When the UK Business Secretary and prominent Liberal Democrat, Vincent Cable, recently attacked parts of the financial industry as “spivs”, it underscored how much work the banking sector faces in getting its message through in an often hostile climate.
It was therefore timely that a newly-minted wealth management organisation, New City Initiative, met with Cable late last week to explain why the industry deserves a fair hearing and why it has constructive ideas on how to avoid future financial blowups.
Daniel Pinto, the founder of NCI and chairman and managing partner at Stanhope Capital, the UK-based multi-family office, is determined to make the case for independent wealth management. In particular, he wants politicians such as Cable to understand that there is a world of difference between independent wealth management and those big, banking conglomerates that sustained massive losses and had to be bailed out by the taxpayer.
A word that Pinto stresses is “independence”. It signifies how good wealth management, as he sees it, shuns the criticised practices of “product push” and treats the long-term needs of clients as paramount.
“The New City Initiative came about because the values we hold at Stanhope are shared by many other firms but not properly represented in the public debate,” Pinto told WealthBriefing at his firm’s Portman Square offices in London.
“The reality is that these values have become more and more unusual, much to the dismay of clients. That is the premise of NCI – it is about reconnecting with clients and going back to the roots of what the City is about,” he said.
As an instance of such values, Pinto says he favours the idea of getting the financial regulator, the Financial Services Authority, to insist that investment firms disclose to clients if fund managers are co-investing in a new fund and also to divulge the exact size of that co-investment. This is all about showing to what extent investment firms “eat their own cooking”, Pinto says. Such behaviour is the most effective way to align the interests of client and investment professional. To highlight this topic, NCI recently issued a white paper entitled Alignment of interests: fixing a broken City.
NCI already has plenty of clout as a think tank and source of opinion. It has about 25 member firms, such as Fleming Family & Partners, Lord North Street, Sand Aire, Vestra Wealth, Veritas, Stonehage, Odey and Asset Management. In total, the group’s members oversee a combined £150 billion of client money.
Of course, NCI is by no means the only group that gathers financial professionals together to discuss policy and ideas in the areas that affect wealth managers. At the global level, a group familiar to readers is the Society of Trust and Estate Practitioners. The managing director of ClearView Financial Media, Stephen Harris, has recently called for a global lobby group to defend the wealth management sector. (The company publishes WealthBriefing). And in the UK, there is, of course, the British Bankers’ Association – although it tends to mainly centre on retail banking. APCIMS – the Association of Private Client Investment Managers and Stockbrokers – is another lobby group.
Pinto is at pains to stress that NCI is not a lobbying organisation looking to block legislative proposals. Instead, it wants to set out “best practice” ideas on how wealth managers should behave.
“We’re a think tank and we are not a lobby group that is just going to defend a particular set of interests. It is about being a force for arguing for new ways to reform financial services. This group is not populated by academics but by practitioners,” said Pinto.
Another objective of NCI is “how to reconnect with society in general”, Pinto said. From next summer, NCI members will take on about 20 students in their second and third years and give them a taste of working in wealth management, an opportunity that is all too rare, he said. These students will be drawn from outside the most prestigious universities and colleges, he said.
“We are giving a person who may have never dreamed of working at a firm like Stanhope Capital the opportunity to do so,” he continued.
“We want the City to be meritocratic because that is the only way, in the long run, that it will be doing well,” Pinto said.
NCI will also look at such key issues as business models, such as encouraging best practice in how to set fees and charges. For example, one vexed issue is that of performance fees, he added.
Pinto’s efforts in pushing best-practice ideas in wealth management deserve the widest possible hearing, not just from Cable, but from other policymakers. WealthBriefing will closely follow the debates as they unfold in the months ahead.