The head of wealth management discussed the firm's future including deals, technology, Millennials and restructuring the company.

The head of wealth management at WHIreland has said that the UK-listed firm is interested in buying companies, coming at a time of continued M&A ferment in the sector, although some business tie-ups have fallen through, such as the failed merger between wealth managers Rathbone Brothers and Smith & Williamson.

Roderick Buchanan spoke to WealthBriefing about the firm’s plans for the future, which could see the firm become part of an acquisition, as well as recovering from set backs such as the Financial Conduct Authority’s fine in 2016, as reported by this publication.

“We are interested in corporate acquisition,” said Buchanan. “What we would not be prepared to do is capitulate to just play the numbers game because that would not be in the best interest of our underlying client. In terms of bolt on acquisitions that we might make, again, it is something that we are actively looking at. And for every frog that one kisses, there are an awful lot that do not turn into handsome princes.”

Buchanan added: “We are prepared to bide our time and be choosy in order to get the right acquisition. We have enough combined experience of other institutions in seeing a spectacular numbers of fails. May look great initially on paper, then you put the people together and it all goes downhill from there.”

M&A deals have become the norm in financial services. Ray Soudah of Millenium Associates told this publication in October that the next 12 months could see one of the big players in wealth management vanish as a result of industry consolidation.

However, WHIreland’s head of wealth management does not believe that the firm’s only option for growth is an acquisition: he says there are two other ways for the company to grow.

“We grow by pure organic growth – do what we do and continue to do it well, and attract business ourselves,” said Buchanan. “Secondly, by attracting teams and businesses from other firms, and we had a number of conversations with a number of people and teams in the last few months. We concluded one of those, and others we have walked away from. This is purely and simply because they weren’t the sort of people who had a long term future at WHIreland, because they were old school and unlikely to change.  In terms of the right individuals, it is those who have the ability to represent the firm and generate new assets for the business.”

WHIreland has made several partnerships over the last few years including its seven year deal with SEI, where it outsourced a number of wealth management functions.

FCA fine
The firm has had its times of trouble, including in February 2016 when the Financial Conduct Authority, the UK regulator, fined WHIreland £1.2 million ($1.59 million) for failing to have controls in place to prevent market abuse. The firm was also restricted for 72 days from taking on new clients in its corporate broking division.

Speaking about the fine, Buchanan said: “Were we guilty? The answer is yes, on the basis that the finger was being pointed for a lack of systems and controls. And I think it true to that when Richard Killingbeck and I arrived afterwards, there were a lack of systems and controls. It was painful; I think in a way these things are I suppose good from the point of view of a wake up call, not that we needed one. But actually it points to exactly where the regulator is coming from.”

Buchanan joined the firm in 2013 from Weatherbys Private Bank as deputy head of private clients. And he says that the firm has made a lot of changes since he joined to steer WHIreland on the right path.

“Over the last five years, we have done a root and branch review of the organisation and turned it on its head,” said Buchanan. “The changes have been throughout the entire organisation, the board has completely changed bar one non-executive director. The management team is all entirely new, all of us have joined in the space of the last five years. In terms of the organisation itself, we have rationalised. We went through a process of looking at all the teams and offices, and saying firstly are they profitable or are they capable of being profitable. Secondly, what sort of business are they doing and thirdly, are they capable of growing.”

Buchanan added: “Whilst that was going on, we looked at all the products and services we offer with a view to saying are they fit for purpose? Are they what the target market wants? If not and if those services carried a certain amount of risk then actually should we be offering them? Naturally, we saw a slimming down. In a way the last five years has been about building a solid base. It has been very much back-facing rather than forward-facing but 2017/2018 marks that change on beginning to look forward, and grow the business based on good solid foundations. The one thing I know for certainty is that this will be a very different organisation in five years’ time than it is today.”

Millennials
For firms to establish growth, they have to start looking towards the future. And in the financial sector, the future is the rise of the Millennials. According to Accenture, $30 trillion will be transferred to the next generation. However there are complications that arise when transferring wealth, including inheritance tax.

Buchanan spoke about what wealth managers can do to manage the burden.

“IHT is a ghastly thing and with enough pre-planning can be avoided,” said Buchanan. “It is curious in a way that there is a huge amount of ignorance to a very simple means of mitigating IHT. When it comes to looking after our clients we have two bits: the wealth planning and investment management operations."

“First and foremost, you have got to get the structure right. We are just about to embark on a series of IHT seminars with clients in conjunction with various law firms around the country. And I suppose that typifies our approach to one of these things that we believe in which is education. It is about educating our own clients and community about the simple things to do and the simple things to think about. At least ask the question in order to transfer wealth successfully to the next generation,” he added.

Technology is seen as a big issue for Millennials within the financial sector. According to Legg Mason, almost half of the group want to do their financial planning on a smart phone. Also, UBS drafted a white paper, which discussed technology as an interest of Millennials, as reported by this publication.

He said that technology may be the key to attract Millennial clients, and what the firm plans to do in the future.

“The trick for us is how we maintain a relationship with those individuals so that when the time comes that they are seriously looking at things, we are there ready and waiting for them,” said Buchanan. “We need a relationship that is warm, and that’s where technology has a part to play. We are looking at various things at the moment with a view to launching a few bits and pieces next year. The idea is to ensure we engage with the next generation - who are going to be tomorrow’s investors. And make sure we have a very good chance of keeping them when they actually have wealth to take advice and need the advice.”

WHIreland Wealth Management has around £3.1 billion in assets under management, as at 24 July, and operates from a network of offices across the United Kingdom and internationally in the Isle of Man.