manager whose origins date back some 250 years to its Liverpool
home, has emerged as one of the most successful of the UK wealth
management independents. Now, it has got its first foothold in
Asia.
Rathbone Brothers, looking for the right expansion moves to suit
its history as a highly regarded discretionary wealth manager, has
quietly built up an international trust network to cater for the
complex needs of rich individuals and families. The strategy has
fallen into place with the purchase of Federal Trust (Singapore) by
Rathbone Trust International, marking the first time an independent
trust company has been acquired in Singapore.
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The transaction provides the firm with an excellent base on which
to build its presence in Singapore, says Rathbone chairman Mark
Powell. Alongside existing offices in London, Jersey, Geneva and
the British Virgin Islands, it will enhance the ability to offer
clients a quality service internationally, he declares.
Federal Trust is a licensed Singapore trust company regulated by
the Monetary Authority of Singapore. It offers a comprehensive
range of trustee and company management services to both private
and corporate clients, primarily within the Asia-Pacific
region.
Rathbone’s Powell describes Singapore as “a well-regulated centre
and the middle of a real growth area”. Other bankers say that
Singapore’s prospects as an alternative global wealth centre have
been significantly enhanced by the German regulatory investigation
of nationals with accounts in Liechtenstein and signs that the EU
may embark on a simultaneous toughening up of its savings tax
directive (see
Liechtenstein affair jeopardises future of EU offshore
banking).
Singapore is an “attractive place to move further away from
Europe”, says one trust expert. “In the current new investigative
environment, for example, non-domiciled individuals in Britain will
probably not be looking to go to Jersey or even Switzerland”
because of the extent of the prospective clampdown in Europe.
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By GlobalDataDaniel Truchi, head of SG Private Banking, is on record as stating
that because of the controversial German investigation in tax
evasion in Liechtenstein, “we will see a higher flow of funds into
Singapore”.
Rathbone has just announced record results and says that, unlike
many private banking rivals, it has actually benefited from the
credit crunch. Pre-tax profits rose 16.8 percent to £52.2 million
($103 million) last year while funds under management rose by 7.2
percent to £13.12 billion.
The credit crisis linked to US subprime mortgage markets has hit
the profits of banks and financial institutions worldwide as the
cost of the bank funding they need to finance their operations has
risen.
But Powell says that his firm is a net provider of money to the
financial system, due to the cash it holds on behalf of its
clients, and so the credit crunch has been “beneficial for
profitability”. He explains: “Our banking margins benefited because
we provide liquidity to market, lending into the three-month
maturity in particular.”
In the last quarter of 2007, high short-term interest rate margins
helped expand net interest income at a time when liquidity in
client portfolios rose to £990 million.
Future paths
Rathbone sees the future for UK wealth management falling into two
phases. “For the long term, we are very confident,” says Powell.
“The immediate future has some choppy waters but we not dependent
on stockbroking income, generally part of business that is affected
first when stock markets fall.”
In addition, discretionary wealth management is “extremely long
term and sticky” with clients, he adds. Discretionary management,
Rathbone’s largest division with £11.23 billion under management,
grew 8.2 percent last year.
For the immediate future, the main expansion move is likely to be
in Scotland, where plans call for Rathbone to open an office in
Aberdeen. It has also moved farther into south-west England with
the acquisition of Citywall Financial Management, based in Exeter.
Richard Lanyon, Rathbone’s head of investment management, said:
“Citywall shares our philosophy of providing high-quality,
personalised investment services to private clients, drawing on a
wide variety of investment options.”
Rathbone now employs 800 people within the UK and across its
international network. Although the firm professes that it will
chiefly grow by organic means, rivals think that it may have to do
a “transforming” acquisition to put on significant new scale and so
remain competitive and prevent itself from swallowed by rivals keen
to grow in the UK, Europe’s largest single wealth management
market.
Rathbone ranks 11th among the top 40 UK wealth managers, measured
by assets under management. That puts it in close company with
rivals such as HSBC (with £12.7 billion of client assets in the
UK), Rensburg Sheppards (£13.3 billion) and Lloyds TSB (£15.1
billion). Based on discretionary mandates alone, Rathbone is ranked
in the top five in the UK.
Says Powell: “I don’t accept the premise that we need to make an
acquisition. Of course, the market is competitive – as to
reputation, performance and service, but not necessarily as to
actual size. What drives us as a firm is that anything we acquire
or the people who join us must share our values and our belief
about looking after clients. We are independent so we don’t
distribute investment products and consider ourselves a
best-of-breed buyer in marketplace. The power of intermediaries as
introducers of clients has grow and will continue to grow, in my
view. So any transaction will have to meet our twin objectives of
being a good cultural fit with us and earnings-enhancing within a
reasonable time-frame.”
