London & Capital, the UK-based wealth manager established in 1986, is looking at two new client channels to exploit: recently divorced women and sporting superstars.
The divorce market is an increasingly important one for private banks, says Daniel Freedman, one of the company’s founders. “Younger and younger people are getting bigger and bigger settlements,” says Mr Freedman, whose firm manages assets worth $3.1bn (€2.3bn) for mainly private clients, but also oversees institutional money from the World Bank and the Caribbean Catastrophe Fund in Barbados.
“Previously, if somebody had any real money from a divorce, they tended to be a bit older, but now in the entertainment industry, people are picking up huge sums of money without any major advice behind it,” he explains.
Other banks pride themselves in dealing with sophisticated clients, who have a great interest in their investments. While London & Capital has its fair share of brokers and hedge fund managers, it is from the ranks of the less financially literate that the new clientele is emerging.
“We are often dealing with families who have no financial background at all,” notes Mr Freedman. “A lot of families dabbled in hedge funds and private equity in 2007 and 2008, but didn’t really understand what they were doing. They are now cutting back and moving to things they do understand. They want to keep it simple.”
Many sports people were also heavily invested in alternatives and real estate in particular. The sports division – which has been rehabilitated after an earlier incarnation more than 25 years ago – has been set up in response to complaints from leading sports stars, footballers in particular, that they have been coerced into questionable property investments in Bulgaria, Romania and Dubai, often at very high prices.
“Football players were being advised by unscrupulous characters, whose aim was to sell as many units as possible,” acknowledges Mr Freedman. “Now we are getting enquiries from accountants and lawyers, who need to structure their sports clients’ assets for tax reasons, while not taking too many risks in the investments.”
London & Capital has just linked up with the Association of Football Agents in the UK, for whose membership it will shortly be running a series of seminars on managing footballers’ assets, with a particular emphasis on specialist areas such as real estate management and image rights.
The group has recently taken on the management of assets for one footballer – until recently playing in the English premiership, who had a typically skewed portfolio. “This player owned 24 properties, all of them mortgaged, but half of them empty,” recalls Mr Freedman. “His old football friends were living in the other properties, and none of them were paying him any rent.”
Football agents would typically offload a player to an independent financial adviser friend, with kickbacks for everybody, but nothing being done in the interests of the sportsman. A new breed of agent however, many of them qualified lawyers, want the best for their players, fearful that they may switch to competitors, says Mr Freedman.
Because lawyers and accountants are wary of making sole recommendations to their wealthy clients, particularly since assets were decimated during the crisis, there is an increasing trend of holding institutional-style “beauty parades”, with a series of wealth managers lining up to bid for different mandates.
Mr Freedman claims a large turnover of relationship managers at larger banks, plus their tendency to sell their own products to boost margins, has led to wealthy individuals preferring to include some boutique managers within their coterie of portfolio handlers.
He recalls a recent meeting with a client, advised by another wealth manager to park assets in a St James’s Place insurance bond, paying a 7 per cent commission to the middle-man. “In more professional circles there is no need to pay any commission,” insists Mr Freedman, who backs a fee-based model for asset allocation. “We prefer explaining to clients how investments work and where they belong, rather than just saying: ‘put your money into our product.’”
London & Capital’s “strict regime” of portfolio management is headed by ex Old Mutual investment strategist Ashok Shah, who believes in a mixture of top-down and bottom-up investment influences, favouring strong cash positions and use of derivatives for hedging portfolios in uncertain markets.
