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Wealth Manager: Sam Liddle captures the adviser/discretionary middle ground

Wealth Manager: Sam Liddle captures the adviser/discretionary middle ground

With a wealth of experience in both the private client and fund management worlds, Sam Liddle is well positioned to capture the middle ground between discretionary and advisory.

He launched Albemarle Street Partners with former Skandia Investment Management CIO Clive Hale and Williams de Broë head of fund research Dan Kemp last August, targeting advisers wanting a bespoke investment offering while retaining control of client assets.

‘In our time we have come across a lot of IFAs who have felt coerced to go down the discretionary fund manager or fund of funds route but didn’t really feel that was what they wanted,’ Liddle says.

‘They wanted to still offer an advisory service but felt that the FSA thought they should be outsourcing it. We saw there was an opportunity to help IFAs who wanted to continue offering investment advice but didn’t have a robust enough process or were not confident enough in their skills.’

The idea was born in an initial meeting at Brown’s Hotel on Albemarle Street in Mayfair, with the location providing the inspiration behind the company’s name, although Liddle admits subsequent meetings were held in the rather less exorbitantly priced cafe round the corner.

He says the three have complementary skills, with Hale strong on the macro and written work (he writes the ‘View from the Bridge’ blog); Kemp, with his analyst background, is very quants driven; while Liddle specialises in asset allocation and has a lot of retail IFA contacts.

At the time, Hale was doing consultancy work for a number of IFAs and this helped formulate the business plan, which sees Albemarle provide a range of different investment services to IFAs, depending on their needs.

A range of five risk-rated portfolios lies at the heart of the proposition, but the firm also provides a broad range of consultancy services covering everything from asset allocation to managing advisers’ existing relationships with discretionary fund managers (DFMs).

‘We have five standard models and some IFAs just white label them, or they can be tailored for their client bank,’ Liddle says. ‘Other firms have not had an investment process before and we put that in place for them. We carry out the whole of market fund research and advise them on tactical and strategic asset allocation. We see ourselves as the IFAs’ in-house investment team.

‘With some, the IFAs had already established their own risk-rated models with different benchmarks but were just struggling with fund selection and time, so we are really just taking over the asset allocation. We also have clients who use fund of funds or DFMs but find it difficult to keep on top of what is going on, so we act as an intermediary between them and do the monthly reporting to ensure suitability.’

 

The variety of client needs they are servicing reflects the different levels of adviser readiness for the retail distribution review (RDR) they have found in the market. But while their businesses may be at different stages, the overriding concerns uniting them are charges, the FSA’s suitability clampdown and a desire to keep control of their clients’ assets.

‘There is nothing wrong with outsourcing as a business model, but a lot of IFAs want to bring something to the party. Clients will see a breakdown of fees and the adviser wants to be able to justify that,’ he says.

‘If the DFM is charging 1%, the underlying is 75 basis points (bps) and the IFA is charging 50bps on top, that makes a total expense ratio (TER) of 2.25% and the client will be asking what the adviser is adding. They would be better off going direct to the DFM. By not outsourcing you can reduce the overall fees significantly, going direct and paying 75bps, cutting out the DFM’s charge. We have other cases where the IFA is charging 75bps, which increases their revenue and the client is still seeing a huge reduction in the fees they are paying.’

Albemarle invoices its IFA clients directly, charging up to £2,000 a month, rather than a percentage of assets under advice, so it does not form part of the portfolios’ TER. For an adviser with a decent sized client bank, the cost saving is very significant.

Similarly around suitability, the proposition is very clear. ‘There are some concerns at the FSA about who is responsible for risk assessment and the transparency of funds of funds and model portfolios when it comes to ensuring ongoing suitability,’ Liddle says.

‘Clearly for bespoke outsourced funds it is not a problem as the private client manager does the meeting and carries out their risk assessment. It is different when the IFA is seeing the client and choosing a fund of funds. Our role with the IFA is simple and it puts them back in charge. They have a range of risk-rated funds that are unique to them and have their own branding, and every recommendation is from the IFA to the client.’

Albemarle provides the client reporting with monthly factsheets showing the risk diversification benefits of the portfolio, clearly defining what the fund is trying to achieve, including market commentary and the rationale behind any changes to the holdings.

