Episode 22: Matthew Pitcher
Matthew Pitcher
Managing Partner, Altor Wealth
You can also listen to the episode on Apple Podcasts & Spotify.
In this episode:
Abraham and Matthew delve into the details about:
How he got into the industry and the journey that led to the creation of Altor Wealth Management, including an overview of the firm today
Consolidation in the adviser market and why a number of firms are breaking away from consolidators
Matt’s flat-fee approach, how to reconcile this with the typical % AUM approach for the third-party platforms and investments side, and if it really is the only fair option
What is the best investment proposition for both clients and advisers
His current tech stack, as well as his experience and frustrations with the market, and what he would like to see in the future
Matt’s approach to saving for retirement and what his portfolio looks like
Guest profile
Matt started his career as an independent adviser in May 2001 with what was then Towry Law, rising to become one of only four Executive Partners nationally. Following the acquisition of Towry by Private Equity house Permira in 2016, Matt left to establish Altor believing that there was a fairer way of advising his clients.
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Featuring Abraham Okusanya (Host), Matthew Pitcher (Guest) and Hana Dickinson (Producer).
Introduction (Hana):
Welcome to Retirementals, a podcast that dives headfirst into the issues facing the financial sector at the intersection of investment, technology, and financial advice. Hosted by Abraham Okusanya, you can expect raw honesty, critical analysis, and energetic interviews. Here is your host, Abraham Okusanya.
Abraham:
Hi there, welcome to Retirementals, I am truly excited about my guest today. Matt Pitcher is the Managing Partner of Altor Wealth, I'm not sure how you pronounce this, but Matt is a big, big user of Timeline and Betafolio. So, I am thrilled to have him on the podcast today. Matt, welcome to Retirementals.
Matt:
Thank you. A pleasure to be here. Thanks for having me.
Abraham:
So you are, in my view, one of these rebel advisers, that is doing just fascinating stuff with their business within our profession, one that I believe is worthy of emulation. So, before we dive into all of that, do you want to give us a little bit of an intro into how you got into the industry and your journey, the journey that led to the creation of Altor Wealth Management?
Matt:
Yeah, absolutely. So, I fell into the industry, which I think is the common story for most advisers. I ended up spending 15 years with a big national firm, Terry Law as it was originally and we had about 200 advisers. Over the course of those 15 years, I progressed through the firm and ended up as one of the four senior partners. We were an acquirer for a long time for many of those years, which was great financially and we got to see loads of different firms and looked at different solutions, propositions and software along the way. And then we were acquired, after the end of those 15 years, which it turns out is less fun than being the acquirer. So in that time I took the opportunity, took my cash, and went off, had a bit of time off and then set up with a clean sheet of paper.
So yeah, it's a fairly standard story I'm afraid, but an enjoyable one along the way and the last five years running Altor have been fantastic. A very different experience from working in a big national firm.
Abraham:
Interesting. I'm interested to unpack some of your views on the consolidation side of things. But before we get into that, tell us about Altor today - about the firm, the clients, give us some metrics, give us a sense of where the business is today.
Matt:
Yeah, so Altor. We are five years in and we're a team of seven. We've got three advisers at the moment, one trainee adviser and she actually is doing her CII apprenticeship, advisery apprenticeship, so she'll come to the end of that in the spring next year. So, we'll be four advisers and we've probably got capacity to take on a fifth - we're actively looking at the moment.
In terms of clients, we have about 110 core clients, we advise 50 children of clients. We might come on and talk about that a bit later on in terms of how the proposition runs. So, we're looking at looking after about two-thirds, one-third of core clients and their family. The younger family members are responsible for about £320 million of assets these days. You can work the numbers in terms of the type of client we tend to work with, broadly, our range is £750,000 to the upper end £13 million. Our average client would have about £2.5 million in our core service and that would be fairly standard in many ways. We don't have a niche as a firm as such, people are always talking about niches and always feel like we should have one but we haven't. I don't know if it counts, there's one big FTSE 50 company that we work with and we look after all of their senior executives, and so exco down to senior management level, and I guess that's a niche, depends on how far you stretch that term.
