In the summer of 2010 Rowan Dartington was on its knees. A hefty fine by the regulator for failing to adequately protect clients and the discovery of a £1.4m black hole in its accounts well and truly knocked the stuffing out of the Bristol-based discretionary wealth manager.
The firm was forced to write £1m off its books after receiving a £515,000 fine for failing to protect and properly segregate client accounts over a two-year period, as a result of issues with its back-office systems.
But in March 2011, a knight in shining armour arrived in the form of a consortium of investors, led by Graham Coxell, who having spied an opportunity on the back of the retail distribution review (RDR), decided to buy the firm and turn its fortunes around.
Coxell’s career began more than 20 years earlier when a brief post-A-level flirtation with the Royal Air Force gave way to a role in the financial services industry as a mortgage broker at Black Horse Financial Services.
In 1991, at the tender age of 21, he moved to Bristol & West Building Society, where he became heavily involved in what he describes as “implementing the first piece of technology at point of sale”. This tech was built by a tiny company called Marlborough Stirling, which he later joined, aged 24, as employee number 14.
Two years later, Coxell found himself as chief executive of Marlborough Stirling, which had grown to 200 people. When he left nine years later in 2003, the firm was FTSE 250-listed and had a headcount of 2,300, with operations around the world.
“As a young man I was fortunate enough to be the CEO of a main London-listed PLC that broke into the FTSE 250,” he says. “My claim to fame is that I was the youngest ever CEO of a FTSE 250 company, and that might still stand.”
After a two-year stint dabbling in private equity, Coxell went to work at Capita Group in 2005 to run a team in the life and pensions outsourcing space before “going back to his roots” in 2009 and investing in small struggling businesses. It was in 2010 that the opportunity to buy Rowan Dartington arose.
Reviewing the options
With the RDR just around the corner, Coxell spied an opportunity for wealth management businesses to thrive, especially those able to provide good investment services and performance operating on platforms.
“RDR was on the horizon and everyone was getting depressed about the impact,” he says. “I thought it was probably the death knell of the traditional insurance model because commission was to be banned.
“I felt this was a huge opportunity for the wealth sector and Rowan Dartington was pretty broken at the time.”
Coxell describes Rowan Dartington at the time as a business that did the difficult things well, such as investing and running client money, but struggled with the easy elements, namely running a P&L, taking a proposition to market and going about growing the business.
On acquisition of the business, Coxell became chief executive and he immediately set about addressing staffing issues, retaining the great people and letting go of the “not-so- great” people.
“I am a big believer in the phrase, ‘People are not your most important asset, the right people are your most important asset’,” he states. “I absolutely live by that. Therefore, you have to get the wrong people off the bus quickly and get the right people on.”
Several strategic recruitments, including Guy Stephens and Tim Cockerill from Ashcourt Rowan and John Betteridge, former CIO for Prudential UK’s insurance division, added to the firm’s investment firepower. AUM increased by a third from 2013, hitting £1.15bn at the end of March 2015.
Pre-tax profit declined during 2014, from £752,000 to £285,000, but the firm put this down to the acquisitions of platform Ardan International and financial adviser Stafford House Investments.
Breeding confidence
Coxell was also quick to instil a culture centred around collaboration, friendliness, openness and humility. He quotes renowned business management strategy guru Peter Drucker, who said: “Culture eats strategy for breakfast.”
This involved an emphasis on employee well-being, including mental health. Outside of Rowan Dartington, Coxell is the chairman of JCA Global, an international people development and business psychology consultancy. This, he says, makes him passionate about creating a working environment that is “open and assertive, rather than dictatorial and closed”.
“In today’s world we all work very hard,” he adds. “We try to build an environment where people feel confident, liked and valued. Those are the three core human emotions that underpin Rowan Dartington and criticism and blame don’t do that.”
But in the high-stakes, high-pressure world of investing clients’ money, mistakes can be costly. So do fingers get pointed at individuals regardless of the culture?
“Where the culture helps is if people make a mistake they can be honest about it. The earlier you are aware of a situation, the less impact it has and the more you can do about rectifying the problem. Where you have cultures based on fear there can be situations where people are reticent to admit something has gone wrong.
“We encourage people to speak their truth. By the very nature of being human we make mistakes but if we have the right people, we train them correctly and they are well intended, for every mistake they have probably done 100 things right.”
Open opportunity
Having set the business on the right path, the next stage of the journey saw Rowan Dartington move from acquirer to the one being acquired when in 2015 it was bought by St James’s Place for £34m.
Coxell explains the strategic fit from SJP’s perspective, saying it opened a window for SJP into the DFM market, which is worth hundreds of billions of pounds.
“At the time, SJP could not provide discretionary management services,” he says. “They have their own fund proposition, so they give specific managers specific mandates but they were not whole of market discretionary managers.”
From Rowan Dartington’s point of view, Coxell says the benefits of being part of “Europe’s fastest-growing wealth manager” are obvious, not least the security for clients and staff from being part of a £6bn market cap FTSE 100 firm.
He says: “If I had been speculating about the best next chapter in Rowan Dartington’s development, selling to SJP was better than I could have possibly imagined. It has been a great acquisition for our employees.”
Rowan Dartington has kept its autonomy, running as a separate business within the SJP group. It also runs its own strategic and tactical asset allocation and has its own investment committee.
Since the acquisition, Rowan Dartington’s headcount has increased from 100 to 260 and AUM has increased to £2.5bn. Coxell says 70% of business now comes from the SJP channel, while 20% is from private clients and 10% from external intermediaries and international clients.
It offers three propositions in the UK: a complete bespoke service; a tailored service, which is a mixture of funds and equities; and a collective portfolio service.
Joining forces with SJP has enabled the business to stretch into Hong Kong and Singapore which, while fledgling, is growing rapidly, albeit from a low base. The plan is to roll out its collectives service in these markets by leveraging the SJP footprint.
What about the all-important cultural fit with SJP? Coxell says the deal negotiation period lasted about nine months, which gave the two firms plenty of time to really get to know each other.
“SJP also believes passionately about their people, clients and stakeholders,” Coxell adds.
But what does he make of the fact that SJP has regularly come under fire, criticised for its adviser charges, fee disclosure and high exit penalties? Last year, Which? carried out a mystery shopping sting that assessed 12 SJP advisers and found several wanting in terms of disclosure of the services and charges involved.
Coxell believes passionately that the external perception of SJP is very different to the internal one of staff and clients. “I have never seen an organisation where the external perception is so different to the internal and client perception,” he says. “The contrast is extraordinary.”
That said, he admits it is important SJP improves how it shares its story with the industry to address negative perceptions.
Best foot forward
Looking ahead, Coxell says Rowan Dartington has aspirations to engage in both “semi-organic and non-organic growth”. Semi-organic growth comes through St James’s Place taking on IFA partners looking for discretionary services, while non-organic is through acquiring small DFMs that are finding it difficult to turn a profit in the current environment.
“It used to be if you got to £1bn you could deal with the regulatory oversight and the overhead of that, and then it became £2bn. Now, I’m hearing people say unless you are a £4-5bn DFM, you are not really able to make much of a profit.
“I think there are a number of companies sub-£4bn that are struggling and we are likely to see the continuation of consolidation in the marketplace.”
Having just hit £2.5bn AUM, and rapidly growing, it won’t be long before Rowan Dartington is within that ‘safety zone’. Growth will accelerate through further acquisitions, although Coxell is quick to point out that there is nothing on the table at the moment.
“We haven’t got our chequebook out but if the right opportunity came along, we’d consider it.”
