Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Rathbones' Howell: patience is key to avoid overpaying

Rathbones' Howell: patience is key to avoid overpaying

Philip Howell said Rathbones will be patient and play the waiting game as he waits for the market to settle before making further acquisitions.

The wealth manager acquired the remaining stake in Cornish IFA Vision Group last October, but since then he said prices in the market have spiralled as M&A continues to boom.

‘We’ve said before that we’ll be patient on pricing and be very selective,’ the CEO said. ‘Current market levels will [ease].’

Howell (pictrued) cited Tilney Bestinvest’s £600 million acquisition of Towry as a case in point, with the multiple paid thought to be a record at 6.7% of assets under management.

Rathbones has £55 million in capital in can draw to fund purchases, including the £20 million raised through a loan arrangement with M&G last year.

‘If you look at our capital position, obviously we want to use it as much as we can,’ he said.

The firm is also looking to organic growth with its private office, launched last year, now ‘essentially operational’, following the hire of three experienced private bankers earlier this month.

Howell said the private office is very much a long-term project with the firm expecting a ‘J-curve’ growth pattern in its five-year initial plan for the division.

‘It sounds sexy, but it is a very long-term project and we are still very early in the day,’ he stressed.

The private office is targeted at high net worth individuals and families in the £10 million to £100 million bracket.

Among the differentiators of the service he hopes will attract clients are a consolidation offering, with Rathbones able to provide single monthly valuations for users with multiple relationships with wealth managers and private banks. The tie-up with Credit Suisse, announced earlier this year, is now in place, enabling clients to access its range of private banking services.

Although organic growth is readily welcomed by any firm, Rathbones’ Glasgow office, which launched last May after the firm poached a team from Brewin Dolphin, underlines the value of acquiring teams.  

In its first year, the office has built over £250 million in assets, smashing through its target.

‘When we open an office we set a hurdle rate of £250 million in three years and we are through that in one,’ Howell said.

He said that while he is happy with the group’s regional coverage, it does have one gap that he will look to fill if the right team becomes available.

‘One gap in the network is the Leeds, Sheffield and Manchester triangle,’ he said.

Commenting more broadly on the firm’s half-year results, which were posted today, Howell said: ‘In a tough market we’ve managed to keep increasing our assets under management and jeep our operating margin up near 30%, despite making continuous investment in the business.’

Rathbones' pre-tax profit fell by 28.3% in the first six months of the year as the firm absorbed the costs of its acquisition of Vision and its upcoming move to new premises in the City.

Profit before tax dipped from £31.8 million to £22.8 million year-on-year with earnings per share dipping 32.9% to 35.7p.

The firm's investment performance proved a highlight. Assets under management (AUM) rose 4.8% to £30.6 billion in the first half of the year, outstripping the 4.2% rise in the FTSE 100. The group ascribed £0.3 billion of this to 'net organic growth'.

Underlying operating income for investment management rose by 1.9% to £108.8 million, which was largely put down to AUM growth. However, operating expenses rose faster by 6.7% to £84.9 million, reflecting higher fixed staff and direct costs. Net commission income fell by 25.9% to £19.5 million, which the firm put down to weak trading conditions.

The group’s operating margin 29.4% held steady, albeit dipped slightly from 313.9% in 2015.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Your Business: Cover Star Club

Profile: how Cerno was forged in Asia's boom and bust

Profile: how Cerno was forged in Asia's boom and bust

Cerno Capital’s investment philosophy was born in the spectacular boom and bust of Asia in the 1990s.

Wealth Manager on Twitter