Charming, Erudite and a seasoned rainmaker, it doesn’t take long to realise why Iain Tait is heading up the Private Investment Office at London & Capital.
Tait founded his own wealth management firm after getting his Economics degree in 1996 and becoming a partner at Farmer Anderson and Co. He joined London & Capital in 2006, becoming a partner and is in many respects the heir apparent.
Iain sat down with Peter Robinson at their Fitzrovia office to talk investment strategy, entrepreneurial investment and what London & Capital is doing to engage the next generation of investors.
What does an average working day look like for Iain Tait? Do you start off with exercise, breakfast or a Bloody Mary?
Unfortunately, the Bloody Marys are usually saved for the weekend! On a typical weekday, I’ll be in the office at around 7:30 am and have a rather uninteresting bowl of cereal at the desk before calls and meetings begin at around 8 am.
In an average working day, I’ll see one or two of our larger family office style clients. As a director and a shareholder in the business, the gaps in between will be filled with corporate internal responsibilities. However, by the end of the week, we will start to think about ‘tomorrow’s business’ – this might be meeting potential introducers, lawyers and accountants. By Friday, that might include a nice lunch somewhere, although again, this tends to be a little drier than the old days!
What was it like setting up your own firm in the City in your 20s?
Great fun but hard work! The timing was very fortunate. I had been cutting my teeth as a junior partner at a wealth management firm between 1997 and 2002 and had been fortunate enough to work with people who were very trusting in me, letting me get involved with families and clients that were perhaps a little above my age and pay grade at the time. That gave me the confidence to set up the unimaginatively named Iain Tait & Associates in my late 20s. The backdrop at the time was perhaps a little more fun, in that there was a little less red tape, the ease of doing business was greater, meeting people, getting them on board and working with them was a lot more straightforward than it is now. Although the cynic in me would say that wasn’t necessarily a good thing, because the whole thing was quite light on compliance.
So, it was good fun, but hard work at the same time. I think when you are running your own business, regardless of size, you’ll wake up on a Monday not knowing exactly where or when that next paycheck is coming from. Once you start employing people, you only add to that responsibility, and those pressures intensify. That said, I do look back on those days with great fondness, and although I have no regrets in becoming an employee again at L&C, I sometimes wonder where that business would have gone had things turned out differently.
When you left or merged your own firm to be part of L&C, was there an initial culture shock?
In some respects, yes. Of course, I had to get used to not being my own boss again, but what really struck me was the extraordinary work ethic at L&C. I was by no means a slacker. I was in early and left late, working long hours, but the two founders were always in before me, always leaving after. It took some getting used to, and the first six months were perhaps not the easiest, but it was, and still is, a great environment to be in.
L&C has also seen a growth in entrepreneurial clients. You once stated that entrepreneurs can have a somewhat indecisive attitude to investment, interested in both the conservative and high-risk ends of the investment spectrum. As someone who started their own private wealth company, is it easy to understand and respond to these investment interests that can appear contradictory in nature?
The profile of entrepreneur that we are very privileged to work with certainly has a different mindset to others when it comes to wealth, due to the way it came about. Entrepreneurs will generally go through a significant capital event moment rather than a gradual process, as with those who have earned a lot through working for someone else or those who inherited their wealth. These entrepreneurs then have what, I think, is natural reaction, saying, “for goodness sake, do not lose this, this is what I want to go to the children, this is what I want to take future income from”. They want to make sure that their portfolio is very low risk, that it is highly liquid and highly visible. However, you can’t snuff out that entrepreneurial flair in people, so you quite often end up with this barbell approach in which we try to marry these two opposing forces together. As a firm, I think this is one of the things we’re best at – understanding those seemingly opposing requirements that come from managing entrepreneurial wealth.
Apart from an overall share in L&C, do you have your own investments in any of the funds operating?
