Jonathan Polin, group CEO of Sanlam UK, talks to Lauren Mason about the group's recent flurry of acquisitions, plans regarding the UK arm of the business and his concerns over a no-deal Brexit.
"Sanlam UK does not want to have the 'biggest and best' wealth business in the UK. That is not the aim," the group's CEO Jonathan Polin explains at their office in Monument Street, commenting on a series of acquisitions made by the firm this year, which included buying Thesis Asset Management in April.
The purchase of Thesis, which has several offices around the UK, brought an extra £1.2bn of assets under management to the table for Sanlam UK, which now manages £4.2bn of private client discretionary assets alone.
Globally, Sanlam manages more than £42bn for 15,000 customers - a far cry from the firm's humble beginnings as a team of seven in Cape Town more than 100 years ago.
Now, Polin says, the aim is to continue nurturing the UK arm of the business - launching new products and expanding the firm's capabilities - while, most importantly, offering a "very credible business that can stand on its own two feet in its domestic market" that also provides a safe home for clients' offshore assets.
"A lot of people want to have more offshore exposure now than they ever have done. We see that increasing over the next four to five years, in particular," he says.
"If the asset management business is going to be selling products into the client base in Africa, they cannot feel as though they are getting pushed into investing here because we happen to have the resources.
"It has to be a business they feel can deliver the quality, and deliver the returns, that their clients expect."
Vertical integration
As such, Polin says Sanlam UK's acquisitions over the years have been very carefully selected with a focus on quality.
He describes 2016 - his first full year at the company's helm - as the year of "bringing things together through little changes", while in 2017, the focus was on finding a new platform for the company's wealth and financial planning businesses.
"It was a year of really proving that vertical integration works," he explains. "We had a massively great year - particularly in the financial advice world - and the referral rate to our DFM business went up significantly.
"Why? It's simple. It is because they were sitting together so they could understand each other, and the planners could see the benefit of offering named portfolio managers to their larger clients."
The CEO describes this period of time as the company's "transformation journey", having first purchased smaller firms to get Sanlam UK "acquisition ready".
These included Yorkshire-based financial planners Grennan Advisors and Blackett Water in 2017 and 2018 respectively.
Then, at the start of this year, the company acquired chartered financial planning business Astute Wealth Management.
The hefty purchase of Thesis followed some months after, and the firm's latest acquisition was less than two weeks ago when they bought a 55% stake in Cheshire-based independent financial planning business Avidus Scott Lang, doubling Sanlam's footprint in northern England.
This is all alongside growing Sanlam's partnership programme, which it did through the purchase of Cheltenham-based financial adviser network business Tavistock Financial almost two years ago.
"When businesses come to us, they usually want one of two things. Succession finance - the senior partners are looking to leave the business, but they do not want to sell it to a consolidator. They are going to pass it onto the next generation.
"And, of course, the next generation has not got the money to pay them out. So we will supply that succession finance and then the business comes restricted to us, keeps its own brand, and it manages its own way forward," Polin explained.
"The other reason people want to join us is because they also want to play in the consolidation space - at a smaller level than we would want to - but they have not got the money to do that, so we will loan them the money to do those deals.
"And again, they become restricted to us and the businesses they buy also become restricted to us. It grows our footprint."
New fund launches
After what has been an incredibly busy couple of years for the firm, the CEO says the transformation journey of the business itself is "just about to end".
However, Polin and the team are busy creating and launching new funds for investors, as well as considering adding vehicles in entirely new asset classes for the firm.
For instance, Sanlam UK is set to launch a US long/short equity fund at the end of September, which will be headed up by value specialist Adour Sarkissian.
Polin also says the firm will launch two new multi-asset funds at the start of next month, which will be added to Sanlam UK's existing three-strong range of funds that have primarily been launched for its own financial planning firm.
The two multi-asset launches are subject to regulatory approval.
"We want our clients to have a multi-asset solution, which is why we have these funds," Polin explains.
"I also wanted to move away from a majority of our DFM capability relying on third-party funds.
"So, in our multi-asset funds, we invest in direct equity, direct fixed income, and that is a really important way of keeping down the costs.
