the largest’.
Part of the attraction for Scott is that Schroders is still partly family-owned. It is listed on the London Stock Exchange but over 47 per cent of the shares are still in family hands.
Next, as Scott is keen to emphasise, Schroders has the means to put into place the infrastructure necessary to service the growing needs of UHNW families.
As an example, Clare Anderson, team head in Cazenove’s wealth management division, says this includes ‘real-time interaction with their global assets – not just their financial assets. They don’t want a barrier.’ Which sounds like a considerable IT project – one which it is hard to imagine many boutiques being able to take on.
‘It’s more beneficial to be of scale,’ concludes Scott, who is now chair of Schroders Global Family Office Services. And it’s clear to see there are advantages.
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Mergers, of course, are tricky. According to many, Schroders and Sandaire have a good shot at making their marriage work. But what about the Stanhope-Forbes Family Office deal? Will the talent and the client money stay – or go elsewhere?
‘Very often everything looks good on paper but when you get the people in the same room there’s a bloodbath of egos,’ cautions one industry observer.
‘The rationale for the merger,’ Pinto tells me, ‘is that we felt we had a shared DNA.’ A meeting took place pre-Covid, then all subsequent discussions and negotiations were over Zoom as the pandemic took hold.
The way that the new entity handles the tension between scale and independence may prove decisive. ‘What we are trying to achieve here is the best of both worlds: having the scale of a large institution but at the same time keeping the features that all clients like about independent wealth managers, which are the absence of conflict and the alignment of interest,’ says Pinto.
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What is clear is that the Stanhope and Sandaire deals both point in the same direction – consolidation, which is often driven by either fear, greed, or a combination of the two.
‘Scale is important,’ states Pinto. ‘People used to think that it’s enough to have the trust of a few families and off you go. The game is becoming more and more complicated for anyone involved in the industry. You have to invest across the globe, across asset classes, you have compliance costs skyrocketing, so all these independents are having second thoughts about their business models.’
And Pinto might well be waiting for them with his Stanhope chequebook. Or perhaps it’ll be the turn of one of the banks to acquire them, anxious not lose market share to these new artisans of private wealth, and perhaps to discover the recipe of the ‘special sauce’ at the heart of their success.
But what of the banks? Coutts & Co, which knows a thing or two about the needs of the wealthiest clients, has just revamped its own ultra-high-net worth private office offering.
Its newly unveiled Coutts Family Office has a dedicated staff of 34, looking after 275 clients with AuM of £4 billion. Camilla Stowell, head of client coverage at the bank, says the move simply reflects an effort to ensure that clients continue to get the best from the bank.
Moreover, she is keen to emphasise the benefits of being part of a larger organisation compared with the boutiques (‘we just have that breadth and that reach’) and talks up the firm’s use of open architecture (Coutts has partnered with BlackRock to cut costs).
Coutts has been part of NatWest since 1920, but Stowell notes that it is not ‘an investment-bank-backed private bank’, and therefore is ‘not a distribution channel’.
Indeed, with £4 billion in AuM, the Private Office is similar in scale to many boutiques ‘We’re actually perfectly placed in the middle because we’re a boutique within a bigger bank so get all the benefits of the bigger bank – as well as, frankly, the deeper pockets and the governance and the certainty.’
For now, there is room for firms of all shapes and sizes. But how long that lasts is open to question.
‘The very interesting feature of the wealth management industry is that it is very fragmented,’ says Eighteen48’s Julien Sevaux. He notes that even the industry’s most powerful entity, UBS, has a relatively small chunk of the market.
Its global wealth management division has just 3.3 per cent of the $80 trillion of HNW wealth, as estimated by Morgan Stanley-Oliver Wyman. Yet if the rise of the boutiques named in these pages were to continue as some expect – privately, targets of a tenfold increase in AuM are discussed in some quarters – then the larger players would have little choice but to pay careful attention.
Whether such growth is sustainable may rest on the boutiques’ ability to retain what has made them special.
‘The end client is aware that they’re investing with a group of individuals who really care because those individuals have taken the trouble to set their own firm up,’ says Nick Hornby, who co-founded another boutique, Cerno Capital, in 2006.
‘And it’s really important to these people that what they’re doing is a success.’ ‘Entrepreneurs love working with entrepreneurs,’ says Pinto.
And they ‘tend to be very cautious when they deal with banks, because they know that they are a kind of prey in the eyes of the bank.’ He smiles. ‘We are entrepreneurs as they are, and it creates a kind of bond which is very hard to replicate when they deal with a big institution.’
For now, if the banks are losing any sleep, it is more likely because of an idea that the boutiques have been able to propagate, rather the growth of their AuMs. Still, it is a powerful one.
‘When you say you’re client-centric,’ asks one private wealth insider, ‘can you actually give some evidence of that? I mean,’ he chortles, ‘one can’t just say: “I have integrity”.’
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