SPIRIT OF THE FINANCIAL AGE

 

With this year’s Spear’s 500 expanded to include the rising ranks of family office services and ‘challenger’ banks, William Cash explains how London’s private client world is more alluring than Wall Street…

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WILLIAM CASH
is editor- in-chief
of Spear’s

That this new 2017 edition of the Spear’s 500 is being launched at the Dorchester on Park Lane in our 10th anniversary year is fitting. I have always regarded the ‘private client’ financial boutiques of Mayfair and St James’s in the West End — as opposed to the old City firms of East London, and further east still in Canary Wharf — as the true spiritual heartland of Spear’s. And don’t forget the new flux of Mayfair private member clubs (and private member offices) that have sprung up since Spear’s was first launched ten years ago as London took its place as the new global financial capital of the world.

Despite the 1980s Gekko cliché of lunch being for ‘wimps’, I’m glad to report that much of the real work of London’s wealth management is still done over a Mayfair lunch. Which is why we celebrated our tenth anniversary at a party earlier this year at the Philip Mould Gallery on Pall Mall, only a few hundred yards from the St James’s Street HQ of HSBC Private Bank, where we celebrated our first issue back in May 2006.

Today, post-Brexit, the pound may have slumped, but the Footsie has been bucking the ‘downtrend’ and the truth is that there is no evidence (the major banks have been making empty threats to pack up for years) to suggest that London is in danger of losing its crown as the financial services capital of Europe. Judging by HSBC’s decision to remain in London, many banks are actually hiring more staff for London. This is especially true in the private client world where demand for servicing the needs of HNWs and their families is reflected in our greatly expanded ‘family office services’ section this year.

Meanwhile, we have dropped the term ‘multi-family office’ (MFO) as it so often meant little more than an attempt at sophisticated asset management marketing. Scratch beneath the surface of a soi-disant ‘MFO’, and you find some grand family names and ‘Other People’s’ actual money. This year’s Spear’s 500 confirms this, as our guide now includes not just the elite of London’s wealth management world, including private bankers, asset managers, lawyers, accountants, offshore services (our Band 1 Indices), but also new areas that reflect the changing needs of HNW and UHNW families. Whilst the single family office (SFO) seems to be enjoying a boom today (there’s even been a literary novel called Dog by Joseph O’ Neill set in the world of a Dubai family office) the SFO’s less wealthy cousins —the MFO, ‘Private Investment Office’, and ‘Private Office’ — now have semantic competition with a new term on the Mayfair block: ‘International Family Office’. Which is why we introduced a new Spear’s award ‘for a firm or dedicated department within a multi-national firm, that provides the highest levels of excellence advising family offices (either single or MFO) or UHNW families’. Last year’s winner, LJ Partnership, was a good example. The category covers specialised family office private client services to UHNW families including asset management, governance, tax/legal, art, treasury and fiduciary services, accounting/reporting, property, offshore and succession planning.

Nothing less than a department store of UHNW private client choice covering almost everything a plutocrat today can want — including private jet or yacht financing/leasing to wine investment, all under one roof. This is a similar ambition to what we try to achieve with the Spear’s 500. ‘If you’re rich enough… these are the top guns for hire’, declared the Evening Standard on the evening we launched in 2014. A leading example of the new breed of firm that definitely caters for the UHNW side of the client fence is Stonehage Fleming. They describe themselves as ‘pioneering’ the concept of the new ‘International Family Office’. Other new Spear’s awards this year include a UK best Private Bank award to include ‘challenger’ banks like Metro and Hampden. Traditional private banks such as C Hoare & Co are also naturally included but shortly before we went to press Hoare ‘struck a deal’ with Cazenove Capital Management (owned by Schroders) to buy C Hoare & Co’s wealth management arm. The deal will see around 1,800 HNW clients switch to Cazenove. This shows how much ‘consolidation’ is now going on in London’s wealth management industry.
With all these changes, there has never been more of a need for an independent and authoritative guide to the best private client wealth managers, lawyers, and advisers across the often quixotic spectrum of HNW needs.

