US wealth manager buying into UK.

By Matthew Vincent
February 9, 2008

Focus Financial Partners, the largest fully-independent wealth management group in the US, is bringing its “holistic” financial planning approach to the UK through the acquisition of Greystone, the Manchester-based adviser to high net worth celebrity and City clients. And the CEO of Focus, Ruediger Adolf, now forecasts that smaller wealth managers will outgrow “sales-led” private banks in terms of client assets, as the UK enters “the age of the independent”.

Under the terms of the deal, Greystone will join the Focus partnership with new UK partners locked in for six years, and Focus will invest in the equity of Greystone, and pay cash and shares to its directors.

Greystone will then draw on the expertise of the group to evolve its offering for a larger client base in the UK. In addition to its asset management service—it runs nine asset allocation models for client portfolios, selecting funds from the whole market within its Greystone wrappers—it will look to provide bespoke structured products, and add diversification through funds of hedge funds. At present, it manages just Pounds 800m of assets for 5,000 clients, but these include high earners from the worlds of media, sports and financial services who have up to Pounds 5m in investible assets.

It’s in this range that Focus believes it can add most value. “Our ‘sweet spot’, where the model really works in the US is Dollars 1m- Dollars 15m,” says Adolf. “Our holistic approach takes a broad view of the financial lives of clients. Asset management is one aspect, but it’s a lot to do with protection, tax planning, real estate planning and the trust area.”

Here, Focus believes independent status can deliver better solutions. In the US, the partnership operates as a Registered Investment Adviser (RIA), which gives it a fiduciary duty to put clients’ interests first when making recommendations. At present, RIAs manage only 15 per cent of household wealth, with the other 85 per cent managed by traditional brokers and banks. However, RIAs are increasing their market share faster than the traditional advisers—and Focus sees this trend developing in the UK. “Private banks sell you a product, but we give advice that’s not tied into the sale of a particular product,” argues Adolf. To emphasise this, Focus and Greystone both charge fees rather than upfront commissions.

For complex, multinational planning, though, investment banks claim they have an edge. “Our challenge is to show clients they are better placed at a group with huge resources if they want global reach, and multi-asset class reach,” says Nick Tucker of Merrill Lynch. “For example, for an ultra-high worth individual with homes in the UK, and children in Bahrain and New York, we have an understanding of wealth structures for all these different jurisdictions.”