Before joining Waverton earlier this year as chief executive, Nick Tucker wrote a list of criteria the job had to meet to lure him to what he says is his last role in the wealth management industry.
Tucker (pictured) has nearly 30 years’ experience building wealth management businesses in the UK and overseas. Prior to Waverton, he spent seven years as head of UBS Wealth Management, a role he left in 2017, and before that he spent 23 years with Merrill Lynch, latterly as head of private clients UK and Ireland.
But Tucker says his final role in wealth management had to be a special one at a special company, so what was on his wish list and why did Waverton fit the bill?
“I wanted to have total control, I didn’t want to have a headquarters in, say, New York or Switzerland, where you have different agendas that aren’t aligned with British clients,” he says.
“I wanted to be able to eyeball the owners of the business and, in a perfect world, be part of an owner-managed business.”
Waverton had ticked that box in 2013 when it became an independent owner-managed investment firm after Credit Suisse sold the business to Somers Limited and the existing management team. The business started life in 1986 as JO Hambro Investment Management, before being acquired by the Credit Suisse group in 2001.
Tucker aspired to join a firm with an appealing culture. In his words, that meant “nice people who have a passion for what they do and for their clients”. He also sought an organisation with ambition and where he could make a difference.
Arguably, however, what most attracted him to Waverton was what he calls the firm’s “secret sauce”, which is its use of individual securities to construct client portfolios. This, he says, enables greater investment flexibility and lower costs.
“The large banks are either investing passively, where you can keep the costs down but there is limited added value, or they’re doing funds-of-funds models where the TER is about 2.5%,” he says.
“Capital market expectations are now 5%, so if you’re giving up half of your returns in fees, it doesn’t make sense. With individual securities, our costs are low.”
Even our older client base has become used to Zoom
Waverton was the smallest of the three firms Tucker spoke with in the period following his departure from UBS, but he likes the boutique feel and ultimately it was the only one that ticked all the boxes.
He joined the firm in February this year, just prior to the global outbreak of Covid-19, which sent most of the world into lockdown and caused a dramatic market sell-off. It was a real baptism of fire for him and a test for the company.
“It’s amazing how we barely skipped a beat,” says Tucker, talking about how Waverton adapted to home-working. “Our big worry was whether our communication would break down or if we would stop being able to run money for our clients.
“The technology has been absolutely fine and the client communication is stronger than ever, but also the internal communication has been good.”
At this point Waverton head of private clients Rupert Elwes jumps in to say he speaks virtually with his direct team on a daily basis and to the wider private client team every week.
“The ability to disseminate information has been enhanced, funnily enough,” he says. “We’re not moving physical goods, so it does mean the ability to do what we do in a remote setting is far more feasible.
“Even our older client base has become used to the various platforms and it didn’t take long. Whether it is Teams or Zoom, people get to grips with it.”
Investing in individual securities has advantages over fund of funds
From a portfolio management perspective, the sell-off provided a “positive professional experience”, according to Elwes. He says Waverton’s ethos of targeting companies that generate free cashflow tends to identify high-quality names that, by nature, are well placed to weather the storm.
“Those sorts of companies are natural winners in the sort of environment we happened to find ourselves in Q1,” he says.
Investing in individual securities across equities, bonds and alternatives also means the firm can be more nimble and dynamic than a fund of funds strategy, adds Tucker.
“There are some other private client portfolio managers who do individual securities but I think there are few who do it across the different channels,” he says.
“It is super cost-effective, but also when things are as agile as they have been in the past six months, it has allowed us to be agile on the private client side and even in the managed portfolio service.”
As an example, Tucker points to a healthy exposure to long-duration treasuries that helped portfolios in the first quarter, “which you wouldn’t have if you didn’t do individual securities”.
He explains that little change was made to portfolios during the sell-off period, with the only stock offloaded being JP Morgan. This is because the team noticed the bank’s loan loss provisions increasing against a backdrop of interest rates staying lower for longer – and a generally deteriorating economic outlook.
Elwes says as the crisis played out, there were opportunities to buy into names the team had been following for years, one of which was Walt Disney. “They have challenges with their theme park business but had a huge opportunity in Disney+.”
Tucker says entering a position such as Disney was aided by a derivative protection strategy across the portfolios that generates about 20 basis points a year when markets are going up, or are flat, and provides protection on the way down.
“That was dialled up in Q1, giving us some pretty good downside protection we were able to take off and reinvest in the likes of Disney.”
Nick Tucker talks future M&A deals
While Waverton is clearly proud of its investment prowess, at the end of last year it bought Timothy James & Partners (TJP), an adviser firm based in Tottenham Court Road in London, to add financial planning expertise.
Tucker argues the acquisition helps Waverton address two types of financial planning for clients. First, it helps them identify and plan for what matters most to them. “Is it their children or grandchildren? Is it philanthropy, or wanting to spend every last penny so they don’t leave their children anything?”
Second, it adds a planning element that is so crucial to the entrepreneurs Waverton wants to attract.
“TJP is the first foray into that,” says Tucker. “It’s a fantastic business. I’ve always focused myopically on owner-managed businesses, and that’s what they do. They’re very client-focused and investment-driven.”
When pressed on potential future acquisitions, Tucker says there’s nothing on the horizon but outlines three criteria a firm must meet to be considered.
First, it must enhance Waverton’s overall proposition, which means offering elements it lacks, whether that’s financial planning or high-end family advice.
Second, it has to be culturally consistent with what Waverton stands for. “Waverton is not a big place,” says Tucker. “We want to remain a boutique, so we need to be a business that partners well with other people.”
Finally, a business must pass the financial test. “Over the years I’ve seen so many acquisitions that have destroyed cultures.”
Elwes adds: “Acquisitions often happen for the shareholders’ benefit and not the clients’ benefit, and you get a mismatch of approaches, styles and agendas.
“We’re still small enough that we’ve got that flexibility to manage money, and we’re not killed by committee.”
At this point, Tucker recounts an example of speedy decision-making in action. One of the firm’s portfolio managers recently sent him an email revealing that Waverton’s maternity policy was outdated. “Within a week we were able to change our maternity practices,” says Tucker. “That would have taken me three years at UBS.”
Focusing on ESG
Waverton places great emphasis on ESG investing. As a signatory of the Principles for Responsible Investment, ESG issues are factored into its investment process and investee companies must have sustainable investment models.
In June, the firm launched an ESG overlay for investors using its model portfolio or bespoke services, Enhanced Responsible Investment Service (ERIS), which enables clients to include or exclude themes or sectors reflecting their values.
Waverton has developed three positive themes as part of ERIS in alignment with the UN’s Sustainable Development Goals: protecting the environment; health and wellbeing; and positive social practices.
According to Tucker, even portfolios that aren’t labelled as ESG come out as AA- on MSCI’s ratings methodology, “which is better than most ESG funds”.
Elwes says ESG has always played a part in portfolio construction but the firm doesn’t force this view on all clients because it is a nuanced area.
This thought prompts Tucker to reel off another anecdote about his time working at UBS. “We were very strong in the ESG space but because we didn’t buy individual securities, it was a one-size-fits-all type of solution.
“I remember a client who was passionate that nuclear power was ESG, but we were unable to nuance the portfolio to follow his values.
“With ERIS, however, we can overlay clients’ values on portfolios because we do individual security selection.”