Our guests at our tenth anniversary party certainly reflected the social, cultural, and financial mix that has always made Spear’s unique. These included Philip Mould himself (a long-standing contributor) and our cover artist Adam Dant, who has been doing our covers since our launch in 2006. His tenth anniversary cover was a witty play on the ascendancy of the City as a global financial centre taking as its inspiration the ‘wood-cut’ cover of Thomas More’s Utopia, published 500 years ago.
The Big Bang City revolution of 1986 — exactly thirty years ago — was a game-changer that allowed the City to become, not only de-regulated but, some would say, ‘unregulated’. Today, it is very different: with much tightened regulation, tough new ‘ring fencing’ of the old casino banking system (separating investment banking and retail banking), salary dives, banking scandals of the Panama Papers and Libor, and ‘the War on Wealth’ giving lawyers and politicians the upper hand. Banking holds nothing like the appeal it once did for graduates.

American, Japanese and European banks transformed London 30 years ago from being a Square Mile of City men to the global financial capital of the Metropolitan Moneyman. Since the Big Bang, London has not only enjoyed a new financial renaissance but also experienced something nobody expected when they attended graduate career fairs in the mid-1980s: the ‘recapitalisation’ of London, not just culturally but also architecturally as the stage was set for an invasion of global banks (led by the Americans) that changed the social landscape of London. People sometimes carp that the financial services community don’t ‘contribute’ to society in the same way, say, as entrepreneurs or other middle-class professions. But I disagree. The financial services revolution that began with the Big Bang in October 1986 was every bit as radical and important as the cultural and social revolution of ‘Swinging London’ in the 1960s (Carnaby Street, Chelsea, and the Beatles), which captured the Spirit of the Age just as Wall Street and The Bonfire of the Vanities by Tom Wolfe did in the 1980s.

The 1980s and 1990s invasion of London by an armada of foreign banks, private equity houses, asset management boutiques — and later hedge funds — created not only the largest new graduate job market since 1945, but also nothing less than a new professional class with its own dress uniform and professional tribal habits that have reinvented the idea of what it is to be a ‘banker’, or to work in financial services today. The biggest change today is that whereas 30 years ago, every graduate wanted to be an investment banker, now the best graduates are not so much pursuing careers in investment banking, but in wealth management. That is a major revolution in itself as ‘wealth management’ was long seen as the Royal Navy of the financial services industry as opposed to the glamorous crack SAS troops of investment banking.

In the 1980s it was easy to see why people wanted to work for big American banks as they were so well paid.

In Liar’s Poker, Michael Lewis described life working in New York and London as a young investment banker for Salomon Brothers in the mid- to late-1980s, at a time when a generation of Ivy League graduates barely considered any career other than banking. Having read art history at Princeton, Lewis admits he only applied to dozens of banks as ‘I was frightened to miss the express bus on which everyone I knew seem to have a reserved seat’.

This was exactly the feeling I recall from watching my friends and contemporaries stampeding to attend the banking ‘milk rounds’ at Cambridge in the 1980s. Whilst I thought it mad that anybody would want to spend their summer holidays working as a slave-like intern for an American bank, this was the norm. Just as the idea of selling bonds as a career choice would have seemed incredulous to any college-educated East Coast Wasp in the 1960s or’70s, so it was that very few top graduates in the 1980s or 1990s would have applied for jobs in the wealth management industry. They wanted to be hedgies, corporate raiders or investment bankers.

But that has all changed now as this new edition of the Spear’s 500 proves with so many of the highest graduate achievers shunning investment banking for private client service work. This post-Big Bang generational migration to London was not just an Oxbridge or Ivy League graduate affliction.

Following the Big Bang of 30 years ago, it was the same at universities across Europe — from Barcelona to Paris, Zurich to Milan. All business or economics degrees led to London, whose de-regulated stage made it the new global capital of upward social and financial mobility. In 1986, Lewis recalls being asked to address a group of LSE students on the bond market. After his talk — packed with students — he was besieged ‘not with abuse but with questions about how to get a job at Salomen Brothers’.

By 1987 the firm was employing over 900 people in their vast glass aerodrome of a trading floor beside Victoria Station. Indeed, what has changed perhaps most notably since 1986 is the American-isation of London. The towering glass skyscrapers of Canary Wharf and the City have come to represent the Wall Street-ification of London. Which is why a recent social report that banks discriminate against graduates who turn up to interviews in brown shoes and ill-fitting suits is not simply trivial. The media who reported it as evidence of elite snobbery against the working class missed the more important point about money men dress codes: the navy suit, white shirt, Hermes tie and black loafers look has been the global uniform of the international money man class for nearly three decades now.

Turning up for an interview in brown shoes would be like saying you have never heard of the FT. No would-be banker to a Global Citizen wears brown —that much even I would have known back in 1986.

William Cash is editor-in-chief and founder of Spear’s

william.cash@spearswms.com