Liddle says at launch they set up to target a 20-strong IFA client bank, which would enable the three of them to devote three days a month to each adviser with the fund research ongoing and split between the team.

 

The firm has 13 clients currently and he says building scale as the business grows will not be a problem as they have received considerable interest from people wanting to join the team.

The firm also provides consultancy services to the fund management industry, which he finds interesting as it enables him to dig deeper into the workings and thinking of different companies.

This ranges from product development, to marketing, or restructuring fund ranges.

‘Some groups have a lot of old funds, most of which have declined in assets and we will look at whether the fund range is relevant now. If you look at the changes in investment and regulation, you have to ensure funds are relevant for the next 10 or 15 years and we will advise on which funds should be merged or closed,’ he says.

‘Every retail fund in the market was designed with the IFA in mind and that market is fragmented and reducing in size, which means a large percentage of funds are not aiming at the right audience any more. We can bring a perspective to that.’

At other fund houses, they have advised on funds that have been selling poorly despite strong performance. This can involve rewriting the presentation to better target different investors, or in other cases changing the focus of the marketing, emphasising a fund’s low volatility rather than performance or moving it into a different sector.

The work at Albemarle is certainly varied and you get the impression Liddle would not have it any other way, given the career path he has trodden.

His entry into the industry was unconventional. He was originally a property developer, but decided to back this up with some professional qualifications when the recession of 1982 started to bite.

‘I went to South Bank Polytechnic and did an HND in business studies, then joined a management training scheme at BAT but 18 months later they closed the UK arm and I was made redundant. I had a lot of friends in the City. One friend was joining Towry from the army and I rang them up. He was surprised when I turned up for the three-week induction course but I ended up working there for four years.’

He recalls the time fondly but later had a stint at John Scott & Partners before joining Morgan Grenfell in 1989 when it was setting up its discretionary and retail funds businesses. He initially worked across both divisions before setting up the group’s portfolio management service, which he ran until 1995.

Reflecting his entrepreneurial streak, which remains undimmed, he then set up a joint venture with Singer & Friedlander in which he had a 30% stake before being bought out three years later as part of the deal.

 

After a six-month hiatus from the industry, he returned to the fund of funds world in October 1998, joining Legg Mason, which had just bought Johnson Fry’s multi-manager arm. Following the American-owned group’s move to South Quay, at that time a less than salubrious backwater in London’s Docklands, Liddle decide a five-hour daily commute was not for him. Perhaps the writing was on the wall when the staff nicknamed a seal that was being spotted now and then in the dock after him.

‘The local newspaper sent a photographer and asked our staff if they had seen him and if he had a name, they said they called him “Sam” after one of their colleagues because they didn’t see him often but it was nice when they did,’ he laughs. ‘Docklands was a step too far for me, so I bought the business and joined with Martin Gray. Miton kicked off with about £20 million and five years later, when we sold it to iimia, we had £650 million.

‘They then did a reverse takeover and bought Midas Capital. It felt good in terms of business fit but it was very much a top of the market deal. It was a good company but then we had the shakeout in 2008 and the business had a lot of debt on its balance sheet and got into trouble.’

The staff had two-year tie-ins after the deal and Liddle stayed for an additional year, choosing to leave to focus on his other interests outside of the industry when the new management, led by Gervais Williams, came on board.

‘I had a couple of businesses outside of the industry I was keen to put some time behind. One in particular was an app business called Zapmenow Limited. At the time in 2011 when I launched it, it seemed innovative, but now there are any number of these things around,’ he says. ‘If you download the app, you can have adverts coming in from nearby pubs, clubs and restaurants every 500 metres with updates of what offers they have on. It is different in that you normally look for local offers, but these come to you. It was designed with the student market in mind – people who are unfamiliar with the city and want value for money. I launched it in the Northern university towns first.

‘It’s going well and I have a third party sales and marketing team, so the distribution takes care of itself, but I am now looking to offload it.’

He admits that although profitable, the market moves fast and the cost of sending out the alerts erodes the margin, meaning it has not quite been the money-spinner he had hoped.

Albemarle Street Partners certainly looks a far safer long-term bet.

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