As the UK’s technology sector continues to grow, Shoreditch’s Silicon Roundabout has become a fresh hunting ground for wealth managers to pick up new clients.
Tech deals in the UK hit a record high in 2016. Figures compiled for The Sunday Telegraph by technology investment bank GP Bullhound showed the number of deals rose from 2,858 to 4,009 during the year. At the same time, fundraising and takeover activity in the sector rose by 40%. The net result is a growing segment of tech entrepreneurs, who have achieved success and come into money.
So how are wealth managers seeking to attract this type of client?
Bestinvest founder John Spiers’ new firm EQ has been proactive, targeting individuals who work in Level39, Europe’s largest technology accelerator in Canary Wharf, alongside Tech City in East London.
‘It helps that we can offer our Simply EQ, which is an online robo-advice and telephone-based service,’ said Ben Faulkner, a director at EQ. ‘This digital generation has grown up surrounded by technology. Offering this type of online service resonates with them, as they are confident using it. They don’t necessarily need to meet face-to-face, although that option is available,’ he added.
Meanwhile, Signia Wealth has developed relationships with tech entrepreneurs through its tie-up with Forward Partners – a company that provides operational support and investment for early stage tech businesses. Signia has provided funding for Forward Partners in the past, and the relationship allows the private office’s clients to get exposure to tech businesses.
‘The early stage tech world is incredibly exciting, but incredibly high risk. Whilst a number of clients want to get exposure to it, they are not comfortable doing this by themselves,’ explained Greg Malone, head of wealth management at Signia.
Working with Forward Partners has exposed the company to the UK’s growing technology sector in ‘quite a meaningful way’, Malone says. The company has also received referrals from existing clients, alongside the small community of corporate lawyers, accountants, and corporate finance advisers who advise tech businesses.
‘Walking around Silicon Roundabout in a suit is something I have done too many times,’ Malone jokes.
LGT Vestra’s chairman David Scott (pictured) estimates that tech entrepreneurs account for less than 5% of the firm’s total client bank, but it represents a segment they expect will grow over the next five to 10 years.
‘It is small in terms of the overall business, but it is something we feel passionate about. We sponsor the EY Entrepreneur of the Year Awards and have met a lot of successful entrepreneurs through this, which helps us to build up our networks,’ Scott explained.
Tailoring the proposition
The 2017 BNP Paribas Global Entrepreneur report, produced by Scorpio Partnership, shows that the top priority for ‘Millipreneurs’ is to change the world and give something back to society. These are millennial entrepreneurs, who have largely made their money in the IT, digital and engineering sectors.
Scott has also spotted this characteristic among LGT Vestra’s tech clients.
‘Tech entrepreneurs who have sold their businesses have a much stronger focus on social impact [investing] than the average UK client. I don’t know if it is a millennial thing, maybe that generation feels they have made their money and want to invest in a business to help create a better, more sustainable world,’ Scott said.
To cater for these clients, LGT Vestra has set up Tribe Impact Capital, which focuses on responsible and sustainable investments.
Scott suspects that tech entrepreneurs are potentially drawn to three areas: robo-advice, investing in other start-ups, alongside social impact investing.
With this in mind, he suggests that traditional wealth managers with mainstream investment offerings may struggle to attract this type of client.
The reporting side and online interface is also understandably important to clients from a tech background – and represents an area that LGT Vestra is currently developing.
‘We are trying to get better online reporting, not just facts and figures, more of a live, engaged experience,’ Scott said.
Signia is similarly looking to improve its online reporting. ‘We expect technology to play a part in the relationship and an increasing role, given the type of clients we look after,’ Malone added.
Looking ahead, Malone expects the UK technology sector will continue to benefit from foreign capital coming in. He notes that the corporate financiers he speaks to are excited about the year ahead.
‘A lot of investment is coming into the UK from overseas, particularly from China and the US. Whilst property is always a beneficiary of that, the tech scene in the UK is also being buoyed,’ he said.
One potential stumbling block for the sector is Brexit, however. The course of the UK’s departure from the European Union and its success with negotiations is something to keep an eye on, he says, given that tech businesses tend to be global in their nature.