Abraham:
This is fascinating then, so you know average £2.5 million AUM, 100 families, 100 million per adviser. I don't know if I want to do this, two and a half advisers because you got one of the advisers’ training - pretty, pretty strong numbers there. What do you credit for this in terms of the size of clients? I was listening to a podcast the other day, you know one of these very regarded industry consultants in the US. And he said that one single thing that some of the best performers as advisers do or fastest-growing advisers, or however you want to frame it. One of the key distinct things about them is that the average asset per client that they deal with, is high. And I will put yours in the top 10%, or, if not even five or 10. So in terms of once you credit for this, did you just go after these clients? Tell us the secret?
Matt:
Yeah. So, I think it's probably a couple of things to be honest. The three advisers that we have at the moment are all very experienced 15,20,30 years’ experience in the profession. I think that's relevant because over time working for a bigger firm with a big name with access to some very wealthy clients, ones that have built up with us actually, over the years. That's part of the hookset success absolutely. For the clients that have joined us more recently, we have a lot of clients that have joined us and we keep our marketing very low key, our websites quite hard to find deliberately, because we're not a volume business, by any stretch of the imagination. Extraordinarily prospects still find us and in quite reasonable numbers for us as a firm, which is why we're having to take on new advisers to service those clients. We've got a different model, we work on a flat fee basis. I think that is very attractive to clients with larger portfolios. And we've had several prospects that have actually sought us out deliberately because they've Googled ‘flat fee advice’, or ‘I don't want to pay a percentage’., I don't know what they're putting into Google to get us but they're ending up with us because they're looking for a different model for how they receive their advice. So, I think that probably does make us very attractive to that sort of client. Because we're flat fee, it does mean that we probably have a narrow band of people that we could work with anyway. So, we are too expensive for a lot of mainstream clients. Therefore, that means that we don't take those clients on, it gives us time to go out and find the clients that are in the space that's appropriate for us, we would refer those prospects on to other flat fee advisers, who are used to dealing with smaller client’s simpler affairs.
Abraham:
So flat fee, then let's unpack that. How do you structure that proposition? Is everyone paid the same? You know, the same flat fee? And what led you down that path?
Matt:
Yeah, so it's a really good question. I mean, setting up your own firm after 15 years of having advised means you can genuinely start with a blank piece of paper. You can say, well, what are the good things that I want to replicate? And what are the bad things from a client's point of view, that I don't want to replicate and want to avoid. So, taking that approach meant that we looked at every part of the business and the proposition when we were setting up, asking what do we think is the best thing for the client. On how we got paid, we just felt that offering the same service to every client and charging the same amount for that service was the way to go. We have broken it into two service levels. So, we just have to be within the range of clients that we look after, which is our core proposition where we will provide pretty much everything advice-wise. So obviously, constant ongoing cash flow planning and investments including more esoteric investments, tax led, etc., and plenty of tax planning. And then a simpler service which is priced at a lower price point, where for clients that don't need that additional tax planning, tax later investments, and that complexity. So it's the two services, so everyone within our clients is paying one or other fees that we offer. The only difference we have service wise is where we have clients who want their adult children to access advice. But the adult children can't necessarily afford it, then our clients can pay a third fee effectively for us to advise their adult children. Hence why a third of our clients are actually adult children who ordinarily probably wouldn't come to us as clients without that family connection.
Abraham:
I have heard all these arguments against flat fee, you know the fact that you're taking a risk by the fees doesn't directly correspond with the risk, you know, you could do something with the, you know, with, you know, £2 million pound portfolio, and you get it wrong in terms of taxation. Does any of these things crop up? In your conversation with clients in how do you decide the fee? What's your view on that?
