“I like a good analogy. Financial advisers are like the general practitioners of the investment management world,” Richard Philbin, CIO of Hawksmoor’s Investment Solutions business, tells Portfolio Adviser. “If somebody walks through their door and tells them they have a big dent in their brain, they will refer them to a brain surgeon. If someone else has broken their leg, they wouldn’t send them to that same surgeon.
“At the end of the day, it is still about servicing the individual. What [Hawksmoor] wants to say is, ‘we know there are a lot of brain surgeons out there, but this is what we do’. We set our stall out and, if what we do fits with the adviser, then great. But ultimately, what we do is a partnership – there is no one-size-fits all for any end client.”
Philbin is referring to Hawksmoor Investment Solutions’ proposition, which he refers to as “Wealth Management 2.0”. Formerly Wellian Investment Solutions, it used to be owned by Harwood Wealth Management, which was bought by Hawksmoor’s parent company Hurst Group in 2020. Within two years, the business arm was brought under Hawksmoor and now has a 10-year track record of servicing clients.
But Philbin says their proposition, which he and Alan Durrant founded together a decade ago, transcends the realm of offering model portfolios to advisers. This is intentional, with the CIO warning that risk definitions used across traditional MPS providers vary widely, leaving advisers susceptible to choosing products which don’t cater for their clients’ needs.
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“When we first launched, IFAs were getting bigger, with more assets under management. They were also realising through [the Retail Distribution Review] that they couldn’t do the investment management themselves. So, they were outsourcing it.
“But a managed portfolio from one provider is very different from another. If you were to run ‘balanced’ portfolios from different companies through a risk system, they would have very different ratings – yet they’re labelled in the same way.
“So, with markets consolidating, we would suggest to advisers: ‘when you think how much you have invested with all these different groups, why don’t you consolidate them into one, bring them to us and we will work with you to define what ‘cautious’, ‘balanced’ ‘growth’ and ‘income’ looks like to you and your clients’?”
As such, Philbin and his team work in partnership with financial advisers, allocating capital based on their requirements. “This is flippant, but a client could ask us to build them a balanced portfolio with only ten holdings, nothing less than 9% and nothing more than 11%. Or, they could only want to invest in funds with the letter ‘K’ in their name. We can build those portfolios, because we have the flexibility of the whole of the market.
“As long as the adviser is aware of the decisions they are making, we have the tools, the systems and the team to help create the right portfolios for them.
“Because of this, we don’t have a standard model or an overall view of a particular fund. There have been times when we have met a fund manager and thought to ourselves, ‘this portfolio would be great for this particular client’.
“Investing can’t be a one-size-fits-all practice; every client is different.”
The power of subjectivity
Philbin says choosing funds for bespoke offerings means there are no buylists or even favoured funds, necessarily. Even some of the most high-octane portfolios can be the right product for some clients although – to use another analogy – he tends to treat these as an insurance policy on a broader portfolio.
“When people buy a house and they take insurance out, they don’t think it’s a waste of an insurance policy at the end of the 12 months if they don’t have to make a claim,” he reasons. “They don’t burn their house down to get their money’s worth. But correspondingly, when their house does burn down, they think to themselves, ‘thank god I had insurance’.”
But, in the same way that a fund’s performance is subjective, the bespoke nature of what Philbin’s team offers means it can be difficult to market their offering.
“Some companies can say: ‘this is our MPS – buy it’, because their MPS is a product. However, an outsourced CIO very much works with you. It can take several months before the documentation is signed, and several months for that client money to come in.
“It’s not like we’re a fund manager boasting top-quartile returns on every page of marketing. We haven’t got anything to measure our performance against. It’s about the relationship we have with the adviser, and earning their trust that we can meet all of their requirements. You have to get the ‘buy in’.”
For example, Hawksmoor Investment Solutions recently onboarded a client which wanted five ‘traditional’ portfolios and five ESG portfolios – the latter of which held solely across Article Nine-classified funds. However, the construction of the portfolios – and ultimately the winning of the client – required intense amounts of research and negotiation.
“[The client] did not like transition stories, they wanted Article 9 holdings the whole way through all of the ESG mandates,” Philbin explains.
“We came back to them with the model portfolios but showed them that, when you filter using this ‘Article Nine-only’ lens, the correlation of the underlying holdings is quite high, so risk becomes more concentrated and, because of that, the costs were also slightly higher because of the way these investments deal. We also couldn’t get the granularity they were seeking at a geographical or asset class level.
“So, they suggested an 80% weighting to Article 9 investments – that’s how our process works. We don’t just get given parameters and work blindly towards them. The regulator wants to see that these advisers are getting a great service, and that the advisers are offering a great service to their clients in return.”
Benefits of scale
Because of the ‘buy in’ time required, as well as the personalisation of the service offered, Philbin says critical mass of the broader company is important.
As at the end of last year, Hurst Point Group held just under £10bn of assets under advice or management. Hawksmoor itself largely operates as four separate arms: the AIM Portfolio Service, which looks after tax efficient solutions; Hawksmoor Fund Managers, which runs funds-of-funds for IFAs; Hawksmoor Investment Managers, the private client team which works from a buy list; and his own Investment Solutions business, which works with third-party IFAs to build model portfolios.
Despite operating separately, however, Philbin says each tranche benefits from the large scale of its parent company.
“There are four people at Hawksmoor Fund Managers, five people in Hawksmoor Investment Managers and five people in Hawksmoor Investment Solutions all carrying out due diligence and fund manager research, and we talk to each other on an ongoing basis. That’s really beneficial.
“We also have centralised compliance, centralised marketing and centralised operations. That is where lots of the benefits to advisers come in; even though what we are doing is bespoke to the client, we have a much bigger unit around us to help find the right funds for our clients.
“But also, because our clients are joint venture partners with us, in reality, we have to look at the whole of the market. Therefore, you need a big team. Also, the fact that we have operations, marketing, compliance, our legal team and our admin team, means we can offer them a bloody good service.”
One hand on the tiller
What’s the ultimate goal for Hawksmoor Investment Solutions? To borrow a well-known advertising campaign from the nineties – and to use the final analogy of the interview – Philbin wants it to become the ‘Intel Inside’ for the UK adviser community.
He gestures towards the laptop in my bag: “Without looking, I can guarantee that laptop uses an Intel processing chip – whether it’s a ThinkPad or otherwise. That’s what we want to be for advisers.
“We don’t mind how involved we are with the client – that is entirely up to them. We just want to do the best job we can and meet their objectives. There is no pride in terms of making sure everybody knows they are using Hawksmoor – we just want to be able to be that reliable, repeatable function among portfolios.
“It means clients can keep one hand on the tiller but feel comfortable in telling their clients that it’s a partnership. It’s like the Intel processing chip, that’s in almost every work laptop. It doesn’t matter how it is packaged externally, but we want to be that reliable Intel chip inside.”