Of course, we all have skin in the game! At the tender age of 44, I’m mainly invested in equities. Those that know L&C well will be familiar with our Global Star Equities Fund, a lot of my pension and ISAs follow this strategy. I like to think I’m a little too young for bonds, but that’s probably another question for another time! But really, my colours are nailed to the mast of L&C. If I’m ever successful, it will come through my shareholding in the business, so that’s the most important thing to me.
The challenge to differentiate in a crowded market is getting harder and harder, how is L&C staying above the fold?
We don’t do anything too radical, nor do we need to. We focus on three areas of the market and these niche specialisms separate us from the crowd.
Firstly, we are happy to work with Americans, something not a lot of people will do due to the complexity involved.
Secondly, there are also a lot of people that still find working with fellow investment professionals a little daunting – I still do, and I’ve done it for nearly 15 years.
Finally, we have a real niche in managing institutional mandates on behalf of captive insurance companies, which we’ve built over the last 12-13 years, going back and forth to Miami, Barbados and Bermuda – it’s not an easy business to just jump into.
I wouldn’t say our main differentiator is investment performance. It isn’t what we buy or invest in. Instead, it comes down to the culture at L&C. When entrepreneurs or finance professionals come and meet with us, I think they can see themselves in us. They don’t get a grey dusty discussion about stockbroking. They’re meeting people who are building a business, and I think they are able to relate to that. I do hear that that’s what people find most appealing about working with the key partners at L&C.
Who is the most important person in your team?
I’ll have to say my PA, Teresa, or else she’ll kill me!
How do you understand risk at L&C?
That’s a huge question! Putting my investment hat on, I’d say we are entirely risk driven, as opposed to a return-based approach. We’re not driven by benchmarks, we’re about absolute returns. What is worth noting is how little volatility we consume to achieve our returns, compared to our average peer group. Everything we do is first and foremost about the amount of risk that our clients and their portfolios can consume. as opposed to being initially driven by returns. We obsess about it.
On the business side, although I’d say we’re quite an entrepreneurial group, I’d never want that to come across as cavalier. The risk to the business in terms of potential complaints, getting on the wrong side of MiFID, or not keeping up to date with changes to regulation is paramount. The time we spend on managing business risk and compliance would be entirely unrecognisable from 15-20 years ago.
So, I would say this – my understanding of risk at L&C is twofold. Number one, I understand that from a portfolio construction perspective it’s what drives all the decisions that we take. And number two, as a director in the business and someone keen to grow within the business for the next 10 years, I know that this is something that’s absolutely at the front of everyone’s minds.
What is L&C doing to engage with the next generation of investors?
I’ve always believed that the best way to approach this is to simply get to know the clients really well. We don’t run the same programmes and initiatives as some of our deeper-pocketed competitors, but what we are, undoubtedly, is incredibly close to the families of our clients. That means getting to know the children as well, in a sense growing up with the kids a little bit. The family will let us know when the time is right for them to come and join that first meeting and be involved for the first time. For us, it has always been about letting the family make that decision.
What regions are currently important to your work and why?
In the UK, most of our focus is on London and South East. Outside of the UK, one of the regions we’re interested in is Spain. We’re repeatedly told that there isn’t an L&C equivalent in Spain. Instead, the big banks dominate alongside a couple of sleepy wealth managers, so there may be room for the L&C model. The US is obviously hugely important, although our main focus is looking after US connected people here in London and in France, where we have recently started visiting on a monthly basis. We have an office in Hong Kong, although it is largely self-sufficient, as well as an office in Barbados which handles a number of the captive insurance mandates.
Sometimes there will be other ad-hoc jurisdictions that can be quite interesting for us. Greece, for example, has had a terrible time of it recently, as we all know, but there is now a lot of legitimate wealth in Greece that is not being looked after. The bankers and wealth managers have stopped going over there. As a result, we have Greek clients in London that have made referrals and recommendations for our services.
Why is it that your highly capable clientele of hedges, equity managers and alike, chose L&C to invest their own assets?
