'There are a lot of smoke and mirrors that go on in the investment management space unless you have someone to help you navigate through it,’ says Guy Christie, the newest member of Chawker & Co, the investment management and wealth consultant.
Chawker was set up in 2011 by Edward Goodchild (pictured left, above), whose employment history includes stints at private banking heavy hitters such as Lombard Odier, UBS and Coutts. He recruited Christie, who has over 20 years’ experience in the private wealth industry at firms like Newton, Schroders and Seven Investment Management, back in May.
Goodchild says he initially set up the business as a response to ‘a gap that I saw which was that the owners of capital were at a disadvantage when dealing with the financial colossus’.
‘Because on the one side of the table you have clients who have capital and on the other you have providers of products and services who have all the intellectual knowledge and have the commercial imperative to sell products and services to those who have capital,’ he adds.
That is where Chawker comes in. Goodchild and Christie say that their role is ‘akin to being the chairman of the investment committee, rather than being the CIO’. They ask the tough questions, both of their clients and the investment managers who run money for them, and use their experience to get the best deal for their clients.
‘We are picking the right managers, at the right fee level, with the right instructions to run portfolios on a discretionary basis,’ Goodchild explains.
They also find out what the purpose of the money is, what the end goal is and what troubles clients about money.
Christie adds: ‘We try to identify who should be doing that for them rather than saying we’ll do it for you. Finally what they should pay for that service. Then we will help them understand whoever is managing the money and whether they are doing a good job or a bad job.’
He says that in private investment management, one of the problems is that wealth firms’ objectives are all about gathering and holding onto assets to rake in the fee income. This means that they will not turn clients away and tell them to go elsewhere, even if it might be a more appropriate option.
The pair insist that they have no conflicts as they do not actually hold the money, therefore their fees do not depend on an increase in assets under management. Chawker’s services have a fixed price and all clients broadly pay the same amount, although the fee is not disclosed.
‘From day one I’ve said get paid once, by clients, by invoice. There is no middle ground in that. You do a project, you do it for an agreed price and get paid for it,’ Goodchild says.
They do not have assets under management and declined to disclose client numbers. Looking through Companies House, the firm files as a small company and therefore the accounts do not shed much light into how much revenue and profit the business generates.
But coming from a background of managing portfolios, do they not miss it?
‘The investment management industry in the private wealth space has become very centralised,’ Christie explains. ‘It has taken out the involvement of the individual client manager and become much more of a sausage factory. Most of the people in the private client world are working as relationship managers.’
Goodchild adds: ‘The role that we were doing, doesn’t exist anymore.’
Therefore, the answer is no, they do not miss it and are happy to continue sitting on the same side of the table as their clients.
Goodchild and Christie view their clients as sitting in three different categories: those who are short of time; those concerned that they do not have enough information and understanding; and finally those who are overseas, but need representation in London.
One thing that brings together all the client types however, is that they will all have a significant portfolio of assets.
‘Given our background and my particular history, if someone doesn’t want to have any portfolio of assets, it’s not that we couldn’t look after them, but there is less of a gravitational pull towards us,’ Goodchild says.
While Christie joining the team certainly helps, Goodchild points out that no matter what they do there will always be a capacity constraint as the nature of the Chawker offering is bespoke and very hands-on.
Christie highlights: ‘The reality is in a small firm like ours we will have a small number of clients because they have to find us. It’s never going to be an enormous area, but that being said, I think the experience I’ve had so far is that sophisticated individuals do understand there is a benefit to it.
‘The cost benefit is quite attractive. If you have someone not charging too much, and you get lower fees as a result, if you have a good manager and you know your money is invested in the right places, [there is value].’
Goodchild is open to recruiting further and says: ‘We are in discussions with a couple of other people, but we are not
in a huge hurry. Someone [joining us] needs to be a well-qualified generalist in a sea of specialists.
‘And as the world gets more specialist, it’s harder to find those well-qualified generalists.’
In providing advice to wealthy clients who need help navigating the world of investments, one of the key areas that Goodchild says they try to address is the knowledge imbalance that exists between clients and providers.
He suggests that the client should be the one setting the agenda, not the fund or wealth management firm.
‘At the end of a meeting, either Guy or I will write up a meeting note and have action points. For accountability, I always thought it odd that all the information is given and retained by the firm,’ Goodchild says.
‘Very few clients take detailed notes during meetings. This way there is an actual record and it’s not about trying to catch anyone out, but it’s trying to build a collaborative model around the client – and it means that everyone is accountable.’
Another area they look at is empowering clients to make fully informed decisions about what to do with their capital.
Christie points out that when the discretionary model was set up 30 years ago, the client did not have access to enough information to make their own informed investment decisions.
‘So they were dependent for investment on the investment manager. Now their clients are better informed than they are. They have more information at their fingertips.’
However, now that dynamic has changed, which puts private client advice under pressure, while increased regulation has also had a significant impact on how the industry will evolve going forward.
‘The traditional investment management industry was saying that there are two parts: investment management and service. The regulatory environment has made some of the service elements very difficult to perform,’ Christie says.
‘If you can’t provide the service and the regulatory environment has meant that
every portfolio becomes similar, what you’re buying is a commoditised business, and if that’s true why are you paying the same fee you always paid?’
Goodchild adds: ‘In a way it’s been hollowed out. If you take away that [service] and give people a cookie-cutter approach, why are you still paying 1% when you can buy a Vanguard fund at 20bps?’
The pair believe that as generational change takes place, the fee structures that wealth managers have is going to continue to come under further pressure and continue to be eroded.
In addition, Christie says that arguably ‘the great failure of the investment management industry in the last few years’ has been a focus on the downside of portfolios.
‘The whole universe is taking less risk. The private wealth industry has not put risk on the table to the level it should have done, so it has massively underperformed the risk universe.
‘But anyone save you money, they just stick it in the bank, that’s the easy bit. But it’s a cop out. When things are good, you need to make some money.’