Baughan on the right side of the tracks

Amvescap’s Brian Baughan shuns fly-by-night products and fashionable styles. The investment veteran is sticking to his back-to-basics approach, offering Atlantic Wealth Management clients consistent quality stock selection. Roxane McMeeken reports.

Atlantic Trust Wealth Management, the recently re-branded E10bn private client arm of global investment giant Amvescap, is on the lookout for acquisitions. The firm has set itself a staggering target. It wants to run E75bn in assets for wealthy individuals within three years. Bryan Baughan, founder and managing director of the European arm, is the man responsible for identifying takeover targets, recruiting clients and reshaping the company’s investment process. He predicts significant consolidation in the wealth management industry, and “would not be surprised” if Amvescap acquired key wealth managers in Europe, the UK and the US. Mr Baughan, an investment veteran from stockbrokers Hoare Govett, already has his work cut out reshaping Amvescap’s European operation, Atlantic Wealth Management, which runs E2bn for private clients from its headquarters in London’s Devonshire Square. Rather than channelling clients into the exotic bond and hedge products structured and offloaded by investment banks, Mr Baughan’s back-to-basics philosophy is to give private clients access to a higher quality of local research. By concentrating on stock selection, he aims to give wealthy clients the benefit of equity experience already utitilised in the institutional and retail divisions of sister company Invesco. “We are trying to make the US become a centre of excellence for selecting US securities for private clients,” says Mr Baughan, explaining his re-shaped investment process. “At the same time, we will build a London team to analyse European and Far Eastern stocks”. Until now the London branch, under chief investment officer (CIO) Peter Clark, picked US stocks for its European clients and the US branch tried to select European securities. Mr Baughan says that the problem was that “the US finds it hard to get up to date information on the rest of the world” and vice versa. As a result of the shift, Atlantic is currently recruiting staff for its London office. The basic investment approach echoes the ethos which has popularised the Invesco brand, and led to its funds arm winning a lucrative distribution agreement with Deutsche Bank. Atlantic looks for companies with high quality management, which are committed to creating shareholder value. It also seeks to invest in what it calls “understandable, recurring businesses”. The implication is that it avoids fly-by-night dot.com style investments. Other key factors are a consistent operating history, long- term competitive advantage, excess cash flow, modest levels of debt and a high return on capital employed. Atlantic uses quantitative processes to screen stocks in terms of their performance in various trading conditions and absolute returns relative to benchmark and peer group indices. It also uses qualitative techniques to evaluate companies in such terms as overall sector weightings in the portfolio, risk management and operational capabilities. Unlike many of its competitors, Atlantic considers its top selling point to be that it is exclusively in the business of asset management. And if it can’t manage the assets according to a client’s mandate in-house, it will help them choose external managers. “We are not a one-stop house, but we are trained in the art and we can take our clients to a good provider,” says Mr Baughan. The latest addition to Atlantic’s service is the Online Portfolio Service. This enables clients and intermediaries to access portfolio details on the Web. So far