When Charlotte Ransom retired from her career in wealth management at Goldman Sachs, she had a problem.
After years working with institutional and private clients, including 10 years as a partner at Goldman, she knew too much about the wealth management industry and its high fees to hand over control of her own hard-earned assets.
“Without income I had to be more thoughtful about my own money and how it would be managed. It struck me that I didn’t want to give it to any of the wealth managers in the UK,” Ms Ransom says.
In what some might consider an overreaction, she gave up on retirement, and built her own wealth management company from scratch — Netwealth.
Wealth managers in the UK as elsewhere have often been slow to respond to the technological change sweeping financial services. Established companies have generally stuck to the principle of offering personal advice to clients, believing clients are ready to pay the costs of face-to-face bespoke services.
Ms Ransom is among a growing number of entrepreneurs investing in the industry in the belief that technology can do a lot more in wealth management, not just in lowering costs, but in speeding service (through online links) and delivering more effective financial advice.
The target clients are not just existing wealth management customers but new groups of affluent people, including female entrepreneurs and professionals, who are joining the ranks of the wealthy in their own right in rapidly growing numbers.
While traditional managers insist they are keeping up with the times, many are worried about the emerging competitive threats. More than half of wealth managers surveyed for the FT by Savanta, the research company, said they were concerned about increased competition in a tougher, more price-competitive market. One-third reported that losing clients to lower cost providers was one of their biggest worries.
Their concerns suggest that she may be on the right track.
Shooting for the top
Ms Ransom began her career in finance at JPMorgan, before moving to Goldman Sachs. On her fourth maternity leave, after 15 years at the company managing institutional money, she was asked to head up the private wealth practice. Learning about discretionary management on both sides of the table, selling and being sold to, was a powerful education.
“My sense was that the core critical elements of a traditional wealth management business remained of absolute value and that shouldn’t be compromised on,” says Ms Ransom.
But across the sector, developments in technology that could streamline processes and lower costs for investors had not been properly utilised. She says: “It seemed to me none of the wealth managers in the UK had taken advantage at all of the things that had progressed over last decade.”
She was looking at an industry which she saw as very traditional, with “layer upon layer of inefficiency that is just baked into the business structure”, charging high fees for a full spectrum of offerings when a client might only require a few specific services. It was also very male.
When she launched her company, Ms Ransom says, “I was advised in the last five years that if I didn’t shoot, fish and play golf I’d never build a book of clients.”
But there were plenty of wealthy clients looking for managers who didn’t shoot, fish or play golf. Ms Ransom believes that Netwealth’s straightforward technology and emphasis on lower fees has attracted clients looking for something new in the sector. Netwealth fees range between 0.95 per cent to 0.65 per cent per annum, a number Ms Ransom says is usually a full percentage point below the sector average for the same services. Its full financial advisory package is available for an additional 2 per cent.
The company, which was launched in 2015, now has 39 employees and manages portfolios with an average value of £500,000.
“Most wealth managers don’t spend a lot of time talking about making sure your fees are as low as possible,” says Ms Ransom. “For us it is part of the conversation, making sure they’re paying less than 1 per cent per annum in fees makes their goals more likely to be achieved. I think it’s very difficult for the traditional industry to bring fees in line with groups like ours.”
Though the company does not explicitly position itself as a female-friendly wealth manager, close to 50 per cent of Netwealth’s clients are female — double the industry average.
As women become a larger percentage of the wealth holders in the UK, wealth managers are evolving to meet their needs, which they say can require more nuanced approaches. “Women tend to have complex financial lives,” says Ms Ransom. They are more likely to live longer, their careers tend to be more volatile because of childbirth, and their finances can suffer as a result. “Women are more likely to care for children or parents, and take the brunt of household [responsibilities].”
Ms Ransom argues that managing wealth for women requires a more focused approach than with male clients — a mature personal relationship without the time needed for long, wine-drenched lunches. They’re looking for advisers “they trust and respect”, not friends, she says. “A lot of men would say they have some kind of social friendship with their advisers.”
While Netwealth appeals to both male and female investors, other entrepreneurs have taken things a step further and built businesses specifically around wealth management for women.
