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Justin Urquhart Stewart: Gunning for growth

Justin Urquhart Stewart reveals how discovering he was the ‘world’s worst barrister’ and being shot and seriously wounded in Uganda led him to his calling in finance and co-founding Seven Investment Management. Interview by Beth Brearley.

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When I meet Justin Urquhart Stewart, he is in great spirits, having recently returned from a holiday in France, where he admits he simply relaxed and “drank lots of rosé”. That said, it is hard to imagine him any other way – he is recognisable as much for his sanguine demeanour as his signature red braces.

He even talks wryly about what must have been a dark chapter in his life, pre-dating Seven Investment Management and long before he was recognised as the financial pundit he is known as today. Urquhart Stewart began his professional life in law and by his own admission is a “failed barrister – the world’s worst”, leaving the profession after a matter of months in 1978. He went on to study corporate finance with Barclays and in 1979 joined Barclays Dominion Colonial & Overseas, going to work in Uganda to assist with local trade financing at the time of Idi Amin’s deposition. While there, he was caught in crossfire and sustained serious injuries.

“My family have been in the army since 1946. I am the first one not to join the army and I got shot,” Urquhart Stewart quips. “I’d had my legs shot off so I was brought back to the UK and spent a year in hospital while they put me back together.”

However, Urqhuart Stewart had found his calling in finance, returning to Barclays Bank International in 1981 and taking a post in Singapore for three years. “Finance is very different to law. Law is not constructive – you do not create anything. At Barclays I could be more creative, putting deals together. It was old-fashioned corporate banking.”

On his return to London in 1984 he joined Barclays’ investment banking arm Barclays de Zoete Wedd. This coincided with the beginning of the Big Bang, part of Thatcher’s reform programme to deregulate the financial markets, filter corporate money through to the investment world and create a meritocracy. However, Urquhart Stewart claims the reform to a free market and screen-based trading “went from the sublime to the ridiculous”.

“At the time of the Big Bang we changed from the old cartel of fixed commission and old-fashioned markets, with firms divided by class and religion. It was previously very white and very male. Your position was more from family and connections than merit.

“Post-Big Bang, that opened up so that all could succeed but we lost the partnerships who were risking their own capital, to be replaced by bank capital, where people could trade at others’ risk and be rewarded on results, and governance became replaced by greed for bonuses. We forgot it was a responsibility and a privilege to look after people’s money and not just an opportunity to prosper at clients’ risk and expense.”

Disenchanted by the outcome of the Big Bang, and recognising that the move to electronic trading with the hangover of paper settlement was “a recipe for chaos”, Urquhart Stewart left Barclays in 1986 to set up Broker Services. The firm was based in Glasgow – where there was still a stock exchange – and promoted efficient trading and settlement at a lower cost. However, Barclays – which had always been a shareholder in the business – took over the company, which became Barclays Stockbrokers.

“The deadening hand of corporates came over us and it was back to Barclays for the third time,” he says.

Weary of working within a large corporation and wanting to set up an investment management company that would treat clients as he would wish to be treated, Urquhart Stewart founded 7IM with Tom Sheridan, who he had worked with at Barclays, despite the reluctance of potential investors to bankroll the start-up.

“Everyone said: ’It’s a good idea but I wouldn’t back that,” Urqhuart Stewart admits.

Fortunately, the pair found an ally in Paul Killik, who provided the private equity backing, and the company was set up in the basement of his Mayfair offices in 2001.

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Initially, the company teamed up with financial advisers to provide a discretionary investment management service aimed at high-net-worth individuals. This led to the launch of a range of risk-rated funds in 2003, preceding the recent flood of such vehicles by almost a decade. Indeed, the pair were pioneers of multi-asset and multi-manager portfolios, which Urquhart Stewart says had not previously been seen in the retail market.

“Back then, advisers were hooked on commission and stochastic models. They used a system devised by insurance companies without knowledge of the investment world. We had the high-net-worth end, the bespoke service, but not the funds. So we used the same process for those investing £1,000 to those investing £1m but without the tailored service.”

