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Profile: how this boutique beat the big guns of wealth

Profile: how this boutique beat the big guns of wealth

The centre of a global diplomatic row, little old Salisbury, or ‘Smallsbury’ as it is known to locals, has been firmly thrust onto the map in recent months.

As the historic city begins to recover, both psychologically and economically, from the most high-profile suspected spy attack in a decade, many have wondered what impact the unwanted fame will have long-term.

The government has given it £1 million to boost trade after some local businesses reported their income has dived by 90% since the nerve agent attack, while another £200,000 has been spent persuading tourists to come back.

But amidst all the political rows, global diplomatic tit-for-tat and endless TV debates, there is another story in Salisbury which is not getting much attention: a story about a little wealth management boutique which, after being set up less than two years ago, has already taken on the big boys and won.

Casterbridge Wealth was established in December 2016 by IFA firm Strategic Solutions after it become disillusioned with so many discretionary fund managers (DFM) being bought by the big players.

Casterbridge’s chief executive Keith Edwards (pictured below left) owns 17% of the company, with the rest split between a number of advisers from Strategic Solutions.

Despite its relative infancy, Casterbridge was chosen by advisers as the 2018 winner of Wealth Manager’s Regional Stars award for the South West, beating firms such as Brewin Dolphin and Brooks Macdonald.

Chosen by advisers on the back of its service and investment performance, the firm also appears to be getting things right when it comes to its balance sheet too.

The 10-strong company currently has £180 million in assets under management (AUM), with a further £20 million on the way by the beginning of May. The firm also assures Wealth Manager it is already profitable, although as a young business, declines to disclose numbers.

Edwards joined in June 2016, six months before the firm’s launch. Immediately getting to work on building his team, he hired senior investment manager Antony Clark a few months later.

Like Edwards, Clark also believes striking the right balance between service and size is crucial.

Clark says: ‘I think at a number of the companies I worked for, the bigger the company, the smaller the client focus.

‘There’s a lot of talk about the client being the centre of attention, but I found it was increasingly lacking, the bigger the company became.

‘Here, if there’s a query the client gets an answer as soon as possible.

‘What they don’t get is a holding response to say “we’ve got a five-day service level agreement, we’ll come back to you in five days” and then they get no response. It really is customer service first. It’s key to how we’ve grown so quickly I think and we hope to grow in the future.’

Edwards adds: ‘You see people who either set up companies so that they’ve got so many people they can’t possibly support them, or you see companies set up so lean that when the growth comes through they can’t cope with the levels of service they need to provide.’

Like a considerable number of others at the big wealth management firms, Edwards left his role as head of Quilter Cheviot’s Salisbury office to head the fledgling boutique after having a different vision of investment management to that of a large business.

He had already served as a director at boutique Church House Investment Management in a previous role, which prepared him for life heading a small firm. Just because you are the boss does not mean you are pardoned from doing the tea round, he says.

‘As a chief executive of a small investment management company, you also make the tea and have to make sure there’s water for people to drink, and think about how much paper have we got for the printers. You’re responsible for everything.’

Edwards is a man with a plan, something recognised by Strategic Solutions, which approached him to head the new discretionary fund management (DFM) business.

The idea for Casterbridge came about after becoming ‘frustrated with the vertical integration and constant change in ownership of DFMs,’ Edwards says.

He adds: ‘There were a number of companies that seemed to have been bought every 18 months. That was causing them concern, so they wanted to do what a number of IFAs are looking to do at the moment, which is set up a collective-based DFM, which makes more sense nowadays with Mifid II.’

After being approached, he gave Strategic Solutions his blueprint for how such a company should be run before considering whether to take the role.

To his surprise, they came back to him two months later with a simple response: ‘Sure, let’s do it’.

‘They’d been mumbling at me for years, but they managed to catch me at the right moment’, he says.

‘With the growth in managed portfolio services, the downward pressure on OCFs, the passive funds of funds that you can buy, I believe that if we tried to set up a business that’s going toe-to-toe with these kind of people, we would struggle. They can just set the price that service is charged at and unless you’ve got £10 billion, there is no profitability in it anymore.’

What will succeed, in his view, is an investment management firm set up to serve specific client needs, such as those looking at withdrawals and/or regular income in the next five to 10 years, or some sort of specific capital requirement in the next three years, for example. A minimum client size of £500,000 is also needed to make such an approach viable, he says, and Casterbridge’s average client size is £650,000.

‘But if you want to do that’, he adds, ‘you need the people. You can’t have a chap and one investment manager plus an assistant running a collective portfolio on a couple of platforms. That’s not going to work. You’ve got to do it properly.’

The company offers both bespoke discretionary investment management and a model portfolio service (MPS), which comprises seven core risk-rated funds. Both approaches hold a range of UK and European direct equities and bonds, with varying allocations to alternatives, including hedge and property funds.

Casterbridge describes its approach to stock selection as ‘straightforward’, seeking to identify quality businesses that they deem undervalued. Holdings are then monitored to ensure they are consistent in their business model and they are liquid to trade.

The approach has been working well, with the firm’s Balanced mandate up 2.86% over the year to 31 March, compared to a 2.08% return from the MSCI WMA Income benchmark.

Part of Edwards’ ambitions to grow Casterbridge involve national expansion. He plans to open an office somewhere around Bournemouth in the next two years, due to the distribution there, and an office in London around 18 months after that to service a client base the firm has in the capital.

If all goes well for Casterbridge, five years from now the firm might have a northern office as well, in either Manchester or Liverpool.

Edwards also plans to take on an additional senior investment manager every 18 months, just as he hired Clark, who had been with him at Quilter Cheviot.

Edwards believes the idea of not selling out in the name of growth is key. He says: ‘We tend to deal with queries as they arise and not the standard “get in the queue” and wait.

‘As we grow, we’ll want to be able to maintain that level of service; we don’t want to turn into one of these big, generic firms. It isn’t an inevitable function of growth that you become worse. That’s not acceptable.

‘We may be limited to a billion or couple of billion, in AUM over the next five to seven years, but if it means sticking to our principles then that’s fine.’

There is clear passion in Edwards’ voice as he pours through the company’s plans and principles. There is also a sense that he has been planning for this his whole career.

While Edwards is a little bit slow to agree with this, Clark has his own view: ‘Having been at Quilter in the same office as Keith for a couple of years, the senior guys would often muse about if they ruled the world and what they would do.

‘And it’s probably true of any senior investment manager, whether of a certain age or drive and ambition, they probably see themselves being in charge of something and being able to manage things their own way.’

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