The firm's head of investment management has said there is a market of high net worth individuals who are not being offered a personalised service.

There's a gap in the high net worth investment market, and one that wealth management firm Charles Stanley aims to fill.

The head of investment management at Charles Stanley says the UK-listed business wants to reach out to market of investors with £500,000 ($668,000) to £5 million of investable wealth. These investors, he said, tend to be overlooked for a variety of reasons. 

At issue is what is the "sweet spot" for wealth managers in terms of ideal clients: is it to be found at the highest levels, in the billions or far lower? Over the years this publication has heard the argument that the richest clients tend to bring more complex demands, and paradoxically can be less profitable to serve. On the other hand, below a certain level, the economics become tight, particularly as compliance and other costs have bitten into margins. In 2016, HM Revenue and Customs, the UK tax authority, looked to extend the definition of high net worth individuals (HNWIs) to people with net assets of more than £10 million. And the market of HNWIs is continuing to grow according to a EY Wealth Management Outlook Report, which said that the net investable assets of HNWIs will grow by $14.2 trillion to $69.6 trillion by 2021. This is also a market that needs to be serviced before fintech companies take over, as a report by PricewaterhouseCoopers said that 69 per cent of HNWIs are now using online and mobile banking for their financial needs.

“We believe that there is a group of clients with between the £500,000 and £5 million of investable wealth, who are not mass affluent, who may not want to be commoditised, but equally not of the scale that the private banks are interested in giving a personalised service to,” Gary Teper, head of investment management, told this publication. 

“You could, I am sure, go to private banks with £1 or £2 million, but they are likely to offer you a pretty vanilla and impersonal proposition. And these are people who see themselves as wealthy and successful. We think there is a place for a personalised, bespoke differentiated proposition for that group. It is a potentially, rich area which is underserviced by the sector," Teper said.

“I think we can be a little bit too focused on investments as opposed to the broader client lifestyle issues. I discuss with my investment managers that they [need to] send some very detailed letters around the portfolio construction to their clients, where the client is less focused on that. I sometimes suggest that instead of talking about benchmarking, talk about their goals. I know we have those conversations but then try and translate them into investment speech, but do clients care if they have a portfolio with a particular equity or collective or if it is full active or passive investments? Some may but the majority care about  [how] much they have, and if they are sick that they have enough to be looked after,” he continued. 

A US Trust study in 2015 - Insights on Wealth and Worth - found many HNWIs were being underserved by their advisors, and therefore were not consulting their clients on areas they considered a priority.

Charles Stanley is continuing to grow its business operation with new ideas such as reaching out to certain categories of client. In January, the wealth firm said its assets under management rose by 2.5 per cent in the final three months of 2017 to reach £24.9 billion.

Strategy
Charles Stanley has been restructuring its UK operations with the opening of "super offices". This publication has reported on a new office in Southampton in January, and the merging of its Reading and Oxford operations to open a new office in Botley in December.

This isn’t the only firm planning to bolster its UK offices, as UBS and Julius Baer have recently increased office locations in Scotland, the North West and London.

Teper, who joined Charles Stanley in 2000, also spoke about the firm’s business development plans, and what the next direction would be for the firm.

“We now recognise the benefits of scale in the way we operate,” said Teper. “Historically, we were more dissipated and had smaller teams, for example, in the Thames corridor; we were in Oxford, Reading and Newbury. But the opportunity to bring teams together allows you to get to scale. The marketing people like to use 'super' teams, but in truth this is about scale. Bigger offices means you can bring in more people together, it gives you scale in terms of business development. What we wouldn’t do, which we have done in the past, is open a two-man office in a location. For example, I would love to have offices in the North East. But we need to be at that five or six investment manager level, with support staff. This will allow the office to be a credible offering.”

Teper added: “We would be interested in the North East. We only have one office in Scotland and nothing yet in Northern Ireland. It is not so much about being in certain areas, it’s more about us saying if we can find good people, who we think have the same ethos as ours and can add value to our business then we are interested. In this industry you sometimes have to be opportunistic, you can’t be only strategic. Yes, I would love an office in the North East, but if another opportunity in the South West were to come up with scale, then we would look at it, notwithstanding that we already have a large representation in the South West.”