“We would much rather have relatively few relationships, which mirrors our approach in the private client space – fewer, high-quality relationships – than try to be all things to all people,” Steel says.
“We will be on platforms that allow us to do what we do well in investments, which is direct equities as well as funds wherever possible, while acknowledging there will be some IFAs that prefer an all-fund approach.
“It will not be a scatter gun approach, it is trying to be targeted and develop discussions with sophisticated, investment-focused IFAs with whom we can engage actively and provide solutions for.”
Another area where the firm attempts to differentiate itself is the rigour with which it examines potential investments.
John Langrish, James Hambro’s head of investments, says: “When a fund manager comes in, the whole investment team (or as many as possible) attend the meeting. We look at a lot of funds but we want everyone to buy into each idea, so we are very vigourous in our critique of each one.”
Once the meeting has occurred, the team scores the fund on a proprietary model. If it scores high enough, it is deemed worthy of further work.
This approach also means it is less likely that one of the team will choose to avoid using a fund because they think it was not their decision to put it on the list in the first place.
A similar process is followed when looking at direct equities, but the firm also has the ability to tap into the expertise of JO Hambro Capital Management.
While the firm has expertise in both fixed-income and multi-asset investments, Langrish says, it is definitely an equities-oriented house.
“We would have been foolish to have set up any differently, because we are aligned to a company that runs £19bn in equities, no fixed income, no multi-asset. They are a great sounding board to have, they can give us ideas but they don’t give us a buy list, and we go back and do our own work.”
Objectively speaking
On the client side, while individuals each have different objectives, generally speaking, they can be grouped together by how much risk they are prepared to take and what their ultimate objective is.
“They might differ by age or geography but, by and large, people fit into certain rough boundaries,” Langrish says.
With that in mind, the investment team teases out what each client’s desired outcome is. Once that is decided, he or she is then grouped into a specific risk profile.
The firm’s strategic asset allocation involves many different asset classes and looks at historical data over a 40-year time period.
Says Langrish: “Most of our peers look at the last 10 years and project it forward. We don’t pretend to know what is going to happen in the future, we are just trying to get the odds in our favour because we don’t know any better than anyone else what is going to happen tomorrow.”
But, he adds, what the firm can do is look at history, at correlations in different economic scenarios and use that scenario testing to come up with an appropriate strategic asset allocation for longer-term clients.
