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Wealth Manager: Neil Shillito - financial planning separates asset from wealth managers

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Wealth Manager: Neil Shillito - financial planning separates asset from wealth managers

‘It is hard work,’ says Neil Shillito, co-founder of SG Wealth Management, describing a working day that extends to answering client calls and emails up to lights out at around 11pm. ‘But then we do get paid bloody well for it.’

The directness – and, it has to be said, the language – are characteristic, as is the attitude. While far from unusual in his native Yorkshire or among the cruise ship sailors who were his colleagues for the first 13 years of his working life, in the buttoned-down world of wealth management it is both a little unusual and refreshing.

Shillito has managed the company alongside co-founder Stephen Girling for almost exactly 10 years but it is fair to say he has the higher profile of the two. He has enthusiastically become the public face of the business: blogging, contributing to the press and cheerfully sparing his time to journalists: the yang to Girling’s yin.

‘I always knew I would be suited to marketing,’ he says. ‘If you throw me into a room full of people, I can always find a way to engage with them. It’s part of working on ships. In a regular job, you might not like your colleagues, but you know you are going home at 5pm. On board, though, you are going to be with them all the time.’

If 25 years have not mellowed his sometimes salty language, he otherwise appears to have relaxed into his role, wearing an informal check shirt open at the neck, chinos and deck shoes on a sunny day in his now home of Norwich.

A decade into its existence, he says that the company is only just beginning to gear into its potential, however. After four previous attempts since 2006, the company is within weeks of signing off on its first regional acquisition that will near double its assets under management to almost £200 million.

The purchase will add a group pension division to the company’s traditional financial planning and asset management services and provide a platform for further growth. This on top of a separate brokerage partnership that the business is developing with a City partner.

‘I’m not going to say right now that it will be the first of many – we just don’t know – but when it is known and in the press, we hope that it will spark some further interest.’

 

The company has been steadily and quietly growing profits and turnover for each of the past six years, with the upward trend only dipping in 2009. That year, both profit and revenue took a major hit, first from the outright purchase of new, modern office space and secondly from the credit crunch.

Since 2006 turnover has climbed from £364,801 to £1.32 million and gross profit from £88,229 to £600,000. Having been fee-based since launch, the company’s recurring income stands at 94%, from about £90 million in assets, managed on behalf of 127 clients by 13 staff, five of whom are client advisers.

Born and raised in Skipton to a head teacher father and a mother who worked for the local newspaper, Shilitto had early exposure to the City via his history and architecture buff father, who would take him on extended tours of the Square Mile while visiting the office of his Lloyds-broker uncle.

However, he never had any expectation of working in finance. His ambition was to run away to sea, which he realised at 17 after leaving school. He signed up with P&O as a cadet, rising through the ranks to become a master seaman by the time he decided to settle down with his wife, 13 years later.

‘I travelled everywhere – all the major ports in the world. I actually got caught up in the Iranian revolution, I was dragged out of a car outside the US embassy and arrested by the Revolutionary Guard before the fast-talking Iranian family I was with managed to convince them to let me go.’

The last three years of his time at sea were spent travelling with his wife, before they decided to settle back on dry land to raise a family in 1985. Seeing an obvious connection with his field of expertise, he joined a shipping brokerage, which he ultimately found dull. True to the spirit of the 1980s, he decided to try his luck in financial services.           

He trained and spent 10 years with Equitable Life before leaving in the mid-1990s for an independent financial adviser in Norwich, where he met his future business partner Girling. He describes his career progression as taking an obvious arc.

‘I remember [becoming independent] and the dawn of appreciation that I could set up an offshore bond and put other people’s product in it, but ultimately realising that was all that I was doing: flogging product.

 

‘I realised that you can’t have a service-based proposition when you are trading on commission – it just doesn’t work. I met Stephen there and worked out that if you wanted a business based on service, the only way to do it is to use a fee-model.’ 

With local contact and Conservative peer Lord Chilver providing start-up capital in exchange for a 26% equity stake – since bought out by the directors – the business launched with just a handful of high-net-worth clients in 2001 into the teeth of 9/11 and the demise of the tech bubble. The first three years were a grind, he says. At some points he had to fund his living costs with short-term borrowing, but with some heavy duty networking the business was beginning to get on to a sustainable footing by 2003.   

Now well established, the business is one of a small number of local names offering top-end planning and advice. While he demures from explaining the in-house fee-structure, other than saying it is calculated as a percentage of assets with an initial charge for a planning report, he gives the impression that he doesn’t feel much pressure to compete on price.

‘We would say that it is reassuringly expensive. The value [to clients] is the service proposition not the price tag, [although] we do scale down the fee from £500,000 to above £1 million.’

Norfolk insurance brokers and IFAs Smith & Pinching and Alan Boswell are the only businesses that provide any kind of comparable local service, although both list the insurance sales part of their business ahead of the advice part.

The company is hands-on and has a keen appreciation of the value of media. A client should never have to contact the business after reading in the Sunday Telegraph that one of the core managers in their portfolio has jumped ship, he says – they should have already received an email from SG Wealth explaining what has happened, what it means and what their investment manager is doing about it.

Asset management is largely conceived of as multi-management, with conviction at fund manager level cross-referenced against strategic asset allocation. The discretionary service began in 2005, and the firm runs an open-ended investment company as a core, collectivised client portfolio, which has returned 13.76% over three years versus an index return of 9.6%

 

‘One standard questionnaire we have seen poses this question: “Compared with others that you know, how would you rate your own risk tolerance?”. I can say that here in Norwich, people speak of little else.

‘Many standard models would have us believe that an adventurous investor’s portfolio should be, say, 90% equity and 10% other assets. Following the banking crisis, corporate bonds rallied strongly from late 2008 and well into 2009, with fund returns of 40% to 50% being not uncommon. Our adventurous investor would be peeved indeed to be told that because of his risk profile he’s not allowed fixed interest because bonds are only for the timid and retired.

‘[Our] process is to build model portfolios to broadly match the recognised categories of risk, and to employ a “core and satellite” approach for individual investors rather than a “one size fits all”.

‘In order to maximise the opportunities and minimise the risk, portfolios must be reviewed regularly and our service standards provide quarterly valuations and face-to-face meetings, typically twice a year. High service standards come at a price and so no single wealth manager in our firm can physically manage more than 40 client accounts. Firms who profess to have “thousands of clients” are kidding themselves. In reality, what they have is a database containing thousands of names of people they have sold a product to at some time in the past.’

While all the staff hold level four qualifications ahead of the retail distribution review (RDR), and the business that Shilitto expects to purchase is more or less future-proofed, he is dubious of the value of becoming chartered, other than having another few letters after his name.

‘It is a decision we will have to take, we haven’t taken either road [chartered or certified]… we looked at the chartered financial planning and it doesn’t really match up with what we do. I have found the RDR debate very amusing because all the dinosaurs have emerged and have said it won’t work, but that is a decision we will take as we see what happens post-RDR.’

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