Welcome to our new website! Let us know what you think..

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Wealth Manager: European Wealth's CEO on the steps to its first £1bn

Wealth Manager: European Wealth's CEO on the steps to its first £1bn

If European Wealth Management (EWM) chief executive Rod Gentry can build a business with anything like the brisk efficiency with which he conducts an interview, then the company has a bright future ahead of it.

It should be mentioned that all the evidence suggests he can. Three years on from EWM’s incorporation and it has secured a string of deals that by 2013 is expected to have consolidated around £450 million in discretionary and advisory assets, with no sign of a slowdown.

Getting to this point has not necessarily been easy: his promotion to CEO of Ashcourt (now Ashcourt Rowan) as the financial world was imploding in 2008 might be considered coming up the hard way.

Working for then-owner Syndicate during its empire building period offered a master class in how – and how not – to merge wealth management and advisory companies, however.

‘We have a lot of experience, and learned a lot from those experiences,’ Gentry says of himself and the management team the company has built around Ashcourt alumni. ‘[But] we are all doing it because we enjoy doing it and the moment we stop enjoying it will be the time to call it a day.’

He is reluctant to be drawn on the particulars of his short period at the top of Ashcourt, having worked for the business in one form or another through various mergers over the best part of 20 years, over which time the company grew to run £2 billion.

But he exited the company the year after his appointment over substantial differences with Syndicate on company strategy, and it’s not a great stretch to imagine the experience as a little bruising.

‘[Ashcourt] was moving toward a centralised way of doing things, with less and less control given to investment managers, and we wanted to do the opposite of that,’ Gentry says.

‘We didn’t want to be part of the ongoing deskilling of investment management – and talking to other people in our profession and outside it, we think they feel the same.

 

‘We still work on a pyramid structure, with a team beneath each manager, but the important thing is that they are handed some responsibility for decision-making, and retain some control of what they do.’

The company currently employs 26 people, with 10 FSA-authorised staff. Another financial planner and two advisers are expected to join the company shortly.

After starting with a small kernel of clients and around £20 million, which migrated with the team, the company has bought out three businesses so far. It has terms to acquire another two by year-end currently going through the legal process, and another two at a preliminary stage of negotiation.

Those acquisitions delivered revenues of £2.2 million and a small profit of £150,000 in the most recent financial year. This is projected to climb to £4.2 million revenue and £1.5 million in operating profit next year, on a flat fee of 1% up to £500,000 for discretionary assets, tapering down to 0.75% above £1 million and 0.5% above £1.5 million.

Advisory assets, which make up just 10% of the overall, largely remain on the historical pricing schemes inherited from the previous owners, but are being migrated across to a retail distribution review (RDR) compliant scheme.

Overall, 75% of income is recurring, dragged down by the 50% figure on the advisory assets, although this is expected to rise rapidly as the company moves clients to a retainer.

Besides buying in businesses, the company also has an organic growth strategy, based around Ashcourt’s roots as the investment division of a regional law firm. The company retains a contact book of solicitors across the south of England, and believes there is untapped potential for referrals from the current client bank.

Beneath the European Wealth holding company, the firm is divided into advisory and discretionary divisions, in order to keep some operational independence between the two.

‘They have the freedom to work together but it has been designed so they can work apart,’ Gentry says.

 

While its investment managers will be RDR-level qualified by 2013, the division will allow the advisory team to use an independent title without making the managers jump through regulatory hoops.

While the company has benefited from the secular driver of the RDR, Gentry is insistent that the opportunity open to the business is a long-term one, and he resists any accusation of asset gathering.

‘We are not like some of the larger businesses, which have been doing the rounds in recent years, waving their cheque books and hoovering up assets. [RDR] has provided opportunity – it is making a number of practitioners worried about whether they can cope – but it is not the main driver.

‘Regulation will always be a catalyst for change. But we don’t see this as a short-term [opportunity]. I am sure the number of opportunities will be reduced [post-2013] but we have always in the past been able to source opportunities at good prices, and am sure that we will still be able to do so.’

Gentry’s rejection of the suggestion that the company is an asset gatherer is given weight by its reluctance to drive straight into the fashionable adviser outsourcing market, which he is unconvinced (as are a number of well-informed wealth management veterans) really adds up as a long-term business strategy. 

The company has signed up a handful of advisers who had approached the company to request the service, but it is certainly not seeking them. ‘It wasn’t part of the plan. [Outsourcing] does seem to be the flavour of the month – previously advisers would have just signed off, now they want to retain some control of assets.

‘We were happy to get involved when they approached us but we are not convinced by the companies who are out there trying to build strategies around it. Personally, I think the current model will have to be modified. The platform wants 35 basis points, the adviser wants 85. You are getting up toward 1.2%-ish before you even charge for investment management.

 

‘For us it is fairly low cost because we are already running the asset allocation models and we have our own platform to provide custody, but I don’t think the [wider] market is sustainable. There are a lot people out there all chasing the same opportunity.’

Born in the small south coast town of Seaford to a father who was a chartered accountant, Gentry began his professional life as an engineer, specialising in superheated steam propulsion.

As demand for expertise in his sector declined, he retrained in finance, sitting the Securities Institute exams in 1989 and taking a job as investment manager in the asset management division of law firm Donne Mileham & Haddock (now DMH Stallard) in Brighton in 1990.

By a steady process of accretion, the company built up asset management businesses as law firms spun out the regulatory burden of FSA-authorisation, before being bought out itself by Syndicate in 2005. 

European Wealth’s senior management was largely formed by like-minded Ashcourt executives, including former Syndicate CEO and Aberdeen chair John Morton. In addition to the director’s capital, Swiss family office Courvoisier & Associés provided initial equity and debt funding and holds a seat on the board.

More recently, investment company Kingswalk has taken a 33% interest in the business, in an equity swap that provided European Wealth with access to an offshore-listed structure.

‘[We] welcome their investment, which will accelerate our ability for further organic growth, attracting the most experienced investment professionals as well as making further acquisitions,’ said Gentry, who has taken a seat on the Kingswalk board.

In addition to its traditional discretionary service, the company has recently recruited former New Star manager Nigel Marsh to launch a standalone, cash-like liquidity service for both institutional and private clients, with several local authorities in talks to sign up.

‘It offers up a new range of clients: local authorities, building societies,’ Gentry says. ‘The return on cash is negligible so is partially driven by current conditions but ultimately there is always demand for liquidity management.’ 

Leave a comment

Related Fund Managers

Your Business: Cover Star Club

Profile: Quilter Cheviot boss Baines sees more consolidation ahead

Profile: Quilter Cheviot boss Baines sees more consolidation ahead

Nineteen months on from the merger of Quilter Cheviot chief executive Martin Baines says the deal is now paying dividends.

Wealth Manager on Twitter