Author: Chloe Barrow
CAPITAL OUTFLOW
While the country debates the merits of spending £50 billion on HS2, which will cut 30 seconds from journeys between London and our great second-tier cities, perhaps we’ve got it wrong: we’re assuming that the regions need better access to London for their growth and wealth.
But if you look at how wealth management is blooming beyond the capital, it seems more likely than HS2’s passengers will be London’s bankers heading out to try to pick the flowers of regional entrepreneurialism.
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Take Liverpool. According to Chris Heyes of Liverpool in London, which promotes Liverpool’s commercial offerings in the capital, ‘We have 7,000 companies within the financial professional services sector employing something like 60,000 people and contributing £8.3 billion to the economy.’
This follows a 2010 report (soon to be updated) showing that Liverpool, which now has an estimated £13.5 billion in assets under management, was the second biggest UK city for wealth management. (Manchester and Edinburgh were not far behind.)
You might sniffily say that that represents a lot of footballers, but Heyes affirms that Liverpool has always been a city of entrepreneurs. ‘You look at some famous entrepreneurs that have come from Liverpool — B&M Bargains, which moved from Blackpool and is now chaired by Sir Terry Leahy, is an amazingly fast-growing company, and then there’s Home Bargains, run by the Morris family, who have just hit a billion pounds’ worth of sales.’
Indeed Liverpool’s success has been such that the city will host the first International Festival for Business, which this year has a focus on professional and financial services and will see over 250,000 delegates attend. The city hosted Accelerate in 2013, a festival dedicated to high-growth businesses, and the Global Entrepreneurship Congress in 2012. Perhaps the mayor of London, instead of constantly incurring Liverpudlian wrath, could learn something.
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There is no shortage of wealth managers and private banks opening branches around the country. ‘We’re seeing lots of wealth managers in private banks maintaining or increasing their focus in the regional markets,’ says Dylan Williams, regional managing director at Coutts, who explains that they are key strategic wealth management areas for Coutts and its competitors. ‘Coutts was very focused at moving into the regional markets at the back of the Nineties and early 2000s. We’ve built a very strong footprint in key cities both in the North and the South.’
Coutts has 23 branches across England and Wales, from Newcastle to Exeter. In Scotland, another RBS wealth management subsidiary, Adam & Company, has three branches. ‘If you look at the big cities, Manchester and Leeds are very strong performers,’ says Williams. ‘Core cities like Bristol are very strong, as well as those in the south coast area, around London and in the Thames Valley, but all are experiencing a similar type of activity. We expect to see a lot of growth in the North and Midlands as well.’
Joining forces
It would seem the regional market is going from strength to strength, says David Loudon, head of onshore branches at Quilter Cheviot. Early in 2013 London-based Cheviot partnered with Quilter — originally a Liverpool firm — to become Quilter Cheviot Asset Management, which gave the combined firm a strong presence in both London and the regions. The new firm now has offices in thirteen locations across the UK, Jersey and Ireland.
‘Our regional funds under management are up 25 per cent within the last eighteen-month period — I’d say that’s a very substantial increase,’ says Loudon. ‘In the regions we are managing £6.5 billion out of more than £15 billion of funds managed altogether, so the regions account for about 40 per cent of total funds under management outside London.’ This is a larger percentage than when Quilter operated individually, he adds.
Loudon agrees that Liverpool and Manchester, as well as Edinburgh, are key areas for wealth management in the UK. But he cites Birmingham as the company’s biggest regional office, managing £1.6 billion: ‘I can see Birmingham benefiting from the industrial recovery because company executives, directors who have their own businesses, will find they’ve got more money and more capital.’And where wealth accumulation is on the rise, so too is the demand for asset management services.
For growth, Loudon predicts wealth — and wealth management — will flourish throughout the North beyond Manchester and Liverpool. The standout regional city for Loudon, however, is Salisbury. ‘If you think about Hampshire and Wiltshire you’re talking about a very wealthy part of the country, and that office has grown beyond our expectations over the last twelve to eighteen months.’
In February, European private equity firm Permira bought investment manager Tilney from Deutsche Bank. The deal saw Bestinvest, Permira’s investment adviser firm, merged with Tilney’s regional businesses in Birmingham, Edinburgh, Glasgow and Liverpool to create a £9 billion AuM business. Also competing for regional presence is Barclays, which recently unveiled new offices in Southampton and St Albans.
A good example of recent aggressive regional growth is Charles Stanley, which has 32 offices across the UK. Three years ago, the firm opened an office in Liverpool, and last year it hired a private client team from Brewin Dolphin to launch a Leicester office. And in an indication that this is not a story solely of progress, the firm also revealed plans to exploit Barclays’ decision to reduce the level of wealth management services it provides in Cardiff and is about to open a branch in the Welsh capital.