Anna Sofat, founder and chief executive of Addidi Wealth management, a wealth manager that caters to female clients, says: “What I was noticing with women, myself included, was that we’d left university and had our own money, our own career success but we weren’t necessarily happier or more balanced.” As women became wealth earners, “we just had so much more to juggle”.
She adds: “In all of that, often the finances got neglected. The financial services world wasn’t built around the needs of women, and often women weren’t able to access what was available.”
Like Ms Ransom, Ms Sofat also had a long tenure in the wealth management industry, working for larger corporates and for herself. She founded Addidi in 2006 to offer bespoke solutions for women and address the hole she saw in the market.
In 2008, just when Addidi began to take off, Ms Sofat’s youngest daughter, a university student, tragically passed away after an unexpected illness. “I suppose it was a defining moment,” she says. “It made me braver. It enabled me to not worry so much about the bottom line and made me focus on what I felt was the right thing, or value thing to do.
“I wanted to feed my soul, I wanted things that fed my clients’ souls rather than just be about money,” she adds. Addidi broke services up into parts and focused on long-term relationships rather than short-term profits.
Ms Sofat says she recognised that wealth management could be very focused on selling products and services to clients regardless of their actual need.
“If you establish a mutually beneficial relationship over the long-term, you don’t have to make every single client profitable today,” she says. “You might not give them 100 per cent as comprehensive a service, but you give them what they need at this point in time.”
The average annual fee at Addidi is approximately £5,000-£6,000 on an average portfolio size of £500,000-£600,000. By the time Ms Sofat sold Addidi to London-based advisory Progeny in December for an undisclosed sum, it had a dozen staff, and more than £135m under management, working for about 240 clients.
“Most firms just talk about creating wealth,” says Ms Sofat, who still works with clients. “People want more than just financial returns from their managers, they want personal return.”
As well as serving female clients, Ms Sofat passionate is about encouraging more female investors. Noting that fewer than 15 per cent of angel investors who invest in early-stage ventures are female, she says that women are missing out on opportunities to take risks, engage in the financial markets, and boost their wealth. “Women have to become investors and risk our money, because that’s where everything starts.”
By contrast with Ms Ransom and Ms Sofat, Helen Watson believes that staying true to an established company’s traditional offering is in its own way revolutionary. The chief executive of Rothschild & Co’s UK wealth management business says: “The fundamental thing we’re trying to do hasn’t changed, the environment we do it in has changed.” More wealth is being created and much of it is first generation, or made by women. “This is very different than 30 years ago.”
Her path over the past three decades to the top of one of the UK’s most storied wealth managers is unusual.
She never attended university but instead jumped into a career at a wealth manager, where she learnt the ropes. She later joined Morgan Stanley, where she worked as a sales assistant and did everything from making cups of tea to running money to becoming the most junior employee ever accepted into the company’s MBA programme. She eventually worked her way up to managing director level before joining Rothschild in 2010, and took charge of its UK Wealth Management division in 2015.
Rothschild is resolutely not following any industry trend to cut services to reduce costs. “We are not aiming to be the cheapest,” she says. Instead Rothschild is focused on keeping the number of clients allocated to financial advisers low, to ensure a consistent and valuable relationship. Innovation is not the priority. She says: “The knife edge of the industry is not where we want to be.”
Rothschild aims to deal with the growing competition among wealth managers by doubling down on client relationships, helping clients focus on their goals and desires, and maintaining and building their wealth.
“People value those intangible things,” she says, such as an adviser who has a sense of their client on a personal level. “Clients have spent their entire life generating this wealth and they want to preserve and grow it. People are paying for what they perceive to be value for money,” she says.
Client relationships have changed because of the Covid-19 pandemic, with person-to-person conversations giving way to phone and video calls. While some clients may want to return to face-to-face contact as soon as possible, others have become more comfortable with the technology.
Ms Watson believes this could be an opportunity for female wealth managers, who frequently have to balance family responsibilities with work, and can benefit from flexible working.
“We’ve always adapted and innovated and that’s why we’ve survived as long as we have,” Ms Watson says. “We focus on — it’s that broader, overused phrase — being a trusted adviser.”