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Exclusive: Wealth CEO exits over 'inappropriate language'

Exclusive: Wealth CEO exits over 'inappropriate language'

The chief executive officer of wealth boutique Henderson Rowe is leaving the company following a number of complaints regarding ‘inappropriate language’, Wealth Manager understands.

Charles Aram, CEO and co-founder, had returned to Henderson Rowe last year to sell the business to Asian fund management firm Rayliant after previously quitting the firm in 2015.

Rayliant chairman Jason Hsu has confirmed that Aram (pictured) is to exit the business, which has around $650 million (£499 million) AUM. Aram has been accused of using racist and sexist terms in the office. 

It is understood that the company is forming an executive committee, which will be headed by Rayliant managing director and chief operating officer Mike Bowers, on an interim basis.

Hsu told Wealth Manager: ‘We were alerted to the inappropriate language. When we saw a formal complaint, we went in and looked at it immediately. We spoke to people who were involved and we concluded three things: One is there is quite a bit of distracting bantering that goes on, that’s one thing we want to address.

‘There are definitely awkward jokes that are in poor taste. We spoke to people about it, some think it’s just bantering, but we were very clear some things are bantering and some things are just in poor taste.’

He added that the final conclusion they reached was that there was clear-cut inappropriate language, which the management team confronted Aram about.

‘To his credit, he said “Jason I am really embarrassed, I don’t know why I said something like that”. It was an enormous lapse in his judgement. He acknowledged that given that he’s made such a large mistake publicly, he doesn’t feel like he is the kind of person to take the firm forward, to align Henderson Rowe’s culture with Rayliant.’

A number of sources have said that a knife was left on the desk of an employee who complained about Aram. Although Rayliant investigated the incident, the evidence proved inconclusive, with no suggestion that Aram had left a knife on the desk.  

When contacted for comment, Aram said: 'There have been complaints at Henderson Rowe regarding inappropriate conduct and an unfriendly workplace. We have made huge progress in improving the investment processes and introducing a new culture and the work has been intensive.

'Both Rayliant and I have been deeply troubled by the allegations. Rayliant and I have agreed that a new leader could better support the firm’s desired culture and as such, we believe that the best path forward is for me to step down as CEO of Henderson Rowe. I remain a believer in the firm's bright future and will do my very best to ensure a successful transition.'

Churning allegations

Wealth Manager has also learned that there was an internal investigation into allegations that the firm was churning client portfolios to increase revenue prior to its acquisition.

In fact, this investigation, Hsu said, delayed the acquisition by a few months as the Rayliant team waited until it was concluded.

It was alleged that portfolio managers at Henderson Rowe were being told by management to make unnecessary trades to increase the commission they were paid by clients.

Hsu confirmed an independent auditor was brought in to investigate unexplained activity, but said they did not find any evidence of systematic churning.

Hsu added: ‘Even though we received a clean bill of health from the auditor, Henderson Rowe decided that there were some accounts, even though it is not churning, which from a dispersion perspective had seen more trading than the average account. So they proactively went ahead and spoke to clients to explain the situation, to ensure that there is no potential liability. We were happy to see them step up and be willing to do that.’

The company identified 15 specific incidents between 2012 and 2018, with incomplete documentation, totalling about £13,300, which was returned to clients as redress.

Hsu added that when the conversation to acquire Henderson Rowe began, the management told him about the investigation. He said: 'The genesis behind the investigation was there was a complaint filed by a departing employee.

'[We said] until we see an independent third party audit of your trades and make sure they are in alignment with your investment philosophy, until we have evidence of it we won't move ahead with it. We spoke with executives there. We also wanted to assess if there was a culture where the client manager would churn and harm clients.'

He said the company is also looking into moving to an all in fixed fee model of charging, to move away from commission.

While admitting that the culture at Henderson Rowe is different from Rayliant's Hsu also said that he does not want to be unfair to the remaining people at the company. 

Hsu added: 'I’m hoping we can make lemonade out of lemons. Judgement lapsed and it was very embarrassing. It’s probably within the wealth industry, a lot of the bantering can be very insensitive. We don’t stand for that, we don’t tolerate that and firms need to do more to train and coach people, and people need to be empowered to escalate things.'

Henderson Rowe in numbers (last accounts on Companies House to June 2017)

  June 2017 (£) June 2016 (£)
Turnover 6.4 million 5.5 million
Pre-tax profit 905,000 816,000
Administrative expenses 5.5 million 4.6 million
Cash at bank & in hand 1.3 million 1.1 million
Staff costs 3.9 million 3.6 million
Average number of employees 24 23
Directors’ remuneration 892,000 892,000
Highest paid director 440,000 462,000
Interim paid dividends 270,000 265,000
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