Having garnered the support of advisers, the group’s platform was built to meet demand in 2005 and in 2008 7IM broadened its proposition by launching the Asset Allocated Passive funds. Last year, the group added model portfolios to its offering; a risk-rated range which uses a simplified version of the process used for the Asset Allocated Passive funds, as well as the 7IM Unconstrained fund, which sits in the four-strong specialist range. Today, the company has over £5bn in assets under management and administration, which Urquhart Stewart is comfortable with, perceiving AUM to be the product of their endeavours rather than the absolute goal.

“We will never be mass market but we would rather provide great service to the right people in the right way. The financial planning and investment industry is at a crucial moment, where clients are desperate to find someone to trust and there are many great financial planners who we can support and help develop for their benefit and their clients. This means providing not just discretionary services, models, risk-rated funds, specialist investment structures, the platform and technological innovations but also deposit and lending services as well as marketing and sales support. AUM is just part of that.”

7IM’s deposit and lending services – which were introduced this year – mark a slight change in direction for the group as they steer advisers towards banking services. Urquhart Stewart reasons that if advisers can offer banking services, they can effectively market themselves as a family office without the charges associated with the latter.

“The bank brands are soiled and they turnover employees every three years, whereas financial advisers tend to be more long term,” he says. “Over five generations, an adviser could administer £1m, it would be easy to achieve. This is a huge business opportunity for advisers. We now have the technology which allows advisers to offer this service. People are frightened and do not know where to go with their money.”

Urquhart Stewart’s current project is “the linkage of professions”. He says changes in regulation and professional requirements have changed the historical hierarchy, to the potential advantage of advisers.

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“Solicitors’ business has been taken away from them – for example, wills, housing transactions, all these issues are gradually going elsewhere. Accountants only speak to clients once a year, whereas a good  adviser should speak to clients once a month. These people are having to market their services for the first time. Financial planners are not linking up with these other professions but they should do. They are like the glue.”

When I ask Urquhart Stewart where he hopes to be in five years’ time, I do not get quite the answer I am expecting.

“Originally I wanted to study archeology but I needed to have studied physics and was told to get a proper job. So I would like to be studying for a degree in archeology. I’m looking at universities now.”

I glance at the group’s logo emblazoned on my coaster; the roman numerals for the number seven sit atop the letters IM in a Times Roman font. A nod to Urquhart Stewart’s love of the past?

“Yes. Tom suggested Dalegarth – the name of his house – but I said it sounded like something from Lord of the Rings. I said it could be number 62, the number of my house and then we thought why not a number? And there were seven of us, so…..”

“Lucky number seven?” I suggest. “Or seven deadly sins,” Urquhart Stewart grins.

Urquhart Stewart says there are reasons to be optimistic about the economy – small businesses, for example, those with a market cap of less than £250,000 are quietly doing ok, he says. But he reckons the Government is out of touch and there is a lot more in the way of small initiatives they could be implementing.

“We need to get rid of old taxes, such as stamp duty, and build more property, so there is not a bubble; we are not going the same way as the last decade. We need to add more flexibility to housing, such as long-term leases for life and short tenancy agreements. We need to reform the banks properly – it has taken three years to split RBS – and invest in proper infrastructure. We should be developing more funding structures like peer to peer lending to recreate the connection between private investors and local companies. There are lots of little things that can put confidence back in the economy.“We can also foster students to educate them in finance and not just economics. Like Britain really needs another economist! We can tell them that, yes, they can do things themselves. I would tell them: don’t do what I did. Try not to get shot.”

Quick-fire questions

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What would our readers be surprised to know about you?
I was an elected shop steward for the UCATT (Union of Construction, Allied Trades and Technicians) on Southampton Docks in 1976. We managed to avoid a strike!

What would your desert island item be?
A case of Chateau Giscours 1966 (and please could I have a corkscrew).

What is the best advice you have received?
It was from a doctor in Uganda: “Make the most of every day – every day.”

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