It’s the moment of truth for WH Ireland. The 200-year-old London broker and wealth manager has as yet been unable to turn its luck around and stop losing money. In the past six months alone it has issued a string of profit warnings, senior bosses CEO Richard Killingbeck and head of wealth management Roddy Buchanan, who were charged with reviving the business five years ago, have fled. Shares in the battered business have fallen by 75% in a year.
And yet Brewin Dolphin veteran Stephen Ford says when he was approached to join the business as head of wealth management toward the end of last year, it was an offer he couldn’t refuse.
“When someone comes to you with the opportunity to help turnaround a listed wealth manager that is a long-established brand, which has had an entirely new management team and is trading below its breakup value, these are opportunities that don’t exist very often,” he explains, weeks after the firm surprised the market with a £5m placing which sent shares tumbling.
Where others see a loss-making firm in turmoil, Ford sees a business that is “fixable”, with problems that “are not insurmountable by any stretch of the imagination”.
“It’s like when you go looking at houses,” he says. “Some people see a tired château in France and think it’s too much work and can’t see beyond all the issues; others see that structurally it’s sound, that you can turn it around and it will be very lucrative. I’m in the latter camp with WH Ireland.”
Primed for business
Ford’s reputation as a City fixer upper is well documented. He led the two-year transformation programme at his ex-employer Brewin Dolphin, setting the then 250-year-old broker on a path to becoming an integrated wealth manager prepped for business after the Retail Distribution Review.
When the restructuring began in May 2011, the discretionary fund manager had a market cap of £350m and was trading at 148p per share. Five years on, Brewin, now a constituent of the FTSE 250, is worth £935m and its share price has doubled to 328p.
But Ford is adamant he is not trying to turn WH Ireland into another Brewin Dolphin. “They’re similar in certain regards. They both have a great heritage going back to the 1800s and very similar market segments, as wealth managers helping private clients structure and finance their future efficiently and effectively. But WH Ireland is not a Brewin Dolphin 2.0.”
Ford wouldn’t mind replicating the success story of St James’s Place, however.
Though he stresses “I don’t want to do business like it”, Ford thinks there is a lot to admire about the UK’s largest wealth manager, which has “become a machine”. “Here’s a company that came out of nowhere less than 40 years ago and is now in the FTSE 100, and many wealth managers, including WH Ireland, have been left in its wake,” he says.
“I have to look at what SJP is doing right and admire it. They’ve got massive scale quickly and they’re focused on distribution to the point where their proposition is so valuable to the end customer that they don’t appear too price sensitive.
“All of us in the wealth management industry, whether we like that machine or not, can learn things from that model.”
Change environments
Ford’s past experience has taught him that being the harbinger of change is never easy. But when you’ve got a business where costs and revenue are out of kilter, difficult decisions around trading platforms, business models and people must be made, he says.
“Nobody likes taking those decisions but if we want to preserve one of London’s original, great stockbroking names for the next 100 years, then we have to do it.”
There have been a number of key departures in addition to the exit of Killingbeck and Buchanan, including chief operating officer Paul Jones, who left recently to become Rathbones’ chief of staff. The management team headed up by Cantor Fitzgerald man Phillip Wale is almost exclusively comprised of new recruits, with the exception of chairman Tim Steel.
Wale, Philip Tansey, who has replaced Jones as head of finance, new head of compliance Yen Chang and Ford himself all have experience of operating within “change environments”, he says.
But through all the radical change, Ford maintains that wealth management will remain at the heart of the business. “Wealth management is our core strategy but I think we can do it differently and more efficiently.”
According to Ford, WH Ireland has a key competitive edge over other players in the market in that it has a dedicated corporate arm that helps companies plan for their future financially.
“This is an area where we can expand our offer and help those entrepreneurs all the way through from raising capital, selling their business to then managing their private resources. Similarly, on the private client side we can do a better job in educating company directors to make it clear we can help them with their corporate as well as private needs.”
But there are other areas where the firm is lacking, says Ford. WH Ireland is not in the external IFA marketplace and is not making the most of touting its international offering via the Isle of Man business to UK clients.
He also thinks the firm could be harnessing the strength of its strategic partnership with platform provider SEI Wealth to bring its financial planning and investment management services to a broader audience at a lower cost.
Under the radar
WH Ireland soft launched an MPS range ‘Navigator’ last year, targeting clients with a minimum of £20,000 to invest. With less than a year’s worth of track record, the cautious, balanced and adventurous portfolios, which have £5m and £6m in assets between them, are being deliberately kept under the radar. “Obviously, when that’s more established we’ll be shouting about it.”
In recent years the firm has been placing a much higher emphasis on its discretionary service, where it can charge higher fees in favour of low-margin funds. Discretionary assets made up 44% of the business’s total assets under management of £2.6bn, as at 30 September 2018.
Though he has some initial ideas for the business, Ford doesn’t want to divulge much on strategy or dwell on where the past management team went wrong.
“I am very much in a ‘diagnostic and listen’ phase at the moment. If I had all the answers within two weeks, something would be terribly wrong.”
At this stage Ford’s number one focus is to stop the firm haemorrhaging money.
“‘Fix it then grow’ is normally my mantra. And at this stage I refuse to accept that a wealth manager with circa £2.5bn can’t break even.”
Support from key shareholders has proven pivotal during the firm’s recovery phase. Hours after announcing it would require an emergency £5m injection to meet its capital adequacy requirements on 5 March, M&G Investments and Polygon Global Partners, two of the wealth manager’s biggest shareholders, stepped up to purchase more shares in the group at a heavily discounted rate.
A day later Aviva also scooped up 32 million shares in the beleaguered group.
“We have very committed shareholders,” says Ford. “How many other people managed to raise money in February and March?”
Several of the group’s directors participated in last month’s placing, purchasing shares in the company for the first time. Chief executive Phillip Wale bought 32,500 shares, while chairman Timothy Steel took on 25,000. Wale joined the group last July from Cantor Fitzgerald, while Steel has been on the company’s board since 2014, surviving the mass exodus that occurred after the Financial Conduct Authority took the firm to task for failing to protect against market abuse.
Ford agreed to buy 111,000 shares or a 0.26% stake in the business. He says purchasing shares in the company was always part of the plan. “If you’re a leader involved in change, and you genuinely believe those changes are positive for the business, then you ought to have shares in the business.”
When the group is out of the woods financially, the next move will be to grow the business organically, through selective hires and “absolutely” through M&A, says Ford.
“There’s more we can do on the organic growth but to get scale in a faster fashion we’d have to look at some form of M&A or other acquisitions at a later date.”
