Thomas Miller Investment’s (TMI) head of wealth Matt Phillips has strong opinions about many things, but human conduct and interaction is what seems to excite him the most.
A big fan of behavioural finance and the workings of the mind, he sees wealth management as a means of helping people, something he believes the industry has forgotten.
‘Have you read Thinking Fast and Slow?’ he asks. ‘It is a great book that tries to get us to understand how our brain works and the biases that occur that we are not even aware of. As a consequence, it is asking us to question our own conclusions and decision making, which might be why I am using this evidence to validate my thinking.’
He refers to a study which recorded a change in people’s behaviour when they get past a savings amount that is equivalent to their annual salary.
‘Your risk metric suddenly changes and you want to validate that with someone,’ he says. ‘This is what our business model is based on and it is not just the fear factor. It is actually that we can help people build long-term plans, because the human being thinks in 18-month packets.’
Now emerging from a restructure that saw TMI post two consecutive years of losses, Phillips, its managing director, is confident that the company is now on the right path.
Having joined the firm in 2014 after its acquisition of Broadstone, where he was managing director, he says he feels liberated from the constraints of working for a company owned by private equity.
For him, the independent ownership model of TMI means no more tension between short-term management goals and building long-term bonds with clients.
‘We know that private equity is not going to own you for 20 or 30 years, but your client relationship could go longer than that,’ he points out.
Although the short-term pressures on the business have been removed, that is not to say TMI is snubbing expansion.
Quite the contrary, an acquisition is in Phillips’s immediate plans: he has been in talks with several smaller companies since the summer and is now drawing closer to sealing a deal with one of them, which is understood to be based outside London.
The strategy is to acquire one smaller firm a year for the next three years and potentially even further than that, depending on the opportunities that arise.
The balance sheet allows for that. Phillips says that from a £272,000 loss in 2015 and a £65,000 loss in 2016, this year’s accounts will have a positive number, with profit potentially around the £200,000 mark for the wealth management arm and around £1 million for TMI as a whole.
The recent losses, in part, were driven by heavy investment in the company’s technology, as it implemented a new customer relationship management (CRM) system and built a bespoke portal and multi-platform communication application for its clients.
On the upcoming acquisition, Philips says it is not being driven by a desire to increase efficiencies through scale.
‘We want to grow, and the firms that we have looked at are already growing ones. We are not talking about huge acquisitions, but smaller businesses that make a suitable fit.’
But a bigger size does not come without its challenges, Phillips admits. The danger of shifting towards a more corporate ethos is something that should be avoided at all cost, he says, and so this makes a cultural match, with new partners imperative. The success of the current model is based on the personal element, both in client and staff relationships, he says, and this has to remain centre stage.
This is partly why he rules out robo advice becoming a prominent service for TMI in its quest for expansion, and that is despite the fact the firm is soon to launch a robo offering aiming to capture a wider demographic.
Still, Phillips categorically rejects the idea of wanting to build a tool to penetrate the mass market. The upcoming service is designed to capture an audience that might not yet fit the company’s core, but may well have sufficient assets in 10 years.
The profile of the average core client is that of a senior exec or similar in their 60s, who could have had a liquidity event, as well as some high profile clients in entertainment or other fields. The company is also on the Lotto panel.
‘I do not want to compete with Nutmeg. They are probably one of the contenders who are going to win this race.
I know [Nutmeg CIO] Shaun [Port] and I really wish him well, but why would I compete in a place where I would have to spend a gargantuan amount of money on an outcome which at best cannot be seen and at worst looks like a fallacy,’ he says.
‘I am not anti-robo; but for us, replacing the human being with a robot just does not work. I could produce something so long as it maintains the feel and touch of the core and allows the ability to talk to a person when you need to.’
One of the examples Phillips is fond of mentioning to prove his point is that of a client who, after unexpectedly coming into money, asked one of the company’s advisers to accompany him to an appointment to help with purchasing a house.
‘People buy people and we employ really good individuals that should and can be trusted. We use technology to enable the relationship, not replace it.’
The firm’s 80-strong staff is split almost equally between wealth management professionals and other departments, including compliance, administration and IT. Phillips is now looking to recruit for several senior positions, but he says there is no set limit when it comes to how many hires will be made. The priority is finding people who are right for the firm, he stresses.
‘I am looking for experienced, highly qualified professionals who have been dealing with their clients for very many years and have established a good track record.
‘The business is not about me, it is about the people in it. And I would like to think that if you interviewed everyone in the firm, you would see a commonality; they are not like me, thank God, but you would find a culture of people that you would recommend to your mother if she needed advice.’
Managing £3.4 billion in assets, TMI’s client base has grown by about 100 since last year, mainly through referrals from solicitors and accountants. The total number of clients currently stands at 1,196, with the majority being private clients and only 32 on the institutional side.
Although most clients are in the silver age, perhaps unsurprisingly, Phillips has no intention of putting in extra effort to reach the young. He thinks the older generation has a more pronounced need, and likely more money, than millennials, a term he particularly dislikes.
‘It looks like the sort of thing that people try to tout as a truism, that if you are a good business you need to have a strategy about how to capture the new generation,’ he says.
‘It does not stand up to any sort of analysis. You could spend a great deal of money going after a demographic that does not seem to have any brand loyalty and is more likely to use technology.
‘And we still do not know how millennials are going to behave when they are no longer millennials.’
Having said that, Phillips does dream of helping to educate the young and diversify the industry, but this falls under his longer-term aspirations.
‘TMI is an equal opportunities employer, but there is more than we can do. We probably reflect the current make-up of City firms. The overwhelming presence of white males in the industry is a reflection of where the wealth has been, but that is rapidly changing,’ he says.
Philips is also now a non-executive director of a South East London school, helping with financial decisions on how to use its budget.
‘I hope one day I could be more involved with the people of this school. Do people in that school of minority backgrounds aspire to get into the City? Do they know what it is?
‘What I would love to do, looking five to 10 years forward, is have a graduate training scheme, which would be totally blind and started to address some of the inequalities.’
Such plans will have to wait though.
‘As a business, Thomas Miller Investment has both short and long-term needs and there are a lot of changes that are coming through at the moment, like Mifid II and GDPR. We have to keep the business alive and prospering in the short term to be able to help society later on.’