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Profile: the evolution of WH Ireland through its buy list

Profile: the evolution of WH Ireland through its buy list

Technically, John Goodall has made little apparent professional progress in the last decade: he remains in essentially the same position in the same team and his business card still identifies the same job title he has had since shortly after joining WH Ireland in 2007.

In a rather more measured sense, the form and function of his role have changed as drastically and as rapidly as that of his wider employer over the period however, as the company has sought to retain the best of its stockbroking past while embracing a closely-regulated future as a fund manager.

‘I think that is exactly right,’ he replies, to the suggestion that the course of his career, from a FTSE 350 broker analyst to multi-asset strategist recognised as one of Wealth Manager’s Top 100 fund buyers of 2017, closely mirrors the changes he has seen happen around him.

Those changes have moreover changed his role from added-extra service provider to one of the lynchpins of the company’s operations. The white list produced by his five-strong team is now the ultimate authority governing the direction of £3.1 billion in client assets. Unlike its major peers, the business has yet to unitise its models for distribution, but managers suggest this is a logical next step. 

‘Obviously stock picking is still very important to us, but what we do now is much more of a complete service. Back in those days it was all about stock picking – we didn’t do general, multi-asset investment management.

‘I largely spent my time looking at UK stocks, putting together recommendations for broker clients.’

While boasting the red braces closely identified with an earlier and slightly more high spirited period of intermediation, it should be noted that he comes across as being more naturally at home in a world of repeatable outcomes and due diligence than AIM speculation and chunky trading spreads.

Soft spoken and without an obvious relish of the limelight, he is no Gordon Gecko. And despite starting his career at bucket shop Spreadex back in 2000, he emphasises that he used a two-year period at Tilney in the mid-2000s to become CISI chartered.

He later won CFA charterholder status in 2011, becoming, he believes, the first at WH Ireland to do so. 

This was fortunate, given that despite nominally being hired as number two in a two-person department, from more or less the day he joined he was sitting in his boss’ chair. ‘[I was in charge] essentially from when I joined the research team – the person I was reporting into was on maternity leave. We didn’t have much of a department then, it was really just me.’

He adds that circumstances rapidly put his fast track career advancement on a more permanent footing. ‘Well, she ultimately moved to Canada with her family. But it was really from when she got pregnant again shortly after I joined that it became clear that she probably wasn’t coming back.’

The long and bumpy road which WH Ireland has taken over the 10 years since he joined have been well covered in these pages: mis-firing takeover tussles, regulator enquiries into improper share dealings and investment processes, a £1.2 million fine and a short-term trading ban for weak controls.

Both the regulator and the market seem to view these matters as now having been resolved, with the share price up almost 130% since a low in 2013, to trade at a valuation close to the peer average.

What is less well appreciated, says Goodall, was how far the company had already begun to move towards its current state before current chief executive Richard Killingbeck – widely credited with putting the business back on an even keel – assumed the role in early 2013.

‘It goes right back to when Richard Killingbeck joined – people forget now that he originally joined as head of wealth [in 2012] and only then became chief executive after Paul Compton left [following allegations of improper share dealing. He later settled a claim of illegal dismissal].

‘It was clear from the start, since [Killingbeck] became chief exec, that he and current head of wealth management Roddy Buchanan had a very clear idea of how they saw the business. I think you can say that approach has turned out to be correct.

‘It more or less started with the research process. It began with the bi-weekly equity research meeting on stock selection, which he initiated’ - Goodall pauses while checking calendar - ‘in January 2013, which essentially set the ball rolling on our eventual move into collectives.’

He emphasises that this remains a journey, rather than a destination. Around 90% of new client assets are now invested to the 90-strong fund white list which he and his team compile, although there is interbranch variation within this, and the average is dragged down by a minority.

He says that he does not have figures for what overall percentage of client funds are held within white-listed funds or stocks, but that it may make little sense to use that as a benchmark given the number of entirely legitimate reasons to hold onto a legacy position.  

‘It has been a process to convert people to discretionary. We can set the strategic direction but you can’t tell people what kind of service they want, and you will always have [clients] who want to do their own thing.

‘In some offices – like the Isle of Man – it is probably 100% of new business. And obviously there are valid reasons why we cannot always change existing portfolios, if someone has been holding a position for decades they may have [capital gains tax] liabilities, for instance.’

Over the last three years the company’s balanced risk profile has returned 19.7% versus an ARC Sterling Balanced index return of 18.7%, and over five years 50.8% versus 42.3%.

All the company’s models are above benchmark over the longer timeframe (the cautious model does not yet have a five-year history), but are at or slightly below over three years. The higher risk variant, for instance, has returned 21.1% versus the ARC Sterling Equity Risk index’s 24.7%. 

UK equity is currently the house’s biggest underweight, with Goodall describing himself as ‘very worried’ about short-term volatility while the government attempts to keep Britain’s boardrooms onside as it negotiates its way through critical points of the Brexit negotiation in the next year.

At the time of the interview at the end of November, the company was holding some of the cash taken from UK stocks, with the intention of adding to the company’s infrastructure holdings by year-end.

The house has also banked some of the outsize profits accrued from US equity holdings in recent years, but he adds that identifying the right active US strategies remains one of the toughest parts of his job, with the $68.4 billion (£50.6 billion), growth and income-orientated Dodge & Cox Stock fund a particular highlight, as well as the JPM US Equity Income fund. 

‘US equity... where we need to capture the upside; we are concerned about just how much of the market is now owned by ETFs and how that plays into high valuations. We are underweight the US, but who knows when the valuation will come down?’ he asks.

While the house is structurally underweight UK equity, a significant chunk of the research team’s remit remains maintaining a 30-40 strong list of FTSE 350 tips for brokerage and advisory clients. 

He said the company’s holding in AstraZeneca has been one of the biggest changes it has made in the last year. ‘It has made us quite a decent profit but it was becoming a bit of a binary prospect on immunotherapy. A lot of the good news was already in the price and if something fails [at trial] that can be really painful.

‘We have added Shire which has honestly been a little bit of a disappointment [so far], but it remains quite cheap. We have a slight overweigh in pharma. The other [sector bias] is within basic materials – BHP, Rio [Tinto] and [plastics manufacturer] RPC [Group].  

‘We thought they looked more reliable than the oil stocks. Back from when they began to get their balance sheets in order, it was clear that their dividend cover was strong enough that even if iron ore fell further they would be able to maintain multiples of dividend cover.’

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