Profile: Mike Balfour on why Thomas Miller Investment’s acquisition of Broadstone is a big deal

balfour

Discretionary fund management firm Thomas Miller Investment has just announced its acquisition of Broadstone Wealth Management and chief executive Mike Balfour is clearly pleased that the deal has been done.

“Two or three years ago we recognised that we were good at private client investment management but we didn’t have a business that had critical mass. We were good at growing – we’ve been growing at 20 per cent a year but from a relatively low base. It would have taken us a long time to go from £150m to £500m – the level where you start to get self-sustaining profitability,” he says.

Broadstone Wealth Management, which used to be part of accounting firm BDO, was seen as a good cultural fit for Thomas Miller Investment and Balfour is now preparing to integrate the two businesses. “It’s gratifying that a few years ago we set down some plans and they have come to fruition. The next stage, subject to FCA approval, is integration. That will be equally hard work, if not harder than the acquisition process. We should have FCA approval within the next six weeks, but planning will happen before that. We want it to be done quickly.”

Thomas Miller Investment is part of the Thomas Miller Group that was established in 1885 and has its roots in marine insurance. Balfour says it differs from competitors in terms of the consistency of investment performance, the way it has replicated its institutional service levels for private clients and giving advisers and clients access to the people who make decisions about their portfolios. “Some competitors have someone in the middle and client services teams,” he says.

Balfour joined the firm initially as chief investment officer in 2009 and stepped up as chief executive the following year. “I realised the company had a lot of potential and the challenge was to grow it into something better. Simplistically I look at investment management companies and think they need to be good at investment performance, good at administration and good at sales and marketing. When I joined Thomas Miller Investment it wasn’t good at any of those.” he says.

Balfour then set about improving investment performance, outsourcing the administration – a huge and costly exercise which he says was worth it – and now has sales and marketing in his sights. “As a brand Thomas Miller Investment is low down in the pecking order and we need to improve that. We are using the acquisition and other methods to spread our wings, our tentacles and distribution links,” he says.

Many discretionary managers who were quietly going about their business not so long ago are also trying to raise their profile among advisers. Balfour says this is due to the industry maturing and more advisers wanting to outsource their investment management responsibilities, which has provided new opportunities for DFMs.

“As the industry matures and consolidates there will be fewer players as time goes on but the few will get bigger and bigger. So there will be a requirement for brand names and name recognition. Many advisers want to outsource and are happy to do it with household names, brand names and names they are aware of. It’s a comfort factor,” he says.

Balfour is a rare example of someone who didn’t ‘just fall into’ financial services. “I wanted to become an investment manager. When I was younger I used to read the football magazine Shoot! – and Investors Chronical,” he says. “I trained as a chartered accountant and the only reason I did it was to get into investment management.”

Back in the late 1970s and early 1980s, Balfour says the only way to get into fund management was through contacts in the City of London. But Balfour had none of those – he was brought up on a rural farm in Scotland close to Gleneagles, which hosts the Ryder Cup. “In the summer holidays I used to caddy at Gleneagles,” he says.

Following his time as a chartered accountant, Balfour joined Edinburgh Fund Managers in 1985. He learnt his craft there over a 16-year period “Edinburgh Fund Managers came to a bit of a sticky end – 18 months after I left it was taken over by Aberdeen and disappeared into history. But between 1985 and 2001, when I left, it was an interesting, successful and varied career path for me. I remember starting there when it had £350m under management and when I left it was £8.5bn,” he says.

He became chief executive of Glasgow Investment Managers in 2004 and set about turning this small investment management business around. “Improving the business, profitability and pushing it forward in a couple of niche areas. I look back on that now with pride because it wasn’t a terribly successful company when I joined and we sold it to Aberdeen in 2007 just before the financial crisis at a healthy profit.”

But the biggest highlight of Balfour’s career was founding the Edinburgh Dragon investment trust, which is now managed by Aberdeen. “I started it in 1987, six weeks before the stockmarket crash,” he says.

Balfour is currently a non-executive director of another investment trust, the Martin Currie Global Portfolio Trust, and thinks investment trusts are growing in importance because of platforms. “Some platforms haven’t got investment trusts on them because it’s too hard and that’s disappointing. But a few more buyers are coming in through platforms – you can see this in the share registers. And more people are doing it themselves, it’s their hobby. As technology and the internet are taking over, that’s what has enabled people to research and analyse and monitor their portfolios at home,” he says.

Talking about technology reminds Balfour of the biggest challenge of his career. “It was during the dotcom boom of the late 1990s and I was at Edinburgh Fund Managers. I was convinced a crash was coming and the challenge was trying to persuade my colleagues in the investment team that they should be selling tech and buying more sensible things,”he says.

Back in the present, Balfour says that buying Broadstone is not the start of an acquisition trail for Thomas Miller Investment because it wants to grow steadily and allow the changes it is already making to bed in. “Our plans for the future are better distribution, keep up the investment performance and grow organically. We want to take it steadily, one step at a time.”

FIVE QUESTIONS

What is the best bit of advice you’ve received in your career?

“Find your edge”. This was said not from a what makes you better than others perspective, but try to find a harshness. You can’t be nice to everyone all the time.

What keeps you awake at night?Too much red wine

What is the most significant impact on financial advice in the past year?

George Osborne’s budget – the removal of the annuity requirement and increased Isa allowance was important and an indication of the future.

If I was put in charge of the FCA for a day I would…

Raise salaries to attract quality people who would then stay.

Any advice for new advisers?

Look after after the clients and they will look after you.

CV

2009-present: Chief executive, chief investment officer,Thomas Miller Investment

2007-2009: Non-executive and non-fund management related roles with various companies

2004-2007: Chief executive, Glasgow Investment Managers

2001-2004: Non-executive and non-fund management related roles with various companies

1985-2001: Managing director, chief investment officer and other roles, Edinburgh Fund Managers

1981-1985: Chartered accountant, Neville Russell

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