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Profile: How WH Ireland got its groove back

Profile: How WH Ireland got its groove back

The pile-drivers outside WH Ireland’s City HQ – deep in the tangle of narrow medieval alleyways that are knotted around Edwardian buildings and more recent glass and steel office blocks between Monument and Cannon Street stations – are loud enough that the boardroom gently thrums.

The 21st century building boom outside, atop a street plan laid out with the needs of a very different period in mind, offers an apt if crashingly unsubtle metaphor for where the group has found itself recently.  

The past six years have seen three chief executives come and go, plus a painfully extended two-way takeover battle with an entrepreneur popularly known as Doctor Death. This period of change is now over and the group is firmly focusing on wealth management. And it would appear that the topography of a successful business is visibly taking shape.

The gestation has at times been painful however, and involved compromises no less tricky than trying to fit a 25-storey office block onto a piece of ground whose contours were defined by cattle drovers on their way to market, and not the needs of a capital of finance.

 

‘We are trying to be a less newsworthy company nowadays,’ chuckles chief executive Richard Killingbeck, who has held the post for just over two years, after joining in mid-2012 from Credit Suisse.

‘WH Ireland was a small business but also obviously a very complex business, the result of very different markets over the last 10 years, and the need to build new revenue streams. It took a while just to understand how the whole thing fitted together.

‘There has always been an entrepreneurialism to WH Ireland and the last thing that I want to do is dampen it. But it wasn’t really focused. What we want to do is focus it on something worth building.’  

Killingbeck took charge of the company following the surprise departure of predecessor Paul Compton in early 2013, amid reports of a Financial Conduct Authority (FCA) investigation into improper share dealing. The head of its Cardiff office was subsequently suspended, while Compton later bought a private wrongful termination suit, which was settled out of court for an undisclosed sum.

 

Compton himself had taken over the role from Richard Ford in 2010, following the collapse of the company’s abortive purchase of stockbroker consolidator Blue Oar, which had left the would-be predator vulnerable to a narrowly averted takeover by its former prey, Blue Oar founder Edward Vandyke, colloquially known in the City as Doctor Death.

What were regularly described by Wealth Manager at the time as ‘boardroom bust-ups’ were an obvious distraction for management, but they also obscured the fact that the company was clearly strategically recognising and addressing the weaknesses in its business model.

In response to plummeting brokerage revenue in 2008 and a stinging £4 million full-year loss, the company appointed its first team of financial advisers as the kernel of a full-spectrum wealth management business in mid-2009, and has continued to steadily expand on the unit since then. 

Aided by its purchase of former rivals Pritchards and Seymour Pierce, the company has grown private client assets under management from £1.6 billion at the end of 2012 to a total of £2.7 billion.

The share price has appreciated 127% over the last five years. A 70% fall in pre-tax profits from £1.7 million to £500,000 in 2014, as the group shut down offices and reorganised management, serves as a reminder that the transformation is ongoing, however.

 

Having begun to gain traction as a broadly national wealth manager, the company is now grappling with issues faced by most private client firms of its size, rather than challenges peculiar to it.

‘From the results, you can see a demonstrable change as revenue has shifted,’ says Roddy Buchanan, deputy head of wealth management at WH Ireland.

‘A lot of that has been a shift internally – clients moving from advisory or execution-only to discretionary.

‘We have tried to drive that from the centre but you need the change to bring people along with it. And that can be much more of an uphill challenge [than deciding overarching strategy]. We have to value the skills within the group and build on them, rather than just trying to deliver an automated package that leaves very little room for an actual client relationship, and which I am not at all sure anyone actually wants,’

John Eastgate, deputy head of wealth management, has been at the business since 2001 and witnessed the substantial change over the years. He agrees with Buchanan’s comments, recognising the need for actual relationships in wealth management today.

 

The company has, like all its competitors, increased its oversight of asset management in response to the regulators’ mission to ensure consistent client outcomes. Buchanan is reluctant to describe this as a centralisation however. The emphasis remains on bespoke client management, and in particular on avoiding crystallising tax events around historical portfolio holdings.

‘We use models and they remain an excellent starting point. But because there are always constraints around what you can do – namely taxation – one-size-fits-all does not make sense. [Security selection] feeds off a number of managers from around the group. We do have controls to ensure consistency and we certainly monitor performance, so we do have systems in place to ensure no office is able to be a risk to the group.’

Killingbeck, who told Wealth Manager at the end of last year that the company had spent £180,000 on FCA Skilled Person reviews into client paperwork, added that the business had sought to draw a line under any unforeseen hereditary nasties by fully reviewing and replacing all Pritchard and Seymour Pierce client paperwork to ensure they were up to standard.

 

In cases where the company has not been able to fully recreate a paper trail, it has taken the step of suspending the client relationship, although it said these were ‘very low’ in number.

In line with greater professionalisation has come geographical consolidation.

The company relocated its headquarters to London from Manchester, where it was founded in 1870, six years ago. Of the company’s 240 staff, 95, including most of the investment management team and all of the directors are now working from the City, with the 95 who remain in Manchester primarily administrative, and the remainder spread across its 12-strong office network.

‘Sixty per cent of the company’s revenue producers are now in London,’ says Killingbeck. ‘We are not immune to the cost pressures that come from immunising risks, and have created new positions in regulation management and expanded compliance.

‘The cost of business has increased as the pace of regulatory changes has stepped up, and we are actively trying to get ahead of the curve rather than follow it. Over the last three years [our] revenue has grown 20%; compliance costs are still below that – just.

 

‘And there are the costs of getting all staff [qualifications] up to CF30 or above, and ensuring we have some degree of oversight and control over regulated functions. These changes are here to stay and they make sense. We just have to decide how we embrace them.’           

Partly that will mean a much more active marketing role, with a head of business development who has a track record of winning IFA business due to join the company shortly.

Killingbeck added that he does not want to pre-empt the review of potential revenue streams that will be their first task on joining, but third-party advised assets were the obvious untapped field of opportunity that WH Ireland is exploring.

‘We need to look at how we offer and sell our services. We have largely been about word of mouth and client referrals until now – we have not made a big splash in the adviser community. In some ways it is nice to not be in the vanguard of this. We are able to look at previous experience and see what has worked or not worked for others, and how we can fit into that field.’


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