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Dividend approach that yields results

Brewin Dolphin executive chairman Jamie Matheson takes a relatively simple approach to investment.

He says: “As far as Brewin Dolphin is concerned, we are dedicated to providing serv- ices to clients and we fly the banner of providing bespoke service to individual clients.

“We believe strongly in getting the portfolio that the client wants and for their individual circumstances. The growth in the business in recent years is a simple vindication of that policy.”

He says the stockbroker and fund manager’s operations have moved more into the wealth management sphere in recent years with around £20bn funds under management, of which around £10bn is discretionary.

Clients’ appetites for diff- erent types of investment have evolved but certain fundamentals still apply.

He says: “Broadly speaking, the private investor tends to be a fairly experienced inves- tor with tempered expec- tations. The dividend point is terribly important. Investment is about return and the primary return is by way of dividend. That is sometimes forgotten but our client base has always regarded dividend as a primary means of return.”

Matheson has strong views on how the scale of the influ- ence of derivatives has skewed the market. In particular, he asks whether the trustees of pension funds are aware that when they get involved in stock lending, it may be used to go short on the investments held by their fund.

He says: “The practice of stock lending is an integral part of the short-selling mechanism but I would love to ask the trustees of pension funds, do they know whether their stock is being lent and are they comfortable that their stock is being lent? I am curious.”

He also believes that recent moves by regulators to raise awareness surrounding short-selling and rights issues on both sides of the Atlantic are very positive.

“If you look at how corporations are legitimately raising money by way of rights issues and find themselves at the vagaries of short-selling. I have to say that I am delighted that the FSA and the SEC find themselves able to address this.

“I think it is a really positive step where practices that, to my mind, have no real economic benefit to either sovereign states or major corporations are being put under scrutiny.

“It is very difficult to legislate and I am not sure legislation is right answer but if there is investor awareness of the effects of these things, then that is good.”

He also suggests that in terms of client demand, he has not seen a huge appetite for derivatives. “What we are doing and have done is to broaden our offering to become more encompassing.

“Wealth management, pensions, Sipps do come into people’s thinking. Our client base tends not to be involved in derivatives and they are derivatives rather than asset clas- ses in themselves.”

Matheson takes issue with describing some of these instruments as new asset classes.

“There is a danger that we are confusing things, you can’t see the wood for the trees. I would say there are three asset classes, physical things which covers everything from property, minerals, resources, cash or cash equivalents and risk equity. You can argue that everything else is a derivative of one or more of those three basic constituents.

“It is very important to go back to our overall approach. Our clients are long-term investors It is very difficult to make a return from the wild gyrations that we are seeing at the moment.”

Talking of changes to the market, Matheson says the biggest change, besides the FSA is the speed of communication. In the 1970s, the bear market happened very slowly, these days, he says a bear market can happen in minutes.

He says in the 1970s, banks needed to refinance as they do now although, of course, without the influence of derivatives, but there is nothing like the political instability now that there was then.

He believes the oil price rise is not simply the result of speculation and he does not believe it will fall back materially.

Matheson believes it is the firm’s solid face-to-face approach that will appeal to IFAs, helped by Brewin Dolphin’s regional reach with 39 offices across the UK.

He adds: “We believe str-ongly in being face to face with the client. They come in to the office or we visit them. It is very much a practitioner to client relationship. The client gets to meet the person who is looking after their funds.”

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