This week we are delighted to introduce our newest discretionary manager partner, R.C. Brown. Find out more about their discretionary investment services here. Alternatively, read on to learn how the business has evolved, including the challenges they have overcome and what makes R.C. Brown unique.
As an entrepreneur, I find R.C. Brown’s journey over the last seven years heartening. Particularly because (and I’m sure those of you running your own businesses can relate) it hasn’t been a linear journey. R.C. Brown is the product of hard decisions and a desire to build a sustainable business that will support the needs of clients today, as well as their future generations.
Let’s start with a quick look at R.C. Brown’s current service offering and value proposition, before we consider the journey that has brought them here.
R.C. Brown is not like a traditional discretionary manager. I know there are many DFMs, particularly new entrants to the market, who will say the same. However, let me share an example that should serve to bring this statement to life.
Not your traditional DFM
I met with Robert Clark, Sales and Marketing Director, a couple of weeks ago over coffee. It was the morning after he had travelled down to London to attend a dinner. The event the night before was an opportunity for Robert to network with ‘front of house’ representatives from other discretionary investment houses, as well as Trustees and financial advisers focused on the private client sector.
I’ve attended similar events in the past and often they can feel intimidating. Particularly when the discussion around the table moves on to the types of clients everyone works with. Frequently, and possibly unintentionally, they can turn into a competition of sorts as stories about ‘my biggest client’ emerge.
Robert was “quite chuffed” (his own words) with how his counterparts at the dinner reacted to R.C. Brown’s value proposition. He talked through their sweet spot and what makes them different. Here’s what he said:
“We work with mass affluent clients, introduced through financial advisers. While most DFMs deem any client with a portfolio of less than £0.5 million to be ‘low value’, this is the area of the market R.C. Brown are set-up to support.
Rather than working with advisers to deliver solutions for their very top clients, of which there might be just a handful, we work with the clients that sit just below this. Those that will also represent a far larger proportion of their book of business.
Traditionally, clients falling into this category would be offered a fund-of-fund style solution, as many would deem them too small for a bespoke discretionary offering. This is where we are different. Our minimum is £15k for a tailored portfolio, offered at a comparatively lower cost.
It is our view that today’s £50k case could end up being tomorrow’s £5 million case. We don’t believe the benefits of discretionary management should be limited to the very few at the top end of an adviser’s book.”
R.C. Brown’s entrepreneurial journey
What factors contributed to R.C. Brown arriving at this solution? Why didn’t they follow the path taken by many traditional DFMs, where discretionary investment management is considered a luxury to be enjoyed by the privileged few?
As I mentioned in the introduction, R.C. Brown’s journey has involved tough decisions along the way. Back in 2010 the business was distinctly to different to what we see today. At that time R.C. Brown had around £200 million assets under management, which had been built up over the previous 20 years.
Those assets came from a handful of charities, pension funds and private clients, and unfortunately, like a lot of businesses in our profession, this lead to concentration risk. The impact of one client leaving could have been catastrophic for the business.
Unfortunately, that’s exactly what happened. One of the charities, representing £150 million in assets, wanted the investment team to take the portfolio in another direction. R.C. Brown have strongly held views on how they manage money so there was a disconnect. As a result, the two parties amicably parted company and £150 million was moved away.
At this point the management team could have thrown their hands in the air and closed-up shop. In fact, I know of many an entrepreneur who, when faced with a challenge such as this, would have done exactly that.
Instead, the team at R.C. Brown decided to radically transform their operation. Everyone tightened their belts, and made the conscious decision to shift focus to supporting Financial Advisers looking to outsource their investment requirements, and create a service that would appeal to the mass affluent.
Rather than focus on a small number of big cases, where client loss could have a crippling effect, they completely reshaped their thinking.
As a result, systems and processes were refined to streamline the way they operated and create scale. The business can now handle a much larger volume of cases – for a minimum investment of just £15k – making the service far more accessible.
Has this change of strategy worked?
It certainly has. Between 2013 and 2017 R.C. Brown more than regained the £150 million in assets they lost and business has taken an incredibly different shape. From the range of services, to how they charge and the way the team are remunerated. They are vocal supporters of transparent fully disclosed charging, and offer clients a number of “inclusive fee” choices in the way they can pay for the portfolio management.
Future articles on this site will cover key points of differentiation such as the R.C. Brown corporate culture, investment approach and charging structure. In the interim, do visit the R.C. Brown page on this site.
Readers, if you have any comments or questions please post in the space below.