David Pitman, the recently installed chief executive of Broadstone Pensions & Investments, discusses why the "Lone Ranger" model of servicing clients can be the cause of various problems.

David Pitman, the recently installed chief executive of Broadstone Pensions & Investments, discusses why the "Lone Ranger" model of servicing clients can be the cause of various problems.

Firms which appoint one person to manage both the relationship with the client and make investment decisions could be setting themselves up for a fall on a number of fronts, David Pitman told WealthBriefing in an exclusive interview at his firm's London headquarters.

While it is a model employed by some of the best-known and largest names in wealth management, giving wealth managers dual responsibility for both the relationship with the client and investment management can be a recipe for disaster, Pitman said.

The problems with this “Lone Ranger kind of management” are manifold, according to Pitman, not least due to the fact that it is difficult for one person to embody the necessary dual skill set to fulfill both roles: finding a combination of top-flight investment expertise with people and sales skills is no easy task.

Possible problems

Aside from the fact that the “Lone Ranger” model creates the potential for “big-hitters” to take a whole swathe of clients with them when they change employer, Pitman also notes that this model increasingly flies in the face of what regulators want investment houses to deliver to clients.

When clients’ affairs are handled by one single person, “you can easily end up with two clients having very different portfolios despite their having very similar needs”, he points out, adding that “in many cases there is a lot of commonality of investment needs” among various client segments.

Broadstone, for its part, opts for a model whereby front-line relationship managers deal solely with the actual client relationship and investment management decisions are taken care of by a centralised team of specialists.

While this “team banking” approach has its big-name fans, Coutts and RBC Wealth Management to name but two, there are still examples, like that of EFG International, where bankers are given full control of investment management on an almost entrepreneurial basis.

Divergent models

While firms such as EFG – and, it must be noted, many others - certainly seems happy to avoid what might be viewed as “a one-size-fits-all” client investment strategy, Pitman is adamant about the advantages of a team banking perspective, not least from the perspective of branding.

Rather than the “banker being the brand” and owning the client virtually in their own right – with all potential problems that entails – Pitman advocates that relationship managers function more as a figurehead of deeply-held brand values. “We want clients to feel there is a team and a brand behind the relationship manager,” he says. Various commentators have of course pointed out the relatively weak brand differentiation among wealth managers in the UK, and the need for firms to really “live their brand” from the boardroom down, in terms of embodying brand values in all its activities.

Branding is certainly high on the firm’s agenda, as its own rebranding was only announced earlier this month. The change of name to Broadstone comes after Oakley Capital Private Equity bought an 84.4 per cent stake in BDO Investment Management in November of last year and installed Pitman as its new chief executive to succeed Richard Spilg. Pitman, the son of one of the UK’s most well-known financiers, Sir Brian Pitman, was latterly director of marketing at the London Stock Exchange, and is also a former CEO of the wealth management business of Close Brothers.

The choice of the new name Broadstone was the product of a six-month consultation period during which hundreds of names were considered, with staff extensively involved, Pitman said. Conveying simplicity, soundness and straightforwardness were key priorities, he added, but the name change was about more than simply semantics. “We were keen to emphasise that this is not just a ‘respray’,” Pitman explained, “instead we started from the question ‘what is our brand promise?’”

The need to differentiate

Broadstone, like many of its competitors, is busily working to differentiate its proposition at a time of both industry consolidation and regulatory upheaval. Again, like a number of its peers, the firm emphasises the financial-planning element of its offering, as well as greater transparency over fees. As well as “simpler and cleaner charges agreed up front”, what the industry must do is eradicate the conflicts of interest which may arise from commission incentives and the sale of in-house products,” says Pitman, echoing comments from a number of quarters in recent years – not least those of the Financial Services Authority.

What we are seeing now is “a real gap in trust and clarity” between the industry and clients, with “inherent conflicts of interest in many firms,” says Pitman. Instead, in his view what clients need is absolute certainty that their wealth manager is structured and its staff incentivised in such a way that they work in clients’ best interests. As he points out, “choosing a wealth manager is one of the most important decisions you’ll make” and while brand strength will probably not be the sole driver behind such a choice, it could well be the additional push that makes clients make that “leap of faith”, Pitman concludes.