The Financial Services Authority (FSA) should better articulate how wealth managers can approach risk management, Collins Stewart’s chief executive officer Neil Darke has said.
Although Darke said he agrees risk management and a focus on suitability is essential for wealth management businesses, he feels the FSA could be doing more to provide the industry with clarity on its regulatory demands.
‘I don’t think they are doing a particularly good job of it. They are being equally vague.
'They say wealth managers should focus on [risk] but what’s your definition of risk? It's very much, “I’ll let you guys work on that one”. You just get a slightly different type of wool rather than anything clearer and explicit,’ he told Wealth Manager.
The firm is also grappling with how best to market its status as a restricted wealth manager following the introduction of the retail distribution review (RDR) in January 2013.
‘We can’t [be independent] because we have restricted services but there is the problem of how you communicate that to clients?’ he said, although he conceded that the labels ‘probably matter less than we think in the industry’.
Darke suggests many businesses are still being coy about their post-RDR strategy, preferring to keep quiet until it is clearer what competitors are doing. ‘We are no different,’ he acknowledged.
‘There’s no first-mover advantage in going above and beyond where you need to go, so you will find a lot of businesses tiptoeing over the line of 31 December and having a look at everyone else.’
Growing the business
One aspect of Collins Stewart’s post-RDR strategy that has been revealed is a bid to grow assets through IFAs with the launch of a range of risk-rated model portfolios.
The five-strong range launched in March after two years’ work on asset correlations during times of market stress, led by former Wealth Manager cover star Robert Jukes.
The service charges 0.8% a year below £1 million and 0.55% above. Darke declined to say how much in assets the service has attracted so far.
‘One needs to not give it too harsh a glare in terms of “oh, we don’t have these assets in these months”. We have to give these things a bit of oxygen and sunlight to grow.’
He expects the RDR to change the industry ‘dramatically’, and foresees an extended period of mergers and acquisitions post-2013 as businesses struggle to compete in a crowded market.
However, the scale of upcoming change will also make it difficult for acquisitors to accurately value businesses now, he said.
‘I think unavoidably the RDR will change the industry dramatically,’ he said.
‘There’s a shift in the tectonic plates. If you were buying a business, clearly you are not going to be buying that valued on a historic 12-month profit and revenue base.’
‘We are seeing some activity now… then I think we will see a little bit of a hiatus. I don’t think we are going to see much in the first half of 2013.’
Collins Stewart acquired the wealth management arm of boutique Eden Financial in a deal that closed early October, and Darke says the focus would now be on integrating the two businesses.
All Eden’s clients have come on board, with £835 million in assets taken on.
The decision has been made not to rebrand Eden to Collins Stewart, as both companies are expected to take on the Cannacord name in 2013.
‘I initially wanted to rebrand them to Collins Stewart Wealth Management because I don’t like having two brands in one place, but given the proximity to a corporate rebrand to Cannacord it was felt that might be confusing for the clients,’ Darke said.