Matt:
Now, I'll be honest, most of my good friends are IFA’s. That's how sad I am. And most of them operate on a percentage basis or each do their own. But for me, I can't see the link between the work we do and the value of a client's portfolio. I can't see how that's fair. For me personally, we do hear that risk argument, I hear that a lot and that gets thrown back at me a lot. But it's almost as if we're operating in an environment where there isn't professional insurance for what we do. As advisers, you know, there are bigger risks, inevitably, if you get it wrong on a £10 million portfolio, compared with a £1 million portfolio. Yes, there are bigger risks, it's going to be a bigger number if you get it wrong but I guess there's two points about that. A, we're all insured, hopefully, without large excesses. So, you don't really have that. You certainly don't have 10 times the risk between those two clients. And B, that's a massively negative foot to start out on where you say to the clients, “Well, look, you've done well, you've built up 10 times the wealth of this other client, I'm going to charge you 10 times as much because there's a chance I'm going to get this wrong”. You know, it's a really odd starting point where surely, we should be saying, “well, look, what work do you need me to do?”. And to be perfectly honest with the diagram, some of the smaller clients, some of the clients with the million-pound portfolio, willhave much more complex needs, maybe their mid-career, you know, maybe they've got all sorts of tax planning, constantly changing careers every couple of years. You've got to deal with employee benefits protection, there's just a whole wealth of things going on for those clients, whereas actually for the £10 million client who's retired, maybe there's a lot less work to do, for that kind of client. And therefore really, it's about the work that needs to be done. So, I'm afraid I don't buy the risk argument. I mean, I wouldn't it's not what we do. It's not how we get paid. But I do think the percentage fees come. It's a historical anomaly. Really, we control the money. We've always done it that way and it's sort of the path of least resistance. All the research suggests that clients don't, or very rarely convert mentally percentage fees into a pounds and pence number. Right. And, you know, for us the conversations we're having every time we're interacting with a client, it's always about the work we've done and justifying fees because the fees are very obvious. I know we've all got fee disclosure these days, so every client should know it. But I bet if you went through most clients and ask them, what are you paying for a percentage-based adviser? They wouldn't be able to tell you in pounds and pence, however good the fee disclosure is. So yes, I'm afraid I have a bit of an issue with it. Now hear me in that I spent 15 years being a percentage-based adviser, so I am not squeaky clean on this at all. And you know, my history would suggest otherwise, but we believe it's the right thing to do now. We get really good feedback from clients about it, although they do find it painful, because we're always talking in impound costs rather than percentages.
Abraham:
That's really helpful, thank you. And I like the humility that you approach this, you know, is heartwarming. Right. So then, let's go over to investment proposition. So, tell us how you approached the investment proposition. You mentioned earlier on that you have esoteric investments, you use your word for some of the clients, how would you approach this. Is there a centralised investment proposition or central service and then other things added depending on the client's need?
Matt:
And so, I maintain (there's a couple of people that argue with me) but I maintain that we don't have a centralised investment proposition. Right. So, there are days where I wish we did, frankly, because it’s a lot easier for us as the adviser, but you know, I'm not a big one for making the adviser's job easier. If it means not doing the right thing for the client. I know, it sounds a bit holier than thou. But you know, a lot of clients come to us, and they have their own views, they have their own desires as to what they want to do. And look, if those views are really wacky, then we will tell the client and we're very happy to debate with the client if we think they're going off on some mad scheme. But a lot of the clients we deal with are actually from financial services, but it's just different rates of financial services. Although we do have some advisers that we advise, and so we're very happy to work with the client to build a portfolio, a completely bespoke portfolio for them. With their input, we've got those clients on one extreme. On the other extreme, we've got clients who just say, look, you guys know what you're doing, recommended the best thing for me. And so, we have a broad range of investment solutions. But if you looked at sort of that usual bell curve distribution, the guys in the middle, they're going to be largely on a platform, they're going to have some low-cost access to global markets in the most efficient way we can buy it for them. That might be a model portfolio service, it might be a Multi-Asset Fund their asset, Vanguard life strategy, but a lot of them will have some kind of MPs service around that. And depending on their preferences, there might be some active MPS (model portfolio service). And there might be ethical if that's desired or social impact investing but that's more of a satellite approach. So, we would have tended to have satellite themes around a core passive approach that's buying market returns. I mean, on the fixed fee side, when we set up five years ago, we would ask every single investment manager, will you offer us a fixed a flat fee option? And most of them said, “Well, no, that's crazy. Why would we do that we make more money on a percentage, why would we ever do it?”. We kept saying to them, again, with our example of £1 million, £10 million, you don't have to ever know the client, you're just going to give us a fund template that will be applied on a platform. Why would our client of a million pay you 0.2% a year and, and 10 million pay you 0.2%? You've no additional risk in their case. I mean, it's even more crazy, in my opinion than advisers operate is absolutely nuts. And five years ago, you know, there were a few that we found, and we were happy, once we've done the due diligence, and even some bespoke managers that would operate on a flat fee basis, but not many. But now there are more and more, that's really encouraging for me five years down the line. You know, there are many more than we started with five years ago, obviously, Betafolio being one of those, which is really exciting for us, because actually, for our clients, our typical client, the more that can be paid for on a flat fee, the more efficient their portfolio is going to be, the better their NET returns, the better job we're doing for the client.
