It is rare that a deal only takes four weeks to complete, but that is exactly how fast everything moved after Massimo Scalabrini from Azure Wealth and Monica Lin from Hywin Capital UK met.
The duo’s partnership came to fruition at the start of the year when Hywin Capital UK acquired Azure Wealth, which was founded by Scalabrini in 2011, and the combined business was renamed Hywin Wealth.
‘We were very lucky to find Massimo and his team. It was a very friendly deal,’ says Lin, now executive chair.
‘I think the whole deal took us only four weeks, with the due diligence and the negotiations. We signed the contract at the beginning of December, we submitted a change of control application on 22 December and we got approved on 11 January.’
The integration of the two firms was similarly quick and the UK wealth management business had its official launch on 20 June. Through this process, the company was able to retain all of its personnel, which now stands at 14 with ambitions to expand, and preserve the culture of Azure as well.
Hywin Wealth has a close operational relationship with Hywin Financial Group, which was established 30 years ago and has its headquarters in Shanghai. Although Hywin Wealth operates as an independent company in the UK, Lin points out that having such a strong shareholder will provide them the backing to achieve their goals. ‘At the group level, assets are £12 billion,’ Lin says. ‘Over the years they benefited from high growth in the Chinese economy. So, in US dollar terms, it’s around $15 billion globally. The group has companies in Hong Kong and the US as well.’
She adds that in the UK, Hywin Wealth will also be able to take advantage from the continued growth in the Chinese economy, as more and more wealthy expats require financial services.
‘It has so many internal and external drivers. I would like our team to be prepared to be the best wealth manager for the Chinese as well. [I want] to open our doors to more and more Chinese who come to invest in the UK and I think that’s an increasing trend. We are facing the challenge that if you’re looking from the West, it looks out of date. But they are still evolving and the wealth is growing.
‘The Chinese wealth management landscape is very competitive, but not very differentiated. So you find people who are product-driven and not really service-driven. As more people become rich, the pool becomes bigger and bigger, so you will need to differentiate. You will eventually need a service like the one Massimo will be able to provide. The whole of Chinese wealth management will need to be upgraded.’She argues that in London as well, clients from China are only generally offered products rather than a service-led proposition. But Hywin Wealth can combine both worlds, she says, having an insight into Chinese clients and their needs.
Scalabrini adds: ‘The strap line of the firm is listen, solve and deliver. We wanted to be the trusted adviser of all our clients. We try to build a relationship that will hopefully be long lasting, so we can have a clear understanding of clients’ worries or help proactively by introducing them to lawyers or trust advisers.’
For Chinese investors coming to the UK, this can be crucial, as they can feel a little lost, he explains. Therefore firms need to really understand them and their needs, which is Hywin’s proposition. At the moment, Chinese clients are a minority for the firm, but this is expected to increase.
The main service of the business is discretionary wealth management Scalabrini says, pointing out that the firm also tries to educate its clients so that they feel comfortable handing over responsibility for day-to-day decisions.
The firm has three model portfolios: conservative, balanced and growth, which are available in dollars, sterling and euros. However, Scalabrini is quick to note that there is inevitably an element of tailoring, which for him can differentiate Hywin from the private banks it is competing with.He says: ‘[In the UK] you have the big banks that have multi-services instead of lending, banking and investment. They try to service clients and offer all the products, some of which they are good at and some they are less good at. We compete with the private banks.
‘Then you have the independent wealth managers. I would divide this into two distinct groups. One is companies that are very product led. Their investment strategy is to create products and then distribute them to their clients and beyond. The other group is client focused. They are problem solvers, have a good understanding of investment and also understand a bit about tax and trusts – it’s a very holistic approach. The strategy is designed to solve the client’s problem. We belong to this group.
He adds: ‘When I look at a big bank, the client has to fit the product of the bank unless you give them hundreds of millions. Whereas an independent wealth manager like us, we have the ability to accommodate the client’s view, his tax position, or if they just want to focus on equity or hedge funds because they already have a bond manager.
‘Models are important – we use them at the investment committee level to change our asset allocation. Then you adapt the model to the specific person.’One issue that the duo is focusing on at the moment is the generational shift – how that will impact wealth management and how their business can help.
‘I think we are at the cusp of a big generational transfer of wealth,’ Scalabrini says. ‘I’m dealing with clients who have been with me 15-20 years. They are starting to think of this.’
He argues that over the next five to 10 years, this shift will take place and wealth will go from the generation that created it to the younger generation.
‘If you’re like us and feel that you’re very close to your client, hopefully you will also be close to the spouse, the children and the probability of retaining the business will be higher,’ he says.
‘Other organisations only focused on the patriarch or the matriarch and didn’t spend time getting to know the younger generation, and they are going to struggle.’
He says that at Hywin they encourage clients’ children who are at university level to come in and spend a few months at the office to learn more about finance, saying ‘it’s a great educational process’.
Lin adds that while the company has ‘hard goals’, such as tripling its assets under management, the ‘soft goal’ of education is also crucial.
‘European clients and old money are getting older and older, and they are facing how to retain their money and pass it over to the new generation.‘And the new money in China and Singapore is facing the same problem,’ Lin says.
‘It’s important because they don’t have any experience of doing this, their father never did this. This is something we are actively involved in.’
Going back to the company’s future growth, Lin is confident that although an ambitious goal, tripling the AUM (which are undisclosed) is achievable.
She highlights how the company differentiates itself and can offer value to clients.
‘If there is no differentiation, people will just pick price. We will never be able to compete on price. However, [Massimo] will do things for free if he thinks it’s good for the client, and not take money from a client if it’s not good for him. Our culture is already a differentiator. Also our language skills.’
Scalabrini, for example, speaks five languages — Italian, English, Spanish, French and German — while the team is also very international, including Mandarin, Polish and Greek speakers, among others.
He adds: ‘It is not unusual to find a mix of cultures in the wealth management business because it’s an industry where you get many different clients from different parts of the world, but I think we are quite an eclectic team for sure.’