‘I think the industry is evolving rapidly, but not necessarily as a whole,’ says Charles Nicholson, who recently decided to leave the comfort of a large wealth manager to set up on his own.
Nicholson, who was head of Sanlam Private Wealth’s Newcastle office until April, believes smaller owner-managed businesses will soon become more prevalent as the industry structure shifts away from consolidations toward start-ups.
Anticipating this, Nicholson recently launched Charles Nicholson Asset Management under the Raymond James umbrella, providing discretionary, advisory and execution-only services.
The firm services private clients, the trusts, Sipps and Ssas markets, along with charitable trusts. Although most of his clients are direct, Nicholson also works with financial advisers, accountants and solicitors.
‘I wanted to set up on my own because I have a very strong belief about how clients should be looked after. We should listen to them and respond to them, rather than us. We’re there to fulfil their needs and from my point of view, I think a smaller owner-managed business is something I feel can deliver that to them,’ he says.
Nicholson is gearing up for growth. He says the goal is to become a leading investment manager in both the North and beyond.
‘As the business grows, we will be looking to attract colleagues who share the same culture. Working with Raymond James has provided us with the opportunity to offer a different service. Our goal really is to have a firm where clients have total faith in what we do.’
So what makes Nicholson qualified to enter a competitive market place on his own, albeit with the backing of the Raymond James machine?
He took an interest in savings and finance from an early age, going on to study economics at university.
Nicholson eventually moved to private client investment management, starting out at his father’s firm Iain Nicholson & Co, which he says was one of the first solicitor/investment managers in the country.
‘The professional ethos and relationship solicitors had with clients [is something] I really carried through to my work and is fundamental to what I do.’
He went on to become a founding director of Iain Nicholson Investment Management, acting as investment director, before joining Sanlam Private Wealth.
With his 20 years’ experience, Nicholson is now ready to apply this knowledge to his own business.
He believes this is what many in the industry would love to do, but lack the infrastructure to underpin it. That is why he chose Raymond James, enabling him to outsource systems, back office functions and compliance. He was also drawn to the fact that through the arrangement, client assets are held with Pershing.
‘Raymond James has been very supportive and incredibly helpful. Clients want to know about security of assets and they are held with Pershing. They provide all the infrastructure and allow me to get on with what I would like to do,’ he says.
The use of Pershing means the firm can invest across the full range of asset classes. Charles Nicholson Asset Management’s approach is bespoke and multi-asset, split across funds, direct equities, exchange traded funds (ETFs), and commodities, such as gold, where appropriate for the client.
Employing a top-down approach, before drilling down through markets and building an asset allocation strategy, client portfolios charged an all-in 1% annual management fee. For suitability, he uses FinaMetrica’s risk-profiling software and delivers regular updates to clients and half-yearly valuations, supported by face-to-face meetings.
Nicholson’s current primary focus is on the UK market in order to assess the impact and opportunities of Brexit, both on the investment and the business side.
‘I think Brexit will certainly throw out many challenges, but also many opportunities, not least for financial services. We will still have a role in shaping the future of Europe and therefore the EU,’ he says.
‘I think political powers within Europe and the UK will search for a pragmatic approach to the situation and we will most likely continue to trade in a similar manner.
Certainly with financial services, a large effort will be made to maintain London’s central role in the industry.
‘From my point of view, I will be setting this business up as I don’t think there will be any major impact from the Brexit scenario. I’m not dealing within Europe as such.’
He says regulation and compliance are the obvious challenges, but he notes there are plenty of others for the industry to tackle. He cites how wealth managers tackle the issue of smaller portfolios becoming less cost effective to run as a prime example.
Nicholson, like many, is concerned that with regulatory and suitability requirements making less affluent clients more difficult to service, there will be less choice for clients in this bracket.
‘Different parts of the industry will move at a different pace and robo-advice will increasingly have a place in that. Firms will look to simple cost-effective solutions out of necessity, not choice,’ he says.
This is also one of the reasons why he believes that smaller, more niche firms will become more widespread in the future.
‘In a smaller owner-managed business, investment selection and the client relationship really go hand in hand. I do believe that you need to have personal contact with the client to decide what is right for them, you have to be making the investment decisions while looking after the client relationship,’ he says.
‘The other reason I’m setting up a boutique is because there is an advantage in having the people dealing with clients also having a role in dealing with the business, making their interests aligned with the interest of the clients.’
Nicholson believes generational planning is important and he is keen to attract the next generation of young entrepreneurs.
‘I think it’s something I’ve always been very aware of – when you are looking after clients, you really need to be looking at running their funds on a multi-generational basis,’ he says.
‘Obviously older people have much of the money now, but we are seeing entrepreneurs coming through, and younger people working in the south of England. People in their 40s and 50s are starting to accumulate fairly substantial sums of money. I’m very aware of the demographics of the business and seek to look after the generations.’