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View the article online at http://citywire.co.uk/wealth-manager/article/a662278

Quilter Cheviot’s Manchester head on the North West opportunity

by Danielle Levy on Feb 28, 2013 at 13:39

Quilter Cheviot’s Manchester head on the North West opportunity

The history of financial services has been littered with the launches of firms looking to offer something new, but Quilter Cheviot’s Manchester head David Rothburn believes the safer middle ground is now increasingly where clients want to be.

Following the retail distribution review (RDR) and during a time of regulatory change, having scale is no bad thing and Rothburn’s company, which is currently in the throes of integrating fellow private client firm Cheviot, looks well placed in this regard. It has a regional presence that spans the UK and combined assets of more than £12 billion. He expects the trend towards consolidation to continue, driven by regulation.

‘Regulatory costs are not going to get any cheaper, they are only going to increase,’ he said.

‘Therefore economies of scale are important for bigger businesses, as they can spread that more effectively and there has been margin pressure at the more competitive end. There is a squeeze in the middle so those that can invest and keep their systems up to date and have economies of scale will do well, all of the usual things that help businesses survive.’

He believes a desire for scale at a corporate level and the battered post-financial crisis psyche of some private clients is leading to a growing acceptance of a safer middle ground in terms of company size and approach.

‘I think there is another factor. You will see the trend for the businesses that are occupying what I call the central safe ground, which is where we are. The way we explain or sell a service is understandable to clients, but new entrants that want to grow can’t possibly occupy that ground,’ he said.

‘They have to be “boutiquey” to compete, so they have to sell something sexy and out there. But I believe the safe ground is where the majority of people want their money invested.’

It is for this reason that he finds it unsurprising that regulation is leading to less differentiation among the larger players in the industry, while investment managers are also hovering more closely around the mean performance-wise than perhaps they have done historically.

He does not necessarily view this as a negative, given that private client managers should not lose sight of their central goal: to grow client assets above inflation.

‘Either you are in a business operating in the safe ground and therefore the client expects you to be around the mean – although you have to be clear about what you are selling on the tin – or you sell yourself as something that is more maverick,’ he said.

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