Sitting down with two of Kingswood’s senior guard, group chief financial officer and platform CEO Patrick Goulding, and recent recruit Leigh Philpot who heads the client proposition, feels like a full circle moment.
Portfolio Adviser had been gearing up to interview former chief executive Marianne Ismail this time last year, but days before the meeting was due to take place, she backed out suddenly. Later that week, the wealth manager announced she had left the business and said it would be overhauling its strategy yet again under executive chairman turned CEO Gary Wilder.
Kingswood is the wealth manager’s third incarnation in under two years. Beginning life as European Wealth in 2010, the firm rebranded to KW Wealth in June 2018 – a year after Ismail replaced ex-CEO and founder John Morton. But Goulding (pictured right) is adamant that this time around the management team has got it right.
“First of all, we’re obviously well capitalised now. I think that wasn’t the case in the past,” he says. “Also, we have a clear strategy in terms of what we want to be, which is an integrated wealth management firm. If you’d have asked people in the past what European Wealth was, it was probably seen more as an investment management platform than a wealth manager.”
New management has been pouring money into tech, personnel, risk and compliance. The wealth manager now has nine offices dotted throughout the UK, housing a seven-person strong investment team. The goal is for Kingswood to become a global wealth management platform, says Goulding.
Making the career jump from Reits to wealth management
Goulding does not come from a wealth management background, having spent most of his career in the real estate investment trust space. He had been working in New York for more than a decade, in roles at Morgan Stanley, then most recently Ardmore Partners, when Wilder, who he had known for years, approached him about joining Kingswood.
Goulding sensed “a tremendous opportunity” to build an integrated wealth manager with a wide distribution channel of IFAs that could target the mass affluent market and address the widening advice gap.
“There’s a lot of dislocation within the industry,” says Goulding. “You have a lot of financial advisers who are at that stage of their careers where they’re looking for the exit. They either have been in a position where they want to retire, or they understand they need further capital and better infrastructure to really grow and expand their business.”
Philpot (pictured left) has only been with the firm since September, but he is by no means an industry newcomer, having worked at Kleinwort Hambros for 13 years as the head of its UK regional office and launching its IFA proposition. He started his career in investment management running client portfolios for firms such as Rathbones.
According to Philpot, joining Kingswood was an opportunity to rekindle the entrepreneurial spark he felt he’d lost in his old job. “This is an entrepreneurial business with a short chain of command. If we want to do something we can go on and do it, and that ensures we are doing things for clients that are relevant and we can be responsive to trends as they occur.”
One such trend is the spike in demand for alternative investments, an area Philpot specialised in while he was a portfolio manager. He says the team currently has a number of initiatives in the pipeline that it hopes to roll out to clients in 2020.
“Most clients are typically looking for similar things,” he explains. “They have assets they want to be well managed and to grow. But when you’re investing in just equities and fixed income, given where we are in the market cycle that becomes a hard transition as things evolve.”
Kingswood plotting US expansion
The new top brass has set about growing quickly by snapping up IFAs across the UK. Kingswood’s acquisition of Sheffield-based financial planner WFI Financial in September netted the firm a £550m client book, taking total assets to £2.5bn and active clients to 5,500.
It received £80m of funding in September from private equity firm Pollen Street Capital, allowing the wealth manager to further its push into the US market and acquire an 85% stake in San Diego-based Chalice Wealth Advisers. In May it initiated a stake in its first advice firm across the pond, Manhattan Harbour.
“We want to build out a big distribution channel in the US, seeing as that market is 10 times the size it is in the UK,” says Goulding.
Southeast Asia is another possible toehold the team is considering. But Goulding emphasises the firm isn’t snatching up IFAs for the sake of it. “We don’t go in and break businesses that are actually working. We’re buying successful businesses. What we want to do is integrate them on to our platform and make them even more successful.”
IFAs reabsorbed under the Kingswood banner are largely left to their own devices.
“We can provide a lot of the centralised support functions for them, but our philosophy is you’ve got the client relationships, you understand them the best, so go and continue to develop and expand those relationships,” says Goulding.
Providing a personalised touch to client service is something people will still pay good money for in the age of digital wealth managers, according to Philpot.
“If you want a robo-solution, or something very unique and tailored, you can find that. But often it is at that crucial point in your life where you want to talk to somebody. Even if you are a market professional and you know everything about the investment world, do you know if you put the correct amount into your pension this year?”
Remuneration needs to be about more than sales
Snapping up so many businesses in a short time frame hasn’t come cheap. Losses at the wealth manager swelled from £1.5m to £2.3m in the six months to 30 June 2019. But Goulding says this is “not a true reflection of the underlying business”.
On a core Ebitda basis, the firm delivered a smaller loss of £340k but Goulding believes the business will be back in the black for the full year.
Kingswood’s senior management shakeup has also contributed to rising costs. In addition to Goulding and Philpot, boss Wilder has brought on City bigwigs such as ex-Cazenove man Richard Jeffrey as chairman of its investment committee and poached Paul Surguy from Kleinwort Hambros to lead its investment management business.
Goulding adds that Kingswood recently recruited a senior woman in the industry to be its chief operating officer and found a chief risk officer from “a major asset management firm”. Both appointments are due to be announced early this year.
Philpot explains that management has also been thinking about employee remuneration. Stories about St James’s Place’s culture of aggressive sales tactics and lavishing ambitious advisers with luxury gifts have thrust old school pay practices at wealth management firms into the spotlight. Philpot argues employees shouldn’t be measured solely on the amount of revenue they generate.
“Just paying them for having a big book of business does not work,” he says. “We must recognise when people are adding value to client relationships, assisting with the growth of our business and giving the right kind of advice to clients.
“We need to measure that and make sure we reward appropriately through a discretionary structure that is set up to do the right things.”
