Wealth advisers reject crowded market claim

NEWCOMERS to the Scottish wealth management market have hit back against claims by a rival that they don't "understand the maths" of running a profitable operation north of the Border.

Mark Little, managing director of Barclays Wealth in Scotland and Northern Ireland, recently questioned how the large number of firms that have set up shop in Scotland over the past three years can attract enough clients, given that the market is not growing.

A number of new entrants have arrived in the Central Belt over the past three years such as Williams de Bro, Cazenove Capital Management, Brooks Macdonald, Ruffer and Rensburg Sheppards.

Little argued that the costs of running a private bank were already "astronomical" and would only increase over the next few years with major regulatory changes on the way, making it difficult for newcomers to gain a stable footing in the market.

However, Murray Mackay, executive director of Williams de Bro's Edinburgh office, which was created when a team defected from Barclays Wealth in 2008, argued that competition in the market has not necessarily increased.

Many of the so-called new market entrants have either acquired long-established firms with hefty books of rich clients, taken over portfolios from companies withdrawing from the market or have poached teams from incumbents, he said.

"To me, it's more shuffling the deckchairs," Mackay said. "The surge of newcomers is maybe a little bit misleading."

He said the arrival of new brands with ambitious goals to grow funds under management should be welcomed, as it not only keeps existing firms on their toes but also raises Edinburgh's reputation as a financial centre.

"If firms want to come and set up business - any business - with the environment we're in, with HBOS and Royal Bank of Scotland and the current economic climate, then great. If they are in our industry, then as far as I am concerned that's fantastic. If you play squash, tennis or golf and you want to be the best player in Edinburgh, if you're the only person who's playing then it wouldn't be much of an accolade."

Another new market entrant said: "One has to admire Mark Little's pugnacity and extraordinary belief in the superiority of his firm."

Mackay said Williams de Bro, a subsidiary of the Evolution Group, now has 450 million of funds under management in Scotland and is "highly profitable" after setting up its Haymarket office.

He suggested there were plenty more opportunities for growth with the forthcoming Retail Distribution Review, which is likely to shake a number of wealth advisers out of the market.