Interview: Brewin Dolphin CEO David Nicol CA
David Nicol CA tells Robert Outram about being CEO of wealth management firm Brewin Dolphin and his role on the ICAS Council.
Brewin Dolphin is one of the oldest names in the City, tracing its origins back to the 1760s, in the form of one of the original brokers who co-founded the club that was to become the London Stock Exchange. With all its venerable history, however, the firm has seen considerable change over the past few years.
David Nicol CA, who was appointed Chief Executive Officer in March 2013, has overseen a programme of renewal and the repositioning of Brewin Dolphin, long known as a stockbroker, as a wealth management business.
Is the programme working? The figures published towards the end of last year, for the year to 30 September 2015, indicate that it is.
Adjusted profits were up 7 per cent to £62.2m and the latest figures for funds under management, for the last quarter of the 2015 calendar year, show a net inflow of discretionary funds under management of around £600m.
'Simplifying and rationalising' the business
Brewin Dolphin now looks after £33.2bn of other people’s money, making it one of the largest independent wealth management firms in the UK financial services sector.
Nicol says: “What we’ve been doing in the past two or three years is to simplify and rationalise the way the business is run. We’ve merged a number of offices, and we’ve narrowed the focus of what we do, so we are now largely concentrated on discretionary fund management.”
“Discretionary” means the firm makes the investment decisions, as opposed to “advisory” where the client is consulted before a trade or strategy is executed, or “execution-only” where the broker simply carries out the client’s instructions. Part of Brewin Dolphin’s refocusing exercise was the sale of its execution-only business, Stocktrade, to Alliance Trust.
Our shareholders are very supportive; they also challenge our thinking and it’s good to have some different voices at the table.
The firm also consolidated its network of offices. Brewin Dolphin had been active on the acquisition trail over many years – the Edinburgh firm of Bell Lawrie White is just one example – and part of that legacy was a large number of local offices. Merging offices such as Taunton and Exeter, and Norwich and Ipswich, has helped the firm to cut its overheads and become more focused.
Increasingly, Brewin Dolphin offers financial advice across a range of issues – not just investments – and has developed a standardised advice process for new clients. Nicol explains: “Instead of only managing money, we are also giving advice on pensions, inheritance tax and so on. Even people who have just a little bit of money, these days, can have some quite complicated issues to deal with.”
For smaller investors, the firm has the Brewins Portfolio Service, offering professionally designed portfolios for people with £10,000 to £150,000 to invest. It’s billed as an uncomplicated, low-cost service that lets investors choose a portfolio to help meet their goals.
As an independent, listed business, Brewin Dolphin is relatively unusual in the sector, which tends to be dominated by partnerships and private companies at one end, and subsidiaries of banks and overseas institutions at the other.
We can grow by hiring people and working with what we have rather than being fixated on acquisitions.
Having spent 26 years with one such institution – Morgan Stanley – Nicol welcomes the relatively intimate scale of a business with 1,800 employees. As he puts it: “I feel you can actually connect with people, which is tremendous. Of course resources are what they are – you can’t call up ‘head office’ and ask them to lend you some people for a project – but it’s something that you can work with, influence and change more rapidly.”
Nicol says: “Not many of our competitors are listed. There are mostly advantages to it; if we need to raise capital, as we did two years ago, there is a process and a channel to raise the money via your shareholders. It’s more difficult if you’re a partnership; or, if you are owned by a big parent that may be reluctant to invest in you, you don’t have many options.”
He stresses: “Our shareholders are very supportive; they also challenge our thinking and it’s good to have some different voices at the table.
“The downside, however, is that you have a six-monthly results cycle, and in between you have the quarterly numbers around how funds under management are developing. It’s a sector where things do not change that quickly, but where numbers are subject to investment market conditions, so you are always talking about the medium to long-term story even though you are reporting on a quarterly basis.”
A fragmented sector
Financial services is a fragmented sector, with a large number of smaller players alongside the big institutions, and there has been a fair degree of consolidation in recent years. This has been accelerated by the reforms implemented following the Government’s Retail Distribution Review, which saw the sector start to move from a commission-based to a fee-based model, and also imposed stricter training requirements for financial advisers.
It is a very personal business, a people business.
Nicol says Brewin is not currently on the acquisition trail. He explains: “It is a very personal business, a people business. If we were to do any more transactions it really would have to work, not just on the numbers and the balance sheets, but culturally and strategically.
“I think we can largely grow the business organically, because of our scale and our footprint around the country, and the investments we’ve made in people and processes.
“We can grow by hiring people and working with what we have rather than being fixated on acquisitions.”
David Nicol trained as a CA in Glasgow with Arthur Young (now part of EY) and qualified in 1980. His experience was mostly working with industrial clients, and his first real exposure to financial services came when he went to Hong Kong with Peat Marwick (now KPMG) in 1981. After two-and-a-half years in the Far East he came back to the UK, to work in London with US banking group Morgan Stanley.
In those days, before the “Big Bang” deregulation shook up the City establishment Morgan Stanley was not a well-known name outside the US. Nicol worked his way up from the role of FX business unit controller through various operational roles. He was involved in the bank’s expansion into other centres such as Tokyo, Hong Kong, Frankfurt, Paris, Moscow and Milan. Eventually, in 2004, he was appointed chief administration officer for the bank’s EMEA (Europe, Middle East and Africa) region.
He moved on from Morgan Stanley in 2011, working as a special adviser to KPMG and taking on various non-executive roles, including a board position with the Hermes Property Unit Trust. He was appointed as CEO at Brewin Dolphin in 2013, having served as a non-executive director for a year.
Since 2012 Nicol has also been a member of the ICAS Council. He admits that for much of his career, like many members he was not particularly engaged with ICAS. It was when the Institute became increasingly active in London – with the opportunity to meet the chief executive and others at a series of events for members – that Nicol decided the time was right to play a more active part.
He says: “It’s about giving a little bit back and helping to shape the future for the younger people coming into the profession. ICAS plays its part in shaping policy and forming opinion on a wide range of issues, from Scottish independence and Britain’s EU membership, to dealing with tax avoidance. We are asking: what’s the next generation’s training going to look like? What’s our approach to technology? All these questions are being addressed by Council.”
Nicol says the changing demographics of ICAS represent an opportunity as well as a challenge: “ICAS can retain its roots, deeply embedded, in Scotland, but it can also be a global organisation.”
His advice to young CAs is to keep an open mind and take the chances that are given to you. He says: “There are great and varied career opportunities in practice, for example, so if you are enjoying working in practice, keep doing what you’re doing.
“Be open to opportunities, however small they may seem, and new ideas. Take advantage of transfers and training, and participate in networks. There are more opportunities for young CAs to network now than there ever were.”