"We have also launched a new white label advice platform alongside Hubwise for our financial planning business.
"Overall, this is reducing the fee from near the 2% mark, to between 110 and 115 basis points.
"We are moving our own clients from our models into our multi-asset funds that are suitable for them, and giving them a significant price reduction."
Meanwhile, Polin says there are plans in the pipeline to launch a Sharia law fund, which will be modelled on the existing £438m Global High Quality fund, as he has noted a particular demand from the firm's clients in Northern Africa.
Longer-term plans
Over the longer term, the CEO is keen to reinstate a strategic bond portfolio into the business once again.
During the second half of last year, he took the decision to sell its strategic bond portfolio to Man Group after managers Craig Veysey and Francois Kotze left Sanlam to join the company.
"That left us in a difficult position because we did not have any other bond capability in house," says Polin.
"Also, the managers ran it in a very specialist way. We had about half of the assets owned by our clients, while the others were pretty new assets that had come through in the past nine to 12 months. New flows were coming through from the wholesale markets into the fund.
"I knew that a small number of holdings were less liquid. Not dangerously so, but I also knew if we said, 'Right, Craig has gone', then all of those wholesale managers would leave and we would be left with our clients owning half of it.
"So we took the decision that the best thing to do was to sell the fund to Man GLG, which was a very brave thing to do.
"Some people said I was mad, but I took the view that actually, the clients of these wealth managers are going to have to leave and we want to sell other products to these wealth manager clients. So why would we leave them in a difficult position?"
Absolute return sector
Another area of the market that Polin is particularly keen to delve into further over the longer term is the absolute return sector, and the use of alternatives as a whole.
"Take Mike Pinggera's [Sanlam] Multi Strategy fund. I have a large amount of my own money in it because I am very nervous of markets.
"It really is an all-weather fund. It is never going to hit the heady highs, but you do not want it to. You will get good capital growth, and protection on the downside.
"That, for me, is a very important part of a person's portfolio.
"I think you just have to have a cross section of funds and capabilities within your armoury. When there is the need and the time for certain products, then you have an opportunity there."
Market nerves
Part of Polin's nervousness towards financial markets at the moment is the result of Brexit uncertainty. "I am a huge remainer, so I find this all infuriating," he says.
"My concern is a no-deal Brexit, which we seem to be getting closer to every day, will have such a tremendous shock on the UK economy - not only would it mean that investors will not invest because they do not know what is going to happen to the market, but markets are already at near all-time highs, there are global tensions in Iran and Korea, and trade wars between the US and China, and some fallout which may or may not happen in Hong Kong.
"Then you have Brexit on top of that."
He describes the current backdrop for investors as a "palette of tension", which he says has been exacerbated by "the self-harm the asset management industry has done to itself through [the] Woodford [saga]".
He adds: "It just means that it is a less appealing place for people to invest.
"We will get over all of those issues, but I think there will be a period of time where, firstly, investment flows will dry up, and then the other period, where there won't be the same amount of wealth created over the next five, or maybe ten years, as there has been over the previous five to ten years.
"But, the structural dynamics of the UK are such that wealth [management] is a great place to be as a business.
"There are £1.6trn of assets that individuals have in their pension funds and so on, and due to pensions freedoms and the ageing population, the requirement is increasing and will continue to increase. I think that will probably dampen out the Brexit factor post the initial shocks."
In terms of what a no-deal Brexit could mean for Sanlam UK from an asset management perspective, Polin is confident the company, and products, will continue to perform well.
He points out that the firm has a Dublin umbrella vehicle of its own - Sanlam Asset Management Ireland - and that this provides wrappers for the whole group.
"Effectively, we have the ability to sell into Europe. I do not see asset management being a real issue for us and, as most of our funds are domiciled in Dublin, and the UK Government has said they will allow the sale of Dublin funds in the UK in a no-deal environment.
"The only other part of the business where we touch Europe, and therefore potential difficulties, is the life company in terms of paying pensions to expat Brits based in Spain, France, and so on.
"But there is a process that has been outlined by the Government in terms of how that will be done in a no-deal scenario.
"I think from an ease of working point of view, it will be absolutely fine."