Abraham:
You know, before our call, I was looking at the pace at which your onboarding assets onto Betafolio. And I was thinking to myself, gosh, I better get in touch with Matt, to see what's going on here. Because you know that the pace, you know, is very strong in our view. So, thank you for that. I guess the question I wanted to ask then is…so you're dealing with very wealthy clients. The core of the portfolio proposition is low-cost, capital market. Yes. You know, you would have maybe I assume, you know, some sort of EIS type product if that's needed for the client, but you get pushback from clients on this, like, you know, that all sorts of arguments. Low cost is too low cost? It’s too simple, or do you get pushback from clients on these on these things? Or no?
Matt:
Yeah, we do from clients. I mean, if you look at the marketing budgets, in financial services, big spenders, the big active managers, those are the big billboards at Waterloo station - the one’s waiting to board their trains. I mean, they're not in the same numbers anymore, but they certainly did do. And so, clients do absorb that, you know, we're humans, we're susceptible to marketing, if we weren't, then companies wouldn't spend so much on it. And so that kind of message is in a lot of our client’s minds at the back of the mind, you know, what, if I could do better? What if I could beat the market? Or what if I could invest with someone that can beat the market? And look, you know, the active managers we use are, at best, I would say are level pegging with the markets and with their personal equivalents. We don't have any that are tracking below at the moment. But we all know, all of those of us that are in the know, know that all the academic literature says that actually, you can't outperform markets. And, and it amazes me that firms can continue to pretend otherwise actually on the advice side, less so on the fund manager side, because they'd be destroying their own business model if they did. But we recently took on a client of a well-respected midsize firm, you know, big breadth and depth of bench of professionals on their investment side. And you look through the portfolio and it's all the funds that are top-performing, have been top-performing in their sector, all first quartile all five-star rated, but it's all it's all backwards looking. So, all their clients are getting is everything that's done well, in the last three years. Now we know because the research tells us that those funds are the most likely to mean revert and underperform over the next three years. But they're relying on being able to cycle out before that becomes apparent to the clients and just constantly cycling into the next best thing. But you're always cycling from, what hasn't performed very well, because you didn't catch it in time. You didn't catch it before it performed your next thing, which isn't good at. You're just constantly turning over the portfolio. So, it leads to interesting conversation, with clients and, and there is a place for active management if you if clients have particular themes that they want to pursue, then very often active is the way to go for that. But it would tend to be driven by clients’ preferences if we were to build those on a satellite position.
Abraham:
Now a word from our sponsor, Nicki Hinton-Jones is the Managing Director and Chief Investment Officer at Betafolio, the high-tech, low-cost discretionary model portfolio manager. There aren’t many flat fee retainer-based model portfolio services out there. Why is Betafolio have an area in this approach?
Nicki:
I think we're more than a flat fee model portfolio service. We’re a true investment partner, we're offering a full investment service to advisers and taking it to a deeper level, we don't just want to push a button and send an investment template. We're building technology and processes so that we can support advisers at the individual client level with client portfolios on real practical issues like cash management, and then accumulation and you know, lots of other areas that are associated with actually implementing a financial plan rather than just providing a model portfolio. So that's where I see us as being pioneering and perhaps taking the MPS products to a new level.
Abraham:
So, let's talk about technology. I know you're a big technology user and a rebel technology user because I was talking to you a while back and I said “well, what's your CRM?” and you went “Well, we built our own”. So, I'm interested in what your tech stack looks like today and tell us a little bit of history of what you've done with this CRM. I don't want to use the term back office but off you go.
