Chancing upon the right man to lead a new venture is a tall order for any business, but London-based investment manager Cheviot found Deutsche Bank Private Wealth Management’s local man Simon Walker (pictured) at the right time to launch a Liverpool office.
Cheviot’s inaugural northerly branch opened in May 2011, headed by Walker who had spent 22 years with Tilney, rising from graduate to managing director through various takeovers.
Walker set the office up with help from a five-strong team from Deutsche Bank, and at the time Cheviot chief executive Michael Kerr-Dineen said he had set a target of £400 million in assets under management (AUM) for the new office.
With £170 million on the books after its first year– doubtless boosted by charismatic head of intermediary sales Mark Ewer – the business already has eight IFA partnerships in the north and is well on its way to meeting expectations.
Manchester born and bred but with a long history of working in Liverpool, Walker had a career in investment in mind after he left university and, via a contact, took his first real job at Tilney Investment Managers in 1988.
More than 20 years later, he became one of the top team and described himself, with frankness as ‘one of the more influential people within the Tilney business’.
Walker has long been a proponent for modernisation in the investment industry, and is irked by those who are holding progress back. He admits there were some of these ‘old guard’ at Tilney, steadfastly opposed to change right up until retirement.
‘There are still pockets of the industry which has got that old fashioned “all we are interested in is the stock market because it’s fun and exciting and that’s what we like to do” [attitude]. Investment management is far less exciting than stockbroking, but less exciting can be a good thing at times,’ he says.
‘The industry would have developed a lot more quickly and clients would have had a better experience if the practitioners had spent a lot more time thinking about what was right for the client rather than what they enjoyed doing.’
Perhaps as a way to move forward in a personal capacity, Walker also became involved in product development. While he is proud of this, he admits some launches went less than smoothly but rather consigns them to the annals of experience.
‘As well as looking after clients, I did a lot of product development work. So we launched a fund of hedge funds in 2002, we launched real estate funds and a number of those within a relatively short two-year timescale were shut down. So it’s a lot of lessons learned along the way in terms of what makes good products or not.
‘I genuinely believe you need to build up experience and get it wrong a few times before you can be good in our business.’
Alongside being a moderniser, Walker is also keen on planning ahead, and as the Cheviot office has grown in AUM so has headcount, including a pipeline of younger would-be managers who will be qualified in five to seven years’ time.
This mirrors what he saw at Tilney. ‘It was a place where people stuck around. If you were there for a year, you’d be there for 10,’ he recalls.
On the question of how, as the business grows, it can retain its small firm ethos rather than the inevitable shift of focus that accompanies huge sums under management, Walker says it’s something he is wary of.
‘It’s something we’ve already started to discuss here. Because if you offer to clients a personalised service there’s a limit in terms of how many people you can deliver that to,’ he says. ‘But it’s difficult to define [that limit]. We have got to be very aware of what we have promised to clients.’
Walker’s time at Tilney started to come to an end, however, when the business was sold to Deutsche Bank – despite both parties’ initial enthusiasm for the deal.
‘I was at Tilney when we sold the business to Deutsche Bank, which was in 2006. I think both sides generally thought it was a good idea for us to expand what we did and for Deutsche Bank to get a presence in the UK.’
Although, as with many modern investment firms with a century-plus heritage, Tilney had had its time under the ownership of huge conglomerates, the experience left Walker ill-prepared for life under Deutsche Bank.
Past owner RBS was ‘effectively an investor in the business rather than the owner and operator’, while he describes a short period under the ownership of US financial services firm Refco as ‘a good time’ spent growing the team’s knowledge of non-equity investing.
‘With the help of Refco, it was a good time for us because it brought a lot more awareness of a broader asset allocation range,’ he says. ‘All the time we were evolving from that core of being a stock market stockbroker business to one that was first of all trying to structure investments for clients.’
Many an investment manager will complain about what is referred to as the ‘big bank model’.
But Walker has thought a little deeper than that. He says he understands that Deutsche Bank has had to adapt to the regulatory bombshells dropped on the industry post-financial crisis.
He is clear, however, in his opinion that much of the new way of doing things is not in the client’s best interests.
‘The events of 2008 have completely changed the banking scene, to state the blindingly obvious, and the implications of that for the wealth management and private client part of banks has brought a pretty wholesale change of strategy for the banks.’
He agrees that banks are no longer, and cannot be, mere owners of the investment houses they acquire.
‘There are some positive reasons for that and some negatives,’ he says.
‘I don’t think any of those [reasons] are good for clients but there are some justifiable aspects of that – not least of which is that the banks are working in an environment that is far more heavily regulated than it was and their regulatory reputation is a key agenda item.
‘So any part of the bank can trip up and get into trouble… and it could be the investment bank or it could be private client part. Naturally, if you’re at the board level you want to have control over that reputation so you want to get involved in the business.’
But no investment firm is immune to the swathes of regulation sweeping the industry and all must respond in kind. Speaking to Walker about working as a private client manager at a big bank, he appears to have detected a shift of focus from the client onto the banks’ mores – which is probably at the crux of his dislike for the model.
‘I think banks have less specialists and more generalists,’ he says. ‘Someone will manage wealth management who was previously managing mergers and acquisitions. They are not practitioners.
‘What you find is when you come to make decisions about the direction of the business… do you invest in a new CRM system which will help the clients or do you invest in a risk management system that can stop the bank losing money?
‘If you’re a practitioner you’ll tend to go for the thing that can help you do your business better, and if you’re a COO you’ll probably choose the risk management. There is a conflict of interest.’
Walker discusses this less than happy episode in his career without malice – ‘Deutsche Bank, to be fair, had a good crisis. It managed itself very prudently’ – and comes across as a pragmatist.
His willingness to leave a place he had worked for 22 years, recognising events were unlikely to turn in his favour again, is reflected in his description of how he manages money. Namely, through avoiding the emotional pull of an investment decision and making a dispassionate assessment of the situation.
‘Detaching yourself from the emotion of decision making is a key part [of success]’, he says. ‘You invest quite a lot of emotion and intellectual capital in a stock decision and it’s not easy.
‘The most successful fund managers are the ones that can form an early view that their original decision was wrong – or that their original decision was a good one and now is the time to disconnect from it.’