Alan Durrant likens the last two years to piecing together a jigsaw.
Durrant, who is chief executive of Harwood Multi Manager, says the firm’s acquisition of Wellian Investment Solutions in May has effectively enabled them to complete the puzzle.
‘Harwood Multi Manager is part of Harwood Capital, which acquired Wellian, Durrant is chief executive of Wellian now as well. We always had very big ambitions and we could have just rubbed two sticks together and built up organically,’ he says.
‘But even though it is a crowded marketplace, there are still plenty of gaps. And we have always said a lot of the barriers to entry can be overcome by building this jigsaw by an acquisition. Our plan was crystal clear from the start.’
As a second branch of his growth strategy, Durrant says he also considered running a big campaign advertising the company widely, with the aim of building it into a consumer brand.
Even though he feels this could have potentially allowed him to reach his targets at more or less the same expense, he preferred to invest and acquire. This meant finding companies he regards as being in good shape that he would not have to spend a lot of time or money ‘doing up.’
This led him to buy Tunbridge Wells-based Wellian in May for an undisclosed sum. The deal saw Wellian managing director Eric Clapton step down and became a consultant to provide continuity for clients.
There have been no significant changes made to the acquired business though and Durrant says he is keen to keep the Wellian and Harwood names separate. This includes leaving the two businesses where they are geographically.
‘There are a number of people in Wellian’s business who have made lifestyle decisions to go to Tunbridge Wells and we have to respect that,’ he says.
‘I don’t need see the advantage of dragging Wellian into London. It would double costs and halve the number of people. We like our brands and we like to think of it as Wellian, powered by Harwood.’
With the combination of Harwood’s funds and Wellian’s discretionary service, Durrant is happy with the choice he can now offer clients, which he believes is important. The combined group’s Oeic and discretionary fund manager (DFM) offerings are complementary, he says, and he is surprised that more businesses do not offer both.
‘I’m surprised more firms aren’t offering both as you’re missing out on half the market by doing only one,’ he says. ‘It’s just plain odd.’
The Wellian Balanced Model portfolio is up 59.36% over the five years to the end of July compared to a 41.31% rise by the ARC Sterling Steady Growth PCI benchmark.
Durrant says the team has regular conversations about macroeconomic issues backed by a formal investment committee meeting every month.
One concern the team currently has is that since the financial crisis, some investors may have been lulled into a false sense of security by the length of the quantitative easing-driven bull-run.
‘In a post retail distribution review world it has been nothing but a bull market and so clients have generally been happy with their returns,’ Durrant says.
‘The biggest risk is when markets are less kind, will your portfolios still demonstrate value? There will be promises some people have made that will prove to be untrue.’
With this in mind, Durrant is careful to ensure all investment decisions are properly documented and relayed back to clients. He believes in many ways, not doing this may be almost as bad as not diversifying portfolios in the first place.
‘We are now unfortunately in a compensation culture in every aspect of our daily lives.
‘It’s very easy to use these phrases and say “I’ve given you a diversified portfolio”, but when the music stops, there may be some unpleasant revelations for some investors when they ask for actual proof of diversification.’
In his view, the need for diversified, reliable investments has been heightened by the introduction of pension freedoms.
Looking past what he regards as ‘sensationalist’ media coverage of the new rules and the danger that clients splurge their pension pots on Lamborghinis, he welcomes this as an opportunity for the industry to move away from short-termism. This is not just in terms of running funds with longer investment horizons for existing clients, but also the chance to broaden the business and tap into future generations of clients.
‘The argument is that if we have been doing a good job for mum and dad, then hopefully we will go on to look after their children as clients when they need to start planning for their financial futures,’ Durrant says.
‘We see portfolios being managed for 40-50 years and you can get to hold on to clients for many decades. This is the much bigger opportunity and it’s good for the industry. It moves the focus away from top-performer-of-the-month funds.’
Even though Durrant is certain that the business is well positioned following the purchase of Wellian, he is keen to continue expanding its distribution and is willing to do this through further acquisitions if necessary.
With the Wellian deal, Harwood also gained more than 50 adviser clients in the area who support the firm. And with more advisers looking to exit the industry for various reasons, Durrant acknowledges this could present opportunities for the business.
‘We want to buy more IFA distribution,’ he says. He is, however, critical of some of the partnerships in the industry between IFAs and the firms acquiring them, regarding these arrangements as ‘asymmetrical’ more often than not.
Durrant is keen to ensure the relationships he builds are as balanced as possible.
‘This is our focus for the future, it’s a relatively simple model,’ he says. ‘We know the multiples we have to pay to buy IFA distribution, and putting more and more capital behind this side of the business will be our intention for the next two years.’