Without wishing to get too wrapped up in semantics, asking whether Investment Quorum is an IFA on its way to becoming a wealth manager, or a wealth manager with a history as an IFA, offers some insight into the current health of both sectors.
On the one hand, lifestyle planning is both front and centre of the client experience. On the other, the company’s discretionary service is rapidly approaching its third anniversary.
The company’s chief investment officer Peter Lowman, a 30-year veteran of Cazenove, is not himself in any doubt.
‘Investment Quorum began life as an IFA. Then at the end of 2006, Lee [Robertson, founder and chief executive] felt that there was an opportunity to move from that into private wealth management.
‘My perception is that we were a big fish in a small pond. We are now a slightly smaller fish in a larger pond, but now we have been noticed by a lot of the bigger players.’
Among those players is the Financial Times, which in this year’s annual private client review included the company for the first time on its list of 30 principal private client businesses in the UK, alongside Coutts, Barclays et al.
Robertson himself recently won a prestigious private client award. While he says the selection process was very opaque, he was told privately it was due to the company’s success in ‘shaking things up’.
Both men make the point that the company has at least one major advantage over the Goliaths they are up against: a determination to treat people fairly and an aversion to discussing their clients in terms such as ‘share of wallet’.
Lowman, who was ready to leave the industry before he was introduced to the company, says the fact that he felt comfortable with the way Investment Quorum treated its clients was one of the factors that kept him in the City.
'If I hadn’t found Investment Quorum, I would have retired. But Lee had a good idea of what he wanted and I was clear that my decision to come here was to help him shift from being an IFA to a private client manager. Recent history has reminded me of why I felt the bigger banks weren’t offering clients what I wanted.’
The company has around £110 million under influence on behalf of around 500 clients, up from £94 million in November 2008. Around 50% of this has transferred to the company’s discretionary service, with the expectation that this will top out at around 80%. Investment fees are levied at 1%, with financial planning charged separately as required.
Over the past year, the median balanced portfolio is up 21.42%, versus the Apcims balanced return of 8.38%.
If the firm has indeed graduated to wealth management it is in no small part due to Lowman’s asset allocation skills, both as portfolio manager and architect of the company’s investment process.
Born in Billericay, Essex, to parents who worked at the local school, Lowman came to the City after finishing his A levels in 1972. He joined Cazenove as an office clerk and worked his way across its divisions.
In particular he was drafted in to the team working to extend the company’s global asset management and private client services – a specialism that led to an appointment in 1998 as manager of its Global Equity fund.
‘[Cazenove] began as a UK house – what we were trying to do was to deliver more of an international flavour. Previously clients would have had substantial UK exposure,’ he says.
‘The learning curve was terrific through the first two years – the fund had a very good track record, we were first-quartile and in the top 20 global growth funds up to 2001/02, but we had a more difficult time after that.’
Before the management team had a chance to recover, JP Morgan took a 50% stake in the company and the unit trust division was closed down, leaving Lowman and his colleagues redundant in the midst of a global downturn.
Following a short period at Morgan Stanley Quilter he was introduced to Robertson by his former assistant David Pegler, who had taken a job at UBS and was working with Investment Quorum to set up an account on the Swiss bank’s ill-fated investment platform.
Prior to the launch of the discretionary service Lowman spent eight months formulating a coherent and cohesive investment process. The group runs a 100-strong white list of funds known as Centurion, which is reviewed on a monthly basis using Financial Analytics screen and the investment committee’s own qualitative analysis.
From that 100, around 25 are then selected for each of the company’s 10 ‘investment solutions’ – portfolios formulated against client lifestyle planning objectives as well as the basic risk assessment. Additional ETFs are used for quick and cheap auxiliary exposure.
‘We form our ideas on a top-down geographic basis and then from the bottom up select managers dependent on what we want to express. That is where we think we can add additional value.’
Having launched in 2007 heavily overweight in cash, the first significant asset allocation call was to shift heavily into Western corporate bonds as yield spreads moved to ‘crazy’ levels above sovereigns in November and December 2008. Fixed interest was rebalanced in favour of global equity in March 2009.
‘What we are trying to do is build a portfolio that lasts. The environment may change and we will rotate the portfolio. But this is solid and we have been round it and kicked the tyres.
Clients receive portfolio rebalancing, biannual meetings, detailed quarterly investment reporting plus a market summary. They also receive constant market updates plus an overarching holistic approach. Future priorities are expansion via word of mouth and selected hires to extend geographical reach, which currently remains concentrated in greater London.
‘Our view of this industry is that we want to let our clients know that we are there for them, when others might not be. We are a young organisation and it is still early days. We are all passionate about this and all singing from the same hymn sheet.
‘Clients who aren’t keen on the bigger banks and investment houses – we are just waiting to hear from you. Please give us a call.’