Despite operations in Hong Kong, Singapore and Shanghai, Asia accounts for only 1% of St James’s Place £1.2bn ($1.55bn) assets under management. About £400m of that total is from the 2014 acquisition of Asia-based Henley Group.
On a client visit to Hong Kong, Bellamy told FSA the aspiration is to grow AUM of the whole group 15%-20% per annum. “I like to think Asia can achieve better than that.”
Bellamy, SJP’s chief executive for 11 years, stepped down from the role in 2017 and now acts in an advisory capacity, overseeing the Asia operations.
He has hopes for the firm’s relatively new discretionary business, brought in through the 2016 acquisition of Rowan Dartington.
In Singapore last month SJP received a licence enabling it to offer discretionary services. “I’d like to see that get traction next year,” Bellamy said.
The wealth management firm runs a partnership distribution model, working with the clients of independent financial advisory firms, and providing investment capabilities, advice and training to the advisory partners.
“Growing AUM is about growing distribution, and the only way to that is through our advisors, helping them to become better and attract more clients. The Asia business is not much different.
“One of the things I’d like to see happen in Asia next year is strong recruitment [of advisory partners].”
Recruitment is a challenge in talent-scarce Asia, he admits. “But we’re not looking to recruit hundreds. We’re looking at a recruitment goal of 10% per annum.”
The wealth threshold for clients is above retail and below private banks.
“Banks in the UK are serving the high end affluent and the same is going on here, market intelligence tells us. A segment of clients are either badly served or neglected and we focus on them [through the network of advisories].”
The Hong Kong and Singapore offices have a large base of expatriate clients. A Shanghai office has 25 advisers, but due to China’s regulations, the firm cannot market to Chinese nationals and it serves expatriates only. As China relaxes regulations, the aim is to address local Chinese, Bellamy added.
He did not see an impact from social unrest in Hong Kong on wealth management. “We hear stories of money going to Singapore, but it’s anecdotal. We’re not seeing anything ourselves.
“The long-term growth factors remain unchanged. The rapid growth of the affluent class, an underdeveloped wealth management industry and the potential opportunities arising from the Greater Bay area plan bode well.”
‘Segregated’ funds
SJP uses a non-standard wealth model, running segregated funds.
Bellamy explains that the firm’s investment committee screens for and appoints top fund managers from various global asset management firms.
SJP sets up a segregated fund that sits in parallel to the manager’s fund. SJP client money goes in the segregated fund, which is run by the manager but all trades are monitored by SJP.
“We select fund managers, we monitor them every trade and if we get at all uncomfortable or they retire or switch investment houses, we can change the management,” Bellamy said, citing the example of fallen UK star manager Neil Woodford.
“Neil Woodford was running £3.5bn of our clients’ money at the time when his other world had started to digress. We’d given him a mandate to buy equity income stocks for us, but he started to move into other things like illiquid stocks.
“We said we weren’t happy with that. The two funds [Woodward’s and SJP’s segregated] started to drift apart and in the end there was only 20% overlap.
“When he was forced to sell around £200mn in assets, he didn’t have the liquidity and he gated the fund. We took the view at that point that Neil could no longer pay due attention to the £3.5bn he was running for us and so we parted company with him,” Bellamy said.
The segregated fund was handed to two other managers and, according to Bellamy, since the managerial change the fund is up 18% “with no lockdown of client money, no harm to clients. We simply moved the £3.5bn to other managers”.
Using this model, Bellamy said the firm can also get wholesale rates in the retail market. “Neil would charge 60 basis points on most platforms, but was charging 25 basis points for the £3.5bn he was running for us and the 25 is what clients paid. Essentially it was a bulk discount.”
Internal review
Bellamy also addressed recent criticism in the UK media about how SJP rewards advisors for attracting new money, charges that have prompted the firm to do an internal review of its own incentive practices.
He explained that 50% of all new money comes from existing clients and 40% from referrals.
“We’ve always been a meritocracy organisation. To our top achievers, what we think is appropriate is to get them together during the year in a nice place and talk business. We don’t see that as outdated or wrong, but positive for the organisation.
He said £300 cufflinks, given to some top achievers, should not elicit charges of lavish rewards. “The idea that we give people diamond-encrusted cufflinks [a media allegation] is rubbish.”
Face-to-face
Despite the winds of change from technology, Bellamy said his firm enshrines the personal relationship, face-to-face model of wealth management.
Yet robo-advisories are evolving rapidly, even making inroads into the lower end of the high net worth investor base, competing for clients with financial advisors. Moreover, expectations are that the next generation of wealth in Asia will be young, tech-savvy family members who have a stronger preference for online engagement with advisers than their parents did.
Bellamy counters that people are living longer, raising the average inheritance age (62 in the UK). “It reinforces the idea that 35 year-olds and below won’t be inheriting anytime soon.
“[Technology] is a tool for us, but it will not replace our relationship-based, face-to-face advisory model. I don’t think I’ll come down one morning and talk to Alexa about my portfolio.”
