Victoria out to ensure private clients are not caught offside

Single-clan family offices, which transform themselves into broader organisations, representing and running money for a range of interests, are beginning to become more important players in the wealth management industry.

Both Phillip Russell and Inno van den Berg, CEO and chief investment officer respectively of the Victoria Private Investment Office, previously worked for the Scanlon family, shareholders in Elders, former owners of Australia’s Fosters brewing empire. The family, which had major stakes in companies that had more than $4.5bn (E3.4bn) in assets under management, later made a fortune in shipping, freight transportation and packaging. The Scanlons’ business included an asset management joint venture with leading US pension fund Calpers, later sold off to the Bank of Montreal.

Following a successful management buyout in 2008, when the Scanlons gave signals that they did not see an internal asset management organisation as core to their future business success, Victoria’s two founders, both ex UBS wealth managers, began to concentrate on attracting and managing money from other business owners. Today they have $500m in assets under advice from their office in London’s Mayfair, next door to swanky Italian restaurant Cecconi’s, now a leading celebrity hangout.

But the history of both men suggests they are capable of managing money on a much larger stage. Indeed, one of the key skills they learned was how to look at clients’ assets holistically by valuing their business interests.

“We had an insight as to how a private equity family looks at its assets,” recalls Mr Russell, a former lower league professional footballer and investment banker in both Europe and Asia, who later handled complex accounts at UBS Wealth Management.

“We were brokers, who valued assets in a mechanical, standard way. This showed us how entrepreneurs valued assets, when they invested in unquoted, turnaround businesses.”

Both men also had “drilled into them” the nuts and bolts of how businesses should be set up and managed, and how initial public offerings should be conducted. “We started with the foundation stones of how you approach running a business,” says Mr Russell.

“We learned to invest for our clients and manage their portfolios, rather than work from an institution’s point of view. We always remember that we are running a collection of private portfolios, rather than saying: ‘This is the house view and this is how you will invest.’”

This approach is diametrically opposed to the way things worked at UBS and other large banks, says Mr Russell. “The biggest difference between a wealth manager and a family office is that we have a real understanding of the cost of capital,” he says. “I have never met a wealth manager who understands what capital really costs, even when they are losing it.”

One of the specialities at Victoria is actually representing clients in front of their existing wealth managers, and explaining the often complex, jargon-filled pitches in a simple manner. “Their portfolio is not performing, so they go in to see a guy in a big office with expensive pictures on the wall,” says Mr Russell, relating the typical client experience at the global wealth players.

“This guy is blurting out stuff to them, which they can’t relate to and don’t feel at all comfortable with. We can go in there, being on the client’s side, explain issues and help them get on with the investment manager. It doesn’t mean we sack the investment manager. But the client and investment manager can get too personally involved. We can get around those personality clashes and explain everything to the client.”

The idea of a private investment office, says Mr Russell, is all about bridging the gap between asset management and wealth management. Too many firms combine the two to maximise product sales, he believes. Clients are sold products by people who are able to manage relationships, but not manage portfolios. “How many relationship managers at large banks have ever managed portfolios themselves? Only a handful. They do not understand risk or the products they are selling.”

He recalls some of the sales-teach-ins he would be asked to join at his former employers. “Somebody from the investment bank would come in on a Tuesday morning, explain a products for an hour and then we would be told to go out and sell it, whether we understood it or not, whether the client wanted it or not. It didn’t matter, we had to sell it.”

As well as learning from experiences throughout his entire banking career, Mr Russell can also share a few tips picked up during the 1970s, when playing for Wrexham FC.

“No matter how good you were, you would always come up against a player with a trick up his sleeve,” he recalls. “And because of that trick, he would go past you. Teams are so well-drilled now that Brighton can beat Manchester United on their day. Their secret is concentration, through the whole time you are out on the pitch. That is exactly the same quality you need when you are managing portfolios.”