Matt:
Yeah, so I mean, if we're the rebel I guess the evil empire would have been the CRM and software that we were using before. So, we did get started, when you're building a firm you work with what's available at the time. So, you go with all the leading tech, and you build out the tech stack from there. So, we adopted one of the major players in the CRM market, and within a very short space of time, we were hitting up against problems. It was built on pretty old technology. It was ugly, it was hard to work with, it was just a constant daily frustration. And we looked around, I mean, I've done a lot of work from my previous firm, around CRMs, and around cashflow, planning software, and we looked at had all sorts of firms come in and present and we'd looked at lots of different solutions. And in the end, we just felt that we were going to be going from the frying pan into the fire on this, on the CRM client portal side. We couldn't find anything where we could sufficiently bespoke it for our clients that we were happy that it was going to be something that we were going to be proud of ultimately. And so, we thought, well, let's build our own. How can that be right? Starting software from scratch, with a small team and a day job to do at the same time? Yeah. So we had a bit of a misstep. Initially, we picked the wrong software provider, they produce something that went into beta testing with a few select clients, and we picked our select clients, who were IT security professionals on a full tray, they picked, they picked our first version apart. So, we had a kit, that was cash burnt, we had to just walk away from that. But the current provider we're with is really good. They built something for us, which release one was as good as the software we were paying huge amounts for previously. And then every release that we keep pushing out, we keep upgrading and upgrading that to the point now where it's, it's lightyears ahead of what we did have, and we've still got loads and loads of plans for it. It's not cheap, but actually, to be honest with what we were paying to our previous big supplier, it's no more expensive than that. So, it's something we're very happy with. It’s a light touch CRM, it provides our clients with a client portal, we very much built it from the client-side with all the client functionality first. So, they can go in, do secure messaging, share documents, where this they can fill, in factfind online, all their asset values are pulled through on a daily basis and, and presented back to them in what we think is a nice format. They can run performance numbers, or they will be able to soon, once we've cracked some of these poor API's you get from some of the platforms, and they'll be able to run the performance numbers. But importantly, we also wanted the financial planning to be front and centre of that portal as well. So, we built a section in there where we can replay their cash flow results to them. So, we're really happy with the outcome. And as you all know, obviously, always with software use that you embark on something and then other people come into the market with other propositions…not thinking of anyone in particular. Start developing functionality, you know, Timeline functionality, some of that is getting to the point now, where we're looking at it and going, Oh, okay, well, that looks better than what we're doing, so maybe where's the trade-off here? We dropped some of what we're doing and, and so that we're not duplicating, essentially. So, I mean, the wonderful thing about being in software is nothing stands still, except the dinosaurs who are going to get wiped out. And look, it's not just CRMs in financial services, there's data analytics software, there's cashflow software that have captured large market share, and they're the incumbents and they're profitable. And they're entirely relying on not having to develop their proposition.
Abraham:
The evil empires, yeah.
Matt:
Exactly. They are all the evil empire, they are just multiple ones and that business model relies on advisers not ever bothering to change software provider. And it's a huge upheaval to change software providers, and some of these guys make it really difficult to leave. We had to pay out our old CRM provider, we had to pay them to extract our own data, our own client data. We had to pay them to give us our data back, which is extraordinary as a business model goes. But the danger for all those firms is that if they don't develop or they don't improve and innovate, someone else will come along and eat their lunch. So, it's an exciting time. I don't know how you feel but in FinTech at the moment, it feels like quite an exciting time. Lots of people trying different things. I don't think all of it is going to work to be honest. But there's lots of people trying and that's great. That's a great ecosystem for advisers, actually, at the moment.
