Many big wealth managers are pouring resources into the UK regions but their efforts to tap the ultra high net worth outside of London are doomed to failure until firms stop merely paying lip-service to serving clients locally.

Most of the big wealth managers are pouring resources into the UK regions at present, but their efforts to tap the ultra high net worth outside of London are doomed to failure until firms stop merely paying lip-service to serving clients locally, former UBS senior private banker Max Thowless-Reeves told WealthBriefing in a recent interview.

Thowless-Reeves is the mastermind behind Sorbus Partners, a new Birmingham-based multi-family office, and he believes that the reason his new venture will succeed with UHNW clients where others have failed is simple: you have to be where your clients are, and have real roots there.

The fact that there is huge wealth outside London has not escaped the big wealth management firms and rarely a week goes by without news of another global name opening a new office or hiring in the UK regions. However, as Thowless-Reeves points out, regional expansion has not been plain sailing for the biggest wealth managers and some have been forced to pull out of the UK regions after just a couple of years of business.

Here, Thowless-Reeves makes the distinction that he is not talking about the smaller stockbrokers and investment management firms which have always been more regional in flavour, but rather the big UHNW wealth managers (the top four of which he believes are UBS, Credit Suisse, Goldman Sachs and JP Morgan). Followers of the industry will know that there have been several examples of high-profile firms withdrawing from the UK regions. Readers of WealthBriefing will remember, for example, that at the start of this year Credit Suisse decided to shutter its Birmingham office and instead to serve its Midlands clients out of London and Manchester. Thowless-Reeves also points to the case of Merrill Lynch, which began a regional rollout in the early noughties before subsequently shuttering regional offices. 

In his view, while the big firms are right to have acknowledged that there is demand for their services outside of London, they have gone about addressing that demand in the wrong way – by using regional offices as “shop windows” for services which are in actuality located in the capital. The model deployed by the regional stockbrokers and investment managers - a centralised research function and local implementation - works “just fine” for them, Thowless-Reeves notes, explaining that for firms with an average portfolio size of say £250,000 (about $400,000) a “degree of centralisation is beneficial and necessary”. But firms thinking that this approach can be scaled up for regional UHNW clients are “making a mistake”, in his view. 

“Essentially, what they [the big firms] have tried to do is to have what I call ‘an empty suit’ – a personable client advisor who doesn’t really have any technical skills themselves – in the regions. They are there merely to package the client into whatever the convenient product is that’s created, serviced and looked after in London,” he said.

“That’s such a narrow understanding of what wealth management is, when clients view it far more broadly than that. Clients have complex requirements and if all you’re doing is pushing them into one of however many strategies then you’re always going to fail.”

Frankly assessing the regional expansion efforts of many of the big firms, Thowless-Reeves levels a charge of “intellectual failure” at those institutions which think that just installing a regional “point person” for relationship management is giving clients a sufficiently local offering. What clients really want, he says, is to have all the intellectual capital they need access to “on their doorstep”, not for their investment management, tax and wealth structuring needs to be taken care of from London.

“It is important to have a local presence, but the local presence should not just extend to a person and an office, it is having the skill set to solve those clients’ problems there,” he explained. “What some institutions don’t understand is that actually the client wants to have access to those people, to have them, as well as the client relationship management person, to hand.”

Regional identity

As well as being guilty of a “major intellectual failure”, Thowless-Reeves also feels that these wealth managers are underestimating how important their regional identity is to clients – to the point of patronising them.

“Clients outside London define themselves as being regional,” he said, “I’m a Staffordshire lad and I have lots of pride and respect for the professionals and my background around here, so to think that I would be happy with my accountancy services or legal services being dealt with by a fast-talking sharp suit from London is slightly insulting I think.”

There are obviously big efficiencies for firms opting to expand regionally in this way, as with all centralised propositions, but Thowless-Reeves’ verdict on this approach is somewhat withering. “If you view wealth management in a slightly broader sense, then the people who try to service the regions from London are failing to understand the totality of what a client requires and the clients will see through them.”

The value of networks

In addition to undervaluing having the relevant intellectual capital “in situ”, Thowless-Reeves also believes that many of the big players are underestimating the importance of bankers’ personal regional networks. To illustrate his point, he gives an example of one instance where his network in the West Midlands proved invaluable to a client.

He explained: “A client of mine recently wanted to acquire a business but was stuck on one particular element of the transaction. After we discussed the problem I put him in touch with a professional who knew this technical area and the people involved inside out. The two sat down together and my client was able to conclude the deal at an advantageous price because of that knowledge.”

“That isn’t something I’d charge for, but it’s something which requires you to have those networks locally. Someone who jumps on a train and comes up periodically is never going to be able to build those connections.”

When it comes to regional wealth management, Thowless-Reeves knows of what he speaks: before leaving to found Sorbus Partners he spent over four years at UBS’ Birmingham branch (where he is understood to have been the branch’s largest total revenue generator) and before joining the Swiss firm in 2008 he was an investment manager with Brewin Dolphin in Stoke-on-Trent. Among his professional qualifications he boasts an MBA from Warwick Business School and he has served as an external specialist in advanced wealth management for the Chartered Institute for Securities & Investment among other academic positions.

Thowless-Reeves decided to leave UBS amid what he considers a reversal of strategy after nearly a decade of success in the regions, and he has some pretty strong words of warning for the Swiss giant. He notes that previously UBS was approaching the UK regions in exactly the right way; because of its acquisition of Laing & Cruickshank Investment Management from Crédit Lyonnais in 2004 UBS essentially had a “mini-version of London” in each of its regional offices, he said, as the bank had relationship managers who could also do investment management, tax structuring and the like. Whereas previously “all the skills a client would need for their wealth management requirements were satisfied locally”, UBS subsequently began what he sees as an ill-advised move away from this model.

“What they [UBS] are trying to do now is say no, let’s just have the client relationship management done locally and lets backsource the rest of the skills to London,” he said. “So, in effect, what they are trying to do is to implement a strategy which has a 100 per cent record of failure by throwing away the one strategy which has delivered regional success.”

This publication understands however that UBS’ investment process has come from its chief investment officer for several years now, and so while it could be said to be centralised this is much the case for London as it is for the regions. The bankers the Swiss management giant has stationed in the UK regions are “emphatically not ‘empty suits’” a source told this publication, adding that the bank wants its regional bankers to have exactly the same skill set as those in London. UBS has also been particularly vocal about its commitment to expanding in the Midlands in fact, and it has reported significant growth at its Birmingham office in the past three years.

Whether providing local relationship management with the “nuts and bolts” of wealth management carried out from the capital will prove to be a successful strategy for those firms which have chosen this route remains to be seen. What is not in doubt however is the commitment of the big wealth management names to the UK regions, if hiring patterns and new office launches are anything to go by.

Despite Thowless-Reeves’ reservations, it should also be noted that there is an increasing trend towards centralised investment propositions going on right across the industry at the moment as firms move to increase efficiencies and keep costs down, both for themselves and for clients. Whether such moves towards centralisation constitute an “intellectual failure” or are rather an example of the pragmatic compromises which businesses must make in today’s challenging environment is clearly a topic worthy of much debate. On the one hand London-centric propositions might offer more in terms of overall intellectual capital and resources, while on the other regional firms might have the edge when it comes to personal networks and client-centricity. The battle for the UK’s regional wealth is hotting up – in the end it is clients themselves who will decide just how regional they want their wealth management provider to be.