Schroders targets wealth management growth
Schroders is looking to build up its wealth management business in Bermuda.
The venerable London investment house, which has been servicing clients on the island for 49 years, re-established a physical presence on the island last year.
The firm is well known in Bermuda as an asset manager for institutional clients, but is now looking to beef up its offering to wealthy individuals and families.
Robin Peters is the client director at Schroders (Bermuda) Ltd, working out of offices in Wellesley House South on Pitts Bay Road.
She has responsibility for client relations and works closely with Schroders team in the Channel Islands.
Julian Winser, chief executive officer of Schroders (CI) Ltd, said the decision to put “boots on the ground” in Bermuda came about not only because of wealth management opportunities, but also because of the strengths of the jurisdiction.
“We felt there was an opportunity in Bermuda, because it has money that faces in two directions — towards the US but also in the opposite direction,” Mr Winser, who is based in Guernsey, said.
“Many wealthy individuals want to diversify their investments and Bermuda is a good place to do this.”
Diversification was not just about allocations in a portfolio, but also in where the money is managed from, he added.
Schroders’ wealth management business has operations in the Channel Islands, Gibraltar, Switzerland, Hong Kong and Singapore, as well as Britain, Germany, Italy and Spain.
“There is a lot of wealth in Bermuda, because it remains a premier international jurisdiction and because of the quality of its legal system,” Mr Winser said. “The lawyers here are in the premier division and they are good enough to have a primary relationship with wealthy clients — in many other jurisdictions, that’s not the case.”
The system’s links to the British legal system also gave wealthy individuals faith that their assets would be protected for future generations. “It’s not all about tax,” Mr Winser added.
Wealthy clients also like Schroders’ longevity — the business has been running for more than 200 years — and its stability, with the Schroders family still controlling about 48 per cent of voting shares of the London Stock Exchange-listed company, as well as it stated intention to take the long-term view.
Schroders had £447 billion (about $626 billion) of assets under management and administration as of the end of last year. About 10 per cent of those assets are in the wealth management business. The firm has more than 4,600 employees working in 29 countries.
With the acquisition of wealth manager Cazanove in 2013, Schroders expanded the part of its business that caters to wealthy individuals.
Caspar Rock, chief investment officer of Schroders Wealth Management, who presented at last week’s seminar, said the firm could draw on expertise around the world to help portfolio managers make sound investment decisions.
On average, the firms’ wealthy clients have about $3 million invested and new investors are expected to come in with at least $500,000.
Wealthy clients do not all have the same objectives, but Mr Rock has noticed patterns among subgroups.
“Clients up to a certain level are most interested in wealth preservation, but those with a higher amount tend to be more interested in growth,” Mr Rock said.
“Families with multi-generational wealth tend to have a higher tolerance for risk than someone who is first-generation wealthy.”
He said Schroders’ services were based on first meeting the client, understanding their goals, capacity for loss, risk tolerance and level of financial sophistication. Then the portfolio would be engineered to match the client.
Just as important was ongoing contact with the client, Mr Rock added, as life events could alter investment requirements.
That is one of the strengths in having Ms Peters in Bermuda to meet up with clients. Mr Rock said many clients had expressed a preference for meeting in person, rather than having video conference calls via Skype, for example.
He said today’s investment climate was somewhat unusual. “The 45 largest economies in the world are all growing at the same time — that’s a bit of an anomaly, but it is a positive backdrop for the markets,” Mr Rock said.
Inflation is the biggest risk to the financial markets, he said. While he expects stronger growth and a tightening labour market to build inflationary pressure in the US, he expects inflation to remain subdued in the EU and to drop off in the UK.
Another risk is that the high hopes for continued earnings growth do not materialise — although this year, at least, Mr Rock believes there are good prospects for company profits to keep rising. However, the markets are priced accordingly.
“We’re quite a long way into quite a long bull market and I couldn’t say that anything is screamingly cheap right now,” Mr Rock said.
“In early January, everyone was gung-ho bullish. Sentiment has come back a bit since then, but there are still one or two amber lights that sentiment is still overexcited. I see more volatility this year.”
The big risks Mr Rock sees include inflation, the tightening of central bank monetary policy, rising interest rates and trade disruption from growing protectionism.
Schroders is neutral on equities, negative on fixed income, and positive on alternative investments and cash.
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