Abraham:
Yeah, absolutely. I couldn't agree any more with your assessment, where adviser tech has been, you know, we have all these legacy systems that were built literally 20 years ago, 25 years ago. They weren't built for the current world that we live in and the entire business model is predicated on making it incredibly difficult for advisers to move. And you know, in the early days of Timeline, we spent a lot of time wanting, we didn't set out Timeline to replace or even compete, frankly, with any tool, right? Timeline was originally meant to just be a decumulation engine, and we spent the best part of a year, over a year actually trying to integrate all these other tools. Because advisers were telling us I like Timeline but it doesn't talk to my cashflow or other things that I did. So, we said, “Okay fine, we'll take on that challenge”. And we go integrate with them and this is just completely it's a mess. You know, many of them don't have APIs, the ones that have APIs, it's not very good. So, we went 100% in a different direction and we said, you know, sod it, we're going to do this, we're now going to evolve Timeline to a point where we replace three, four or five different pieces of technology. So, we introduced Factfind, the cashflow, the portfolio analytics on Betafolio. And yeah, I am really excited about where we take this, and I'm really excited about the stuff that you've done. Because that back office, your CRM client portal is certainly an area that we haven't touched. We don't have a short-term plan to but I'm really, really interested in how you do evolve or what you evolve. I see a couple of firms who are taking the way, I like to put it taking their own future in their hands. You guys are one, our friends over at Rockwealth, I'm sure you know these guys.
Matt:
Yep.
Abraham:
And there are others on it. I forget his name now…Gareth Thompson. Gareth is building something in that space. So keen to support and to help in anyway that we can. All right, we'll see how that evolves. So, let's, let's bring this back home. One of the big questions that I really wanted to get your opinion on, is in two dimensions. This big trend towards consolidation, right? You know, every time I pitch VCs, which I've done quite a lot in recent days, everyone says to me, all these people say to me, you know small independent farms being acquired by are being sucked into large consolidators, like the one you've come out of, Towry, SJP, all that stuff. So, A, I want to get your views on this, right? Do you, I guess, you, you must see a future in small independent firms running their own business taking control of their own destiny, if you like, versus these big consolidators that are gobbling everything up. Where do you see this? You know, this trend going?
Matt:
Yeah, so I've been on both sides of this. And when I was involved in buying up firms, in being the consolidator. Our experience very often was that you would, you'd pay a lot of money for firms, and you would gain the advisers and the clients as a result. You’d try to mould their proposition into yours or you try and change that proposition into your proposition. And most times, what would happen would be the best, most entrepreneurial most new business-focused advisers would walk away. You know, normally after they've taken their pay-out or their cash or the awards, what you keep is the more average advisers and the more average to the smaller clients. And the problem with a big consolidator is actually and which I don't think is well known, particularly from the firms that invest in them, is what you end up with is this ever-growing tail of unprofitable clients. So, I know the finances of some of those big consolidators, and some of them have got horrible looking finances, where no one ever takes away from them the small client, you know, they lose teams of advisers. But those teams’ advisers never come back and take away the small client. And these firms have had to ramp up their charges and ramp up their charges, and in some cases, taking 3% a year in sort of total vertically integrated costs from these clients. And they're still losing money. And if you look at the breakdown of their clients by volume, they've now got more clients in that loss-making space than they have in their core client space. And frankly, the only way that they're keeping those clients on board is by cross subsidizing them with their bigger clients, charging the bigger clients where there are big profit margins to be had on a percentage basis. And that's cross subsidizing that's, that's more client base. And that's a real issue, because actually, what you're doing consolidators very, very often not averaging down the quality of their book all the time. Because you lose your top guys, your top guys don't take the topmost profitable clients, you're constantly averaging down your, the quality of the client base that you're looking after. And then it becomes a numbers game, right, so then you cut service levels, because you can't afford to service those clients profitably. So, that was my own experience. I mean, my experience doesn't go industry wide. I'm sure there are some consolidators out there that say they were doing a brilliant job. And, but actually, what you then get is, you get some really good guys who have set up businesses, small business for small to medium sized businesses, typically, strong team, you know, often they'll take a team of people with them, they have a really focused proposition, a fairly narrow client profile. And those are the guys frankly, that are out there doing the innovative stuff, either on the investment side or the planning side, or the tech side, whatever it is. And to a degree, I would consider us to be one of those. But I know several that have teams of people that have come out of the big firms. They've built some really good, great propositions. Very client centric, very client focused, very compliant, you know, doing the right thing. And high-quality advice and high-quality advisers. And I think that's, you know, all the story is about consolidation, consolidation. And that is clearly the trend if you look at the numbers, but I think, if you look at what's sort of quietly dropping out, in the sort of exhaust of some of those big consolidation exercises, there's some really good firms. And I don't think ultimately the small IFA firm is going to die off, we're still in the majority, I believe, as a number. So, there's still a huge, huge part of the market, that's in that space and that's a huge market to serve if you can get it right. There's some very passionate people there, I mean some people who are passionate about things that I wouldn't necessarily agree with but are very committed, very passionate about what they're doing. You don't see that kind of passion typically when you're talking to people who are working for the big firms.
