Rathbones Unit Trust Management chief executive officer condemns the regulator’s controversial plans to ban cash rebates and warns that it will affect what share classes the company will offer Interview by Rachael Adams
What is more frightening than being a unit trust manager? Being a stand-up comedian, according to Rathbones Unit Trust Management chief executive officer Mike Webb.
“I trod the boards as a stand-up for 18 months after university,” he says. “Being in front of an audience at Bernard Manning’s Pink Pussycat Club is much scarier than being a wealth manager.”
Originally, Webb intended to be a barrister but three years studying for the bar put him off. “All anyone seemed to do was photocopying, which was too dire for words. While I was a comedian I had a lot of jobs on the side, such as running an off-licence and working in a mortuary but eventually my bank took a pretty dim view of the size of my overdraft. I thought I had better get a job.”
He chose financial services because his father had worked in the industry and after writing to a number of companies he got a job as an investment manager at Hambros Bank.
“I did not mean to stay in financial services but I really enjoyed it.”
From Hambros, Webb went to Prolific Financial Management and gained valuable experience for his role at Rathbones. “Prolific had been a real darling of the unit trust industry in the 1980s but had fallen on harder times. It was a high-energy business and taught me a lot about what works in asset management.” He took this knowledge to the retail division of GT Global Asset Management which was bought by Invesco in 1998. “We took the funds under management from £1.2bn to £9bn in three years.”
After overseeing Invesco’s purchase of Perpetual in 2000, Webb took a break. “I helped make Invesco Perpetual a powerhouse, so I took two years off and travelled as extensively as I could. When I got back, I felt I wanted more exposure to the institutional world, so I joined Hermes.”
At Hermes, he spent a lot of time creating innovative investment partnerships with boutique firms but once Hermes switched its focus to rebuilding its global distribution network Webb realised he was veering away from his area of expertise and decided it was time to go back to the retail sector.
“Rathbones seemed too good to be true. It has a great brand name and it is concentrated. I like the fact that it does what it does well rather than launching a plethora of products.”
Rathbones’ management strategy appealed to Webb. “Talented managers run funds how they want to without the imposition of teams of analysts.”
The familiar challenge of getting a company back on track after a difficult few years during the recession was also a driver. “If someone with a clear vision comes in and delivers, then morale that has been damaged by cost-cutting and so on turns round. Everyone from the managers to the graduate trainees were supportive.”
Developing a long-term strategy for the business takes up most of Webb’s time and he is working on two new funds to be launched this year. The first, a fixedincome fund due to hit the market in the last quarter, comes at the end of what Webb refers to as “a 20-year bull market”.
“Returns from fixed income are going to be very different in the future. We are looking to create a fund that allows us to look at the strategic asset allocation across fixed-income markets. Some IFAs know how to do this but we want to make it easier for the ones who do not.”
The second is a new multi-asset product, designed to help Rathbones make the most of the RDR.
“We felt we could put ourselves at the heart of the outsourcing trend occurring in UK distribution. Our multi-asset funds are run off the central investment process that guides the whole of the wealth management side of the business, so the resources we can bring are compelling.”
Although Webb agrees with the RDR in principle, he does see problems with it.
“Like many other people, I can envisage an advice gap at the lower end of the market. Big banks like Barclays are creating execution-only solutions when these people are the least financially literate and need advice.”
He also thinks the regulator may have been too heavy-handed in formulating the RDR. “IFAs are painted as cowboys, which they are not. It may have used a sledgehammer to crack a walnut.”
But the key issue Webb sees with the RDR is cash rebates. “I utterly disagree with the FSA’s stance. What it is worrying about is an intermediary buying an existing retail fund class, getting a rebate back and offsetting that against adviser charges to make them look free.”
Webb believes banning cash rebates for the legacy share class makes more sense than banning rebates across the board.
“If the FSA does ban them, it will affect how we plan what share classes we are going to launch.”
The debate about classifications is equally important for the future of financial services, according to Webb. “I think the managed A, B, C and D categories are a cop-out and make a group of funds that makes up the core of most client portfolios less transparent. The parameters of the IMA asset allocation allow for such a myriad of outcomes that it is a dangerous tool to use. For example, a cautious managed fund cannot have more than 60 per cent in equities but you could create a very risky portfolio with 60 per cent in equities.”
Rathbones has suggested to the IMA that defining risk relative to the equity market is a stronger proposition.
“Most people understand the risk involved with equities because they read about it in the papers, so that seems to be a good way of doing it. I am glad the IMA delayed its paper because it has stimulated a fantastic debate but let us make sure the solution is the right one.”
If the outcome of the IMA’s consultation does not appeal, Webb says the funds within the unit trust business will remain unclassified.
Webb is positive about the future, with aggressive plans for growth in the short term.
“I think we can grow the business from £1.1bn to £2bn-£3bn. We are concentrating on producing outstanding performance for our customers without shooting the lights out. Performance is the engine room of everything.”
Born: Redhill, Surrey, 1962
Lives: Balham, London with his wife and three daughters
Education: Sherborne School followed by a law degree at Bristol University
Career: 2010-present: CEO, Rathbones Unit Trust Management; 2006-09: executive director and head of business development, Hermes Fund Managers; 2004-06: went travelling; 1998-2004: CEO, Invesco Perpetual; 1996-98: managing director of the retail division, GT Global Asset Management; 1991-96: sales and marketing director, Prolific Financial Management; 1986-91: investment management marketing at Hambros Bank
Likes: Golf, scuba diving and wine
Dislikes: Minicab drivers, jobsworths and being told what to do
Drives: A Jaguar XF
Book: A Short History of Nearly Everything by Bill Bryson
Film: Good Morning Vietnam
Album: Last Night on Earth by Noah and The Whale
Career Ambition: To build a truly successful business while having fun
Life Ambition: To be remembered as a decent bloke and a good father and retire gracefully If I wasn’t doing this I would be…In trouble or an out-of-work actor