Piers Cushing and Rob Cloete say it was their ‘awkward’ approach to investing that led the pair to leave Barclays Wealth & Investment and seek a new challenge, building a discretionary proposition for Plurimi Wealth.
The duo co-managed the bank’s Dynamic Strategy between 2012 and 2016, but say they ‘didn’t fit the mould’.
‘The problem we had was that we frequently had an opinion which was contradictory to their house view at Barclays,’ says Cushing.
‘So on the one hand, we identified an opportunity to provide clients with something they actually wanted in challenging market conditions, and on the other hand it was quite difficult to implement what we were doing within the confines of a large institution such as Barclays.’
The two resigned from Barclays in July last year and formally left in September 2016. Around the same time, the chief executive of advice firm Plurimi, Ramzy Rasamny, was looking to develop an ‘original’ discretionary portfolio management service which was different to that provided by other wealth managers.
Cushing says: ‘We always had a really strong view of what we wanted to launch, and then it’s a question of finding how we launch it and where do we launch it, and Ramzy and the partnership here represented a fantastic opportunity for us.’
Both Cushing and Cloete are partners in the firm, but why did they decide not to go it alone and set up their own boutique?
‘It’s actually difficult to set up on your own in this day and age,’ says Cloete. ‘The sort of support we get here is administrative, legal, compliance – all the really crucial elements of sustaining a strategy apart from the investment side, which is what we can focus on.
‘What we have [as an advantage over other] managers is in-house distribution. We’re not out doing roadshows, taking our eye off the ball, because the worst thing to do when you’re out there trying to gather assets is the performance suffering.’
The pair spent the three months between joining Plurimi in September and launching the discretionary service on the last day of 2016 with their first client, laying the groundwork to ensure everything was in place.
The new discretionary division complements the firm’s decade-old advisory service, but stands out in that client assets are actually held by a third party – Julius Baer – which means the duo can ‘sit above the international private banking network in order to manage client wealth in an unbiased manner’.
Core to the discretionary service is the two multi-asset strategies they run, the Dynamic strategy – similar to the one they ran at Barclays – and the Astute strategy, which are both underpinned by different philosophies.
The Dynamic strategy aims to deliver an ‘attractive’ risk-adjusted return, but is focused on wealth preservation, rather than returns relative to a benchmark, and is based around the dynamic asset allocation investment strategy.
While the Astute strategy is a multi-asset class strategy skewed towards equity with a growth mandate benchmarked against the MSCI World AC index. Bespoke strategies can also be arranged for clients.
Aside from the structure of the business, it is these strategies that the two believe makes them stand out, as clients are not shoehorned into a traditional risk profile, which is something Cushing has an issue with.
He says: ‘The problems as we see it now is that when you’ve got a static risk profiling process, it means clients end up locking themselves into a static asset allocation policy, and it’s typically borne out of what’s most recently happened.
‘Those risk profiles are built upon the longer term – they don’t tell you anything about the moment at which clients arrive, they’re not dynamic. So that’s why we created the dynamic strategy.
‘We’re trying to build convexity into the way we manage private client wealth, as opposed to concave structures which you typically find in the static policy mixes.’
He adds: ‘If you go to a wealth manager now and fill out a questionnaire, someone will tell you you’re medium risk, balanced, profile three or whatever it is, which approximately 51% of all people in this country do.
‘You’re going to end up with 55-65% equities, which is wonderful, except the equities might be very expensive, and actually it could be that that is not the appropriate amount.’
Two other distinguishing features with their strategies, they say, compared to the big banks and traditional wealth managers is the fact they’re able to invest in securities directly, a ‘privilege’ which wasn’t afforded to them at their previous employer.
Cloete says: ‘We see huge potential in the dynamic strategy we have, because we have the privilege of using direct instruments.
‘Some of the big banks won’t even engage at an individual stock level, they will all be funds and ETFs. [At Barclays] I had to jump through several hoops and then I could invest in it – there were certain workarounds, but then you would have to justify the investment case to a committee and then there would have to be a vote, and then it would be minuted, and then put onto the menu and then you could invest in it.
‘There are often times you see an opportunity, but you’re waiting 7-10 days for approval to come through and it’s often lost by then. So again, we can be decisive here.’
It is that ability to invest directly which they believe means they can offer better value to clients than other firms.
‘Most banks, etc, will be using funds, funds of funds, fund of ETFs, structured products, private equity, all these opaque structures, and then they have their own annual management charge on top of it,’ says Cushing.
‘So if you go through all those layers, add up all of the fees, the industry typically has a total expense ratio of about 1.5-2%. For our largest clients it’s 85bps all-in, and 100bps all-in for smaller clients. That’s custody, execution, administration and our management fee.’
And to put their own money where their mouth is, both Cushing and Cloete have ‘fully invested as much of our personal wealth as possible’ into the dynamic strategy.
‘At Barclays we had some really demanding clients, the big big clients, billionaire types,’ says Cushing. ‘You learn – having gone through the tech bubble in 2000, and then the credit crunch in 2007 to 2009 – speaking to these clients about the emotional involvement of losing wealth or obtaining wealth and preserving wealth.
‘With that comes great responsibility, so we are invested side-by-side with our clients. We think it’s absolutely critical.’
The two have big plans, as does chief executive Rasamny, who wants Plurimi to gain a larger share of the UK market. This is something which will be led by Cushing and Cloete’s discretionary portfolio management service.
The service is still in its early stages, and while Cushing says assets under management (AUM) are currently a ‘small part’ of Plurimi’s $2.5 billion (£1.94 billion) total, he adds that in time the discretionary AUM ‘will be increasingly more significant’ for the firm.
They also expect the service to ‘expand’ in the near future by adding ‘a few other key skillsets’, and Cushing says: ‘We want to become one of the most reputable, recognised wealth managers in discretionary portfolio management in this country.’
On that note, Cloete adds: ‘From an operational standpoint, there’s no limit for us to either the number of clients or AUM. The sky’s the limit.’