There are several examples of well-capitalised wealth management start-ups that have adapted the ‘build it and they will come’, field-of-dreams approach, wracking up millions of pounds of losses in the process – and with break-even seemingly still a vague pipe dream.
The very wealthy expect only the highest levels of service, thus it makes sense a certain amount of money will be lost initially setting up a ready-for-market proposition.
But at six-year-old boutique Artorius, profligacy is shunned, with profitability the promise for next year, chief executive Paddy Lewis tells thewealthnet.
Assets under management now sit at around £1.6 billion, and profits for the year ending 30 April 2022 are expected to be in the realm of £400,000 to £800,000 – the firm’s first positive net result since its inception in 2015. Targeted revenue will be about £8 million, an uptick of around £2 million on the present year.
“Operational leverage is starting to come through, which is really pleasing, and is off the back of a strong 18 months… [during which] we’ve added nearly £500 million in assets.”
Mr Lewis says that while many wealth managers experienced “a good Covid”, much of this was based on transactional revenue – “whereas about 90 percent of our revenue is annuitised income from our DFM and planning services”.
Artorius is headquartered in Manchester and was founded in 2015 by ex-Credit Suisse duo James Phillips and the late Richard Algar, who died in 2016 and whose input is still very much felt via the firm’s culture, Mr Lewis intimates.
Mr Lewis took over as chief executive of the firm in February 2021 from Ian Marsh who is now the firm’s executive chairman. This meant Mr Lewis spent the first six months in his role getting to know his people over Zoom and only now is having the chance to meet his colleagues in three dimensions.
Having spent the bulk of his career at UBS in London, latterly as MD and head of investment platforms, Mr Lewis then spent a couple of years as a consultant with Sionic – a period which gave him a scopic view of the industry.
“[Artorius] was set up on the basis there was a better way of looking after the needs of the ultra-high net worth client,” he says.
“There was a sense that [other, larger firms] were possibly not focused on the right thing – which is the client. I know everyone says that – ‘the client is at the centre’ and all that. But what’s interesting about Artorius is that we are actually owned by our clients.
“Being able to ask your client, who also happens to be your shareholder, what it is they want makes it easier to curate your strategy. I think that does make us a genuinely different type of organisation.”
No one shareholder is allowed to own more than 10 percent – it is not, and cannot be, owned by a handful of large clients, a la many family offices. The firm’s 50 employees are also all shareholders.
“It’s not a business that is being built to be sold. We’re building something that is going to provide long-term positive cashflow for shareholders.
“It is being grown carefully and methodically, rather than trying to build high AUM, with no profit, with a view to then selling to somebody prepared to pay a multiple.”
Underpinned by old fashioned values like independence, long termism, and service quality, Artorius also wants to be, well, a bit cool.
While competitors can be found in St James’s or the City, Artorius has just set up its London headquarters in Covent Garden, where the office is complete with exposed brick walls, distressed steel, and neighbours that include Doc Martens and the zeitgeisty Seven Dials Market.
It’s part of a concerted effort to appeal to younger entrepreneurs and professionals who might be put off by the stuffiness of the average private bank – as well as enticing staff.
“The office is often talked about as an important part of the client experience. But it’s also very important to make the experience for the employee as high quality as possible, and make the office a place that you want to spend time with your colleagues,” Mr Lewis says.
“I wanted to be in Covent Garden, it’s a different sort of place [and] when you’ve lived a solitary existence with just your camera sitting looking at you for the last 18 months, being in a place where there's a sort of genuine buzz around is important.”
Artorius’ offering is also reflective of its entrepreneurial client base, with its core financial planning and investment management complemented by more specialist services like bespoke credit broking, real estate advisory, investor visas, and alternative investments.
Justin Minien, an alumnus of Coutts and Deutsche Bank, was brought in earlier in 2021 to build the whole-of-market lending offering and has had “very strong engagement” from clients and prospects, Mr Lewis says.
Dealing with multiple providers means Artorius can assist professionals and entrepreneurs with more complex needs – borrowing for management buyouts, or against newly-listed equity, for example.
“Having come from a bank with a single balance sheet, I was only able to do lending for people who had a wealth management relationship with us. We’re able to talk to people earlier on in their financial journey, where often the need is cash.”
Alternatives are handled via offshoot firm Boardwalk Alternative Capital, which originates and sources off-piste opportunities for professional investors who also hold discretionary assets with Artorius.
“They tend to be interested in smaller opportunities, but not businesses that are straight out of the wild. These are established companies looking for their next round of funding.”
Mr Lewis says these more esoteric business lines are often a way into a fuller relationship: “With Boardwalk or indeed lending, that can form the early part of the relationship. But we quickly discovered that pretty much without exception, these clients also need the planning team – which we are expanding at the moment.”
Artorius has also been growing its behind the scenes team with senior hires into IT and marketing.
“We’ve been very careful about the way we spend our money. It's very easy to start a business and get carried away.
“I'm lucky enough to have joined it at the time when it’s going to go up a gear and grow very fast. It is exciting and great fun – which is the most important thing.”