My predecessor was an ex-Salomon Brothers bond trader, who built a great book of clients, selling L&C’s services into a crowd of his former colleagues that had gone on to do very well in other areas of banking and hedge fund management. After his departure, we took the approach of staying quiet long enough to understand their requirements, see how we can add value, talk their language and listen to them. Eventually, they reached a state of confidence where they were willing to let us continue managing their affairs – or manage more.
We took our time to understand this profile of client, who are actually some of the easiest to manage in terms of performance as they are in the markets themselves and found that if you look after them well and help give some of their time back, that you stand a good chance of building a good business within that profile of client.
Do you believe that the family-office structure is attractive to those who have outgrown traditional investment companies?
I believe the term ‘family-office’ has become misused in the UK. The true definition of a family office refers to families with wealth exceeding £5bn and the array of in-house lawyers, investment specialists and lifestyle/service providers that it demands. This is far beyond what L&C do.
Although we manage a portion of a family’s wealth, we do not expect to manage the entirety. More than simply managing money, we seek to explore the client’s pre-existing banking relationships to either consolidate the reporting, provide risk management, or simply provide counsel.
While some wealthy families look to private banking, individual investment consultants or the wealth management arms of larger banks, I have found that most often they are attracted to a privately-owned, smaller boutique company that can genuinely interact with, and understand, their aspirations. This is where L&C fits into the sphere – we don’t claim to act as either of the options above, rather we aim to become a personalised investment committee to families who have a total worth of between £25m-200m. It is in this area where L&C truly adds value.
Do clients typically want to invest in similar ways or is there a difference in investment when considering the requirements of older clients, thinking about the end of their careers, in comparison to younger clients?
There is a great difference. It depends firstly on the timeframe. For example, I can’t touch my pension until I am 55, so it has at least 11 years left to run, and I can’t think of an asset class other than equities that you’d really want to be in over that timeframe. Obviously, that’s a huge asset class and it takes a lot of thought and guidance to make sure you’re in the right part of the spectrum.
An older person that was on perhaps a shorter timeframe may want a much more stable and predictable flow of income or income type returns, which may skew requirements more towards the world of fixed income. Most people know that they’re not getting any return on cash, and most know that they don’t want to bet the house, so already they have a feel for their risk spectrum. If they know that they are looking for an income of say 5% and you’re then given an approximate timeframe – say, 5 years – you’ve got two key pieces of information. Now you can sit down with a client and start to build the early stages of a discussion around a portfolio. Then you can start a conversation about risk. Risk profiling questionnaires can sometimes be a little wooden and I think you need to get to know people well before you can make a decision on something as important as a sizeable investment to meet a stated objective. I would prefer to get to know them over several meetings rather than relying on a questionnaire. We need to do the risk profiling, of course, but that kind of chatting, to get under the bonnet of what the family is really all about, gives you a good feel for the type of portfolio construction that would be appropriate.
Do you think entrepreneurs require a special type of investor?
This goes back to making sure you understand the mentality of entrepreneurs as well as possible. They are usually particularly time-poor, owing to the nature of their successes and are naturally very focused on their niche area. As a result, they require investors with empathy and an understanding of their requirements. They don’t always have a great deal of time for other considerations, and the art is to know how and when to connect with them, when to update them and when to leave them to their business.
Financial entrepreneurs, however, tend to desire closer engagement. With hedge fund managers and others, we can be a lot more intense in terms of how often we speak to and meet with them. We have a great deal of experience as a company in understanding and meeting the requirements of entrepreneurial clients, as it is best to foster and nurture that entrepreneurial spirit, rather than constrain it. There is a fine line between appearing disinterested and becoming overzealous, which is the worst thing you can do. So, yes, I think it takes, not a special type of investor, but someone that has just done it for a long time with lots of different people from a lot of different walks of life, which I now have the privilege of having done.