‘Tactically speaking, all the UK’s largest wealth management businesses are always looking for chinks in their competitors’ armour in the regions, trying to gain more business traction and to increase their market share in specific locations,’ says James Anderson, founder and editor-in-chief of financial and professional services publisher PAM Insight.
Provincial polish
While the quality of money is the same in Liverpool or Lowestoft as in London, is the quality of service in managing this money quite as uniform?
On the whole, the services — current accounts, loans, general investment management — offered in regional branches are the same as those in London. ‘It’s not a deal-breaker,’ says Dylan Williams of Coutts. ‘Clients like the local delivery but know they can access the expertise that exists in our London office at any time, because when people have made money the one thing they don’t want to do is lose it.’ But more specialised services are often only accessible in London, since chief investment officers or decision-makers on discretionary management are almost always based there.
Manchester-based businessman and HNW Scott Fletcher, who founded managed services and cloud provider ANS, agrees that local service is generally sound but perhaps falls short when wealth increases to a certain level. ‘Up to £5-10 million you’re quite well looked after in the regions, but as you become wealthier and, for instance, you’re a Coutts customer, it makes sense to have your manager in the main office on the Strand,’ he says. As Fletcher has a London office, he can take advantage of both worlds.
More regional-focused asset managers such as Quilter Cheviot, however, say there is no difference between client services in and outside of London. ‘We would certainly want the service delivered in one part of the country to be the same as in another part of the country,’ says David Loudon.
Small world
Even if the highest level of wealth management is harder to find outside London, the quality of client-facing interaction could be even more finely tuned in regional cities compared with the capital.
‘[The regional market] is quite parochial and very connected,’ says Williams. ‘Business people know each other and communities are connected, so it’s important that you’re integrated in that community to be successful as a regional wealth manager. To be successful in the sector, whether it’s in London or regionally, you have to be good at joining networks together, but out in the regions you are more visible.’
In other words, if you are slightly below par at networking, it’ll be picked up on far more quickly in the smaller, exposed regional offices than behind the grand haze of the Big Smoke.
The nature of the client — and thus the service required — tends to differ between London and the regions. First, London’s high number of international clients means services have to be global.
Next, whereas in London there are many corporate executives and financial professionals themselves generating a substantial amount of wealth, the type of clients seeking wealth management services in the regions tend to be largely entrepreneurs, according to Williams, with over 80 per cent of Coutts’ regional client base being self-made people.
This difference in the client base and, consequently, the way regional offices operate means regional wealth managers need to have a fairly different mindset from their London peers. ‘Very successful wealth managers are very well known in the community and are influential. They tend to be entrepreneurial as they’ve quite often had to develop the business from scratch and go out and find it themselves,’ says Williams.
So while London specialises in corporate culture and holds great international appeal, regional cities in the UK seem to breed a DIY, start-from-scratch approach to business, both in the making and the managing of money. ‘People do have a togetherness in the regions where they drive that entrepreneurial spirit,’ says Williams. And if HS2 is built, that togetherness may even speed its way to London.
A MANC OF MEANS
Scott Fletcher (above) is founder and chairman of managed services and cloud provider ANS, which last year ranked fourteenth in Investec’s Hot 100 List of the UK’s fastest-growing companies, and is a good example of someone who needs regional wealth management services.
Fletcher set up ANS from his bedroom aged 22 and today it has a turnover of £50 million. He is also chairman of Gödel Technology and, having set up a number of other enterprises, the total valuation of his businesses is over £100 million.
The straight-talking Mancunian is passionate about the North West. He believes that more people ought to consider locating to regional cities as growing the UK’s cities beyond London will strengthen the whole country’s economy.
‘It’s not a question of London versus the rest of the country,’ he says. ‘All our global competitors have two, if not three or four cities that are significant. We’ve got opportunities for growth in the rest of the country, so let’s make sure we invest in that as well.’
The intimate arena
In many ways the North West is more business-friendly than London, says Fletcher, particularly when first establishing oneself, as costs such as rent, salaries and expertise are substantially cheaper. Business networks and advice are also more easily accessible due to a more intimate corporate arena, and young, talented graduates are readily available from Manchester’s high-performing universities.
‘Being based in Manchester doesn’t stop you from employing people based in London and having a presence there,’ he says. ‘We have about 200 people in our main business in Manchester and 30 or 40 based right in the City in our London satellite office.’
Fletcher was named Entrepreneur of the Year for the North West at the National Business Awards in 2008, IOD Young Director of the Year in 2008 and PLUS Markets Chairman of the Year in 2009.
