Investors are constantly being told to diversify, so shouldn’t the same argument apply to running a business? Walker Crips chief executive Rodney FitzGerald thinks so.
FitzGerald has set about diversifying Walker Crips’ revenue and earnings streams. And as the firm marks its centenary year – it started out as Weddle Beck & Co just two months before the outbreak of World War One – it is a very different company under FitzGerald’s leadership.
Having preserved its traditional role as a stockbroker, Walker Crips now has several divisions, including investment management, wealth management, Sipp and SSAS management, and provides structured products and alternative investments.
FitzGerald concedes the firm he joined in 1999 was old-fashioned, with practically all its eggs in one basket – stockbroking. “Trading had a predominantly commission income, driven by the volume of trades as a stockbroker but that goes up and down within the equity cycle, which means variable performance from year to year,” he says. “Now only 50 per cent comes from commission, mostly fees from managing portfolios. It was necessary to diversify our reliance on volume-driven revenue.”
So where do advisers fit in to FitzGerald’s vision of a diversified business? Walker Crips Structured Products, which launched in 2008, is one answer.
FitzGerald believes more advisers are using structured products for their clients and says the low interest environment has helped. “We’ve seen the market hitting a new high as confidence is coming back,” he says. “Structured products have moved on a lot since the FSA guidance on how they are sold and marketed. It’s been good because people have been learning from the past mistakes of others,” he says.
Since the RDR, the trend for advisers to outsource their investment management responsibilities to discretionary fund managers has added another string to Walker Crips’ bow in the intermediary market.
But this has not been without problems. Last month, the Financial Ombudsman Service upheld a complaint against Walker Crips Stockbrokers for accepting investment instructions from advice firm Quintillion Asset Management without the investor’s consent.
FitzGerald says he was surprised and disappointed by this as Walker Crips had no direct relationship with the client. “We’ve had another decision by the FOS on Quintillion that went in our favour this time. We’re talking to the Wealth Management Association about it and they are interested because of the wider implications. This is not the end of it.”
One of the positives to come out of the outsourcing trend is Walker Cambria, a regional brand launched last year to provide investment outsourcing solutions to advisers based in Wales.
FitzGerald says: “That was set up in response to local need. We are UK-centric so regional growth sits comfortably with us. We want to have hubs spread around but we won’t target more than a dozen regional offices. That is enough to manage in terms of the regulatory burden.”
Until 2012, Walker Crips had an asset management business, which was sold to Liontrust for over £12m.
“We built the asset management business from scratch. It was profitable but so successful that it outgrew Walker Crips and we would have needed to make a huge investment in IT to keep up,” says FitzGerald. “It’s not economic to do business efficiently with larger infrastructures.”
Under the deal, Walker Crips received over 1.8 million ordinary shares in Liontrust, which were sold shortly afterwards, raising £1.66m. The net proceeds of this sale were distributed to shareholders as a special dividend.
“We did well out of the sale; we ended up with shares from Liontrust which tripled in value. It was a calculated risk when accepting shares as part of the deal but we knew the team we had would help their bottom line.”
As a child, FitzGerald was interested in a different type of risk – he wanted to be a fighter pilot. “I was about seven or eight, so it wasn’t a serious ambition. I’d seen all the war films – I love war films, and westerns. But by the time I was a teenager I realised how the world worked and saw chartered accountancy as a way to make money,” he says.
He qualified as a chartered accountant with accountancy firm Hays Allan & Co. From there he spent five years working for US construction company CBI Industries, which taught him the art of managing people and getting on with them. “It was my first experience as a line manager for a team of people. I spent a lot of time there dealing with aggressive people who tended to shout and scream. But I found that by doing my homework in advance, I got their respect and that meant I got on well with them,” he says.
FitzGerald entered the financial services world with stockbroker TC Coombs and Co in 1987. That paved the way for his role as financial controller, then finance director at MeesPierson, the derivatives clearing arm of Dutch bank ABN Amro.
There, FitzGerald was immersed in the recording and control of systems for complex derivatives. But after eight years, he became increasingly dissatisfied. “I was becoming another institutional clone within the banking sector,” he says. “ The most enjoyable spell in my career was working for a smaller outfit.
“You can contribute much more to a smaller company, it’s more rewarding, and you can take responsibility for the overall management of business.”
And so he ended up at Walker Crips, which offered more than number crunching. “I wanted to be more than just an accountant. I wanted to make a contribution to the structure of a business or anything on the commercial side.” says FitzGerald.
At Walker Crips, he has been able to implement changes to the company’s accounting procedures and systems. But he admits times were tough following the financial crisis, with the firm losing commission and needing to cut costs.
“As chief executive I’d like to think I’ve shepherded the company safely through that period.”
What’s the best bit of advice you’ve received in your career?
Shape your management style around your personality and don’t try to be anything different.
What keeps you awake at night?
Not much. During the day I tackle tons of issues so I sleep well at night.
What is the most significant impact on financial advice in the past year?
The pensions changes in the last Budget
If I was put in charge of the FCA for a day I would…
Introduce a separate rule book for investment managers. It takes skill and time to wade through the rules and pick out the relevant ones.
Any advice for new advisers joining the profession?
Soak up knowledge quickly and get qualified as quickly as possible.
1999-present: Chief executive and finance director, Walker Crips
1991-1999: Finance director and financial controller, MeesPierson 1989-1990: Senior financial role at foreign exchange bureau Chequepoint
1987-1989: Chartered accountant, TC Coombs & Co
1985-1987: Chartered accountant, Scientific Software,
1979-1985: Chartered accountant, CBI Industries
1975-1979: Chartered accountant, Hays Allan & Co