Abraham:
Absolutely. It's incredible. And I think that, when I was talking to all these, sort of VCs outside of our industry, I wish I had the explanation that you just gave, and the way I ultimately got around this, obviously getting in, you know, with your help is to say, well, yes, you can see the trend, of consolidation is easier to see, the more important trend that you don't see is the breakaway in the market. You know, the Matts or the Altor's of this world, Rockwealth’s of this world, all these guys who are running incredibly successful firms who are breaking away from, these large empires and running their own show. And as I said, go speak to some of them, right, and let's compare notes. That’s why you had a few of them knock on your door. The other corollary to this is to say, well, how do you compete, right? How do you compete with big brand name firms who have lots of professionals and experts, you know frankly for every different part of advice, how do you compete? And you've done this very well you know, even for larger clients, right? Because the idea is or the general assumption is that firms sorry, clients with larger portfolios will go and work with big firms. Because as I am, you know, if I've got 5 million liquid portfolios, and I go to Altor Wealth down the road and they've got, I don't know, 50 million in assets, I'm going to be 10% of their asset. Whereas if I go to, I don't know, as SJP or whatever Towry, how do you compete with these large firms for, you know, large clients, let's say?
Matt:
Yeah, so it's a really good question, although the one thing that is missing in that is, what clients we are used to dealing with, compared with what some of these big firms are used to dealing with? So, we've just won a client, who is quite a way above our average. But we've won him from a much bigger firm than our firm, you know five, six times the assets under management. But, as an individual, he was the biggest client of the adviser he was dealing with, right. So because we're used to the advice needs of a client of their size, then we are talking their language, very often we're talking about the sort of problems they’re worrying about, the sort of advice they need. We've got the experience of the slightly, slightly more complex tax planning that you sometimes require when you're dealing with large multimillion-pound estates. And these firms can be big, but they can be big with 1000s and 1000s of mid-sized clients. And I still find it extraordinary, some of these big firms, you look at their average client, we sometimes get these industry publications through don’t we, that shows total assets under management, total number of advisers, total clients, and some of these big firms, you look at the average client, they're dealing with any. It must be really simple, day-to-day work nine to five, because these clients it must be a couple of ISA’s and maybe a pension and not a lot to do to be honest and these are volume businesses. We would not be able to compete with those big companies on volume. That's why we don't market because we don't need to, but there's no way we could ever compete with them from a marketing perspective. But we're not a volume business so we don't need to, you know, we have a cap on the number of clients that each adviser looks after, which is, again, why we're having to bring new talent through. And that's so that we're giving a brilliant service to these clients. But we bring something that you'd have to go to the very top of the adviser bases in these big firms to get to and getting to those guys is pretty impossible for most clients.
Abraham:
Incredible stuff. So, as we begin to wrap this up, I guess my question for you is where do you take this, you know, 350 million in AUM, three advisers, solid figures and practices business? You know, you look to me like you're in your 20s, maybe 30s?
