Two heads for heights at Smith & Williamson

Marion Dakers
The accountant and investment manager duo who are on the hunt for growth tell Marion Dakers about their long-term plans

SMITH & Williamson (S&W) is keen to get away from its reputation as investment’s “best kept secret” – even if it’s a name the firm has used to describe its own services.

From a quiet office in Moorgate, S&W looks after £14bn, while also running an accountancy practice to keep its clients’ assets running smoothly.

“I think that’s a moniker we’d like to move on from,” says David Cobb, newly-promoted co-chief and head of investment management and banking.

“Deciding how we go about that for a group of naturally reticent professionals, very discreet and hidden away, is going to be quite a challenge.”

Cobb became joint boss alongside Kevin Stopps, who runs the tax and business services arm, in September. The pair, both company veterans, took the job following the retirement of Gareth Pearce, who led the firm for almost three decades.

Co-chief executives are rare but not unheard of. Private equity giant Apax last week decided to split its top job, and Deutsche Bank has operated with two bosses for more than a year. But how does a joint job work in practice?

Cobb starts to answer: “Kevin and I have worked together for…

“26 years,” Stopps adds.

“… 26 years, but I’ve been here for 27 years, so I was here before him.

“So I think we see it as evolution rather than any kind of revolution,” Cobb says. “It’s a continuation of what we’ve always done. Kevin would be advising clients on their business interests and then when things worked well, we’d get the opportunity to advise them on their private interests and that’s been the mechanism in the firm since it started.”

“It pre-dates us,” chimes in Stopps. “We’ve always looked after them [like this], and in fact with some of our earlier clients, we’re effectively a family office for them.”

S&W, founded in 1881, has worked on one family’s finances for five generations, meaning the firm “will know more about that family than any individual in it”, Cobb says.

The company has collected expertise in more financial minutiae than any one family is ever likely to come across. S&W deals with equestrian accounting, hedge fund payrolls, what tax is paid on a testimonial football match and knows how best to bequest a farm, should one of its 25,000 clients wish.

The co-chiefs believe this breadth could be working for more clients around the world, and think one way to raise their business’ profile – besides agreeing to newspaper interviews – is to serve the internationally wealthy.

“It’s probably [Britain’s] biggest export, isn’t it, professional services, and I think it’s clear the City of London has a fabulous reputation for top-quality advice and clients will travel to buy that,” says Stopps.

“It’s got much more established structures of trust provision for subsequent generations,” adds Cobb, noting that tightening regulation in Switzerland is pushing clients their way.

Closer to home, S&W has seen a surge in business from British savers who are no longer offered final salary pension schemes. The shift has taken wealth management from a “cottage industry on the edge of investment banks” to a sector that a big portion of the country are likely to need if they want to save the “half a million pounds at least” required for a reasonable pension, according to Cobb.

Trading since April has been “comfortably ahead of budget on the prior year”, when the firm posted a five per cent rise in operating profit to £29.4m. Assurance work, which makes up about a quarter of income, has been resilient throughout the recession while investment management is benefiting from the stock market recovery.

“We’re feeling slightly more upbeat but the profession as a whole has had a pretty torrid few years,” said Stopps. “The issue for me is we need to see an increase in transactions, and that’s helping financial performance but whether that is going to last, whether that’s a temporary blip, I’m not sure.”

“I’m more optimistic,” counters Cobb. “I can see it starting to get busy, and the retrenchment in the whole industry has meant that capacity has been reduced in the sector and when activity picks up, I think prices will firm and margins will harden after a very, very long period of very tight pricing on the accountancy side.”

The pair are working with the rest of S&W’s board to pin down a plan to grow assets under management from £14bn to £25bn. The vagaries of the markets mean they are reluctant to give a timeframe. “I personally wouldn’t by shy of putting in some relatively modest numbers in years to come because we’re investing with a five and 10 year view. We think in generational cycles rather than in quarterly reported numbers,” says Cobb.

They intend to steer clear of the mergers that several accountancy peers like BDO have done, and have parked the idea of an initial public offering, after mulling it in 2007.

“We could fund any growth path – almost, except for acquisitions – that we wish,” says Cobb. “Listing would only be attractive if one wanted to go on an acquisition path, which to me would be bad for the business and the stability that we’ve built up.”

“I think our policy is that we’re agnostic.” Stopps again. “We’ll annually consider it and if there’s a bias in favour of listing, we may well do, but I don’t think it’s likely in the foreseeable future.”

The pair are also keen to squash talk of a possible demerger at S&W, which would “absolutely not” serve its clients well. After all, with 26 years of working together already under their belts, they see no reason to break off the partnership.


■ Electrical engineering degree at King’s College London

■ Joined Smith & Williamson in 1985 after graduating

■ Appointed head of investment management and banking in 2007

■ Took co-chief executive job in September 2013

■ Degree in economics from the University of East Anglia, chartered accountant and chartered tax adviser

■ Joined S&W on 19 October 1987 – also known as Black Monday

■ Became head of tax and business services in 2010

■ Co-chief since September 2013

■ Founded in 1881, now has 1,300 staff, 25,000 clients and £14bn under management

■ Biggest investor is Canada’s AGF, with the rest owned by staff

■ Split into two LLPs in 2012