Matt:
Yeah, it's a really good question. Look, we, my partners, so we're structured as a partnership, we're not structured for sale, we don't intend to sell ourselves. And the debate amongst the three partners is why we're not bringing the shutters down, why we still open to new business. And we're a bit different as a firm. So, when we set up, we said, look, let's be ballsy, when it comes to what we do to give back. So, we said from the outset that we were going to give 10% of our gross revenue, so 10% of the first lot of income that comes in, goes straight out to our sister foundation. And frankly, that's the that's the only reason why we're growing. So, you know, our revenues about a million now. So we're pushing sort of £125,000 a year out to our sister foundation, the Altor Foundation and that's more motivational on a day to day basis for myself, and for the partners and it's a lot it's there's a lot of fun to be had actually in running a small foundation and being able to give grants to various good causes. So that's the reason why we're growing it still, because we can have a real impact. And you know, at the end of the day, we love our clients a bits but ultimately when I hear other advisers saying, you know, it's the good we do. We need to be a little bit careful and a little bit more humble about what we do, you know, we're dealing with the wealthiest percentage of the population in the country, we are engaged in tax planning, we're trying to grow portfolios. We are not social enterprises, you know, we need to be honest what it is we do for a living really. And look so you know, so for us personally, and this is not, I'm not judging anyone here, but for us personally, you know, we need to be giving back. Ultimately, our plan is that we are developing sort of the next generation of advisers, we are not poaching, we're trying to grow talent from within the business. And hope sincerely is that they will replace us as partners, you know, the point which are advising faculty starts to fail, which hopefully might be 10 or 15 years off. But we're hoping genuinely they will come up through and they'll buy into the partnership, we’ll exit the partnership, as you would expect with know any other professional firm. So, this is what the lawyers do, its what the accountants do, this is how a partnership works. And the amount of advice businesses that are being built for sale. You know again I'm personal friends with a lot of these guys, but the conversation on the side of the football pitch is not about what they're doing for the clients, its about how many more years until they can sell themselves to someone else and what their target sale prices is. And we're not about that. You know, that's part of my retirement planning, getting slowly bought out of partnership. But that's, that's how the other professions operate. I don't know why we're so obsessed with growing and selling, growing and selling in this business.
Abraham:
Fascinating stuff, that is a really good segway into how does a managing partner of a wealth management firm, financial planning firm plan his own family's retirement? Tell us, give us an insight into, you know, Pitcher, family retirement plan?
Matt:
Yeah, so it's very vanilla. I don't know if that's a good thing or a bad thing. But I guess one of the frustrations as a tax planner is very often by the time we're dealing with a husband and wife, which whichever way round it is, there's very often a disparity in the assets one or other has got, particularly pensions. And as a tax planner, I find that incredibly frustrating because it means I can't maximize the income tax allowances and you know, and once you get to that stage, you can't unwind it once you've built up more of a pension. So, myself, my wife, we have a pension each. We've stopped contributing to mine, so we're contributing to her’s to try and get her up to parity. I think we can get there actually, I think we've got long enough, I think we can get there. So, it's standard, got a couple of sips. She made me set up an ISA and you know what they say about cobblers’ children going unsure. You know, us advisers generally pretty bad at looking after our own affairs. So, she runs the finances. My son whilst I was in the middle of my MiFID to 10% notifications that I was having to send out in January last year to, markets were falling, we're having to constantly email and phone every client tell them their portfolio was down by 10% - because the regulator thought that was a brilliant idea. And he had the bright idea that he'd invest his ISA in Vanguard ESG all world developed. Yeah, our fund, so he's done the best out of all of us in the family because he got his timing right. He's the market timer out the family. So yeah, so it's the standard things we'd recommend to all clients, it's the standard tax planning. As a family, I'm deeply conscious, I don't want my teenagers developing into 20 somethings that are going to end up hating their dad for his investment choices. We are entirely invested in the minimum ESG screen but social impact investing with EQ investors in London is the biggest part of our overall portfolio. So, there's, yeah, the biggest weightings to social impact in interest, and then of course, it's the staff coming up and buying us out hopefully at some point that will help, hopefully add a bit.
Abraham:
Good stuff. Matt Pitcher, Thank you for your time. Thank you for your wisdom and for the good work you do. Thank you.
Matt:
It's a pleasure. And thank you, Abraham for all the work you're doing in financial services as well. It is gratefully received by those of us who are desperate for some tech that works. So, thanks.
Abraham:
I'll be remiss if I didn't thank my incredible team who worked very hard to put this program together, led by my producer, Hana Dickinson. Thank you. Thank you very much, guys. I like to thank our sponsors Timelineapp, the retirement planning software, and Betafolio, the high-tech, low-cost flat fee, model portfolio manager. And to you our listeners, thank you for your time. I hope you've had as much fun listening to the program as we have making it. You can find more about the show at retirementals.co.uk. And you can follow me on Twitter, my handle is @AbrahamOnMoney. Until next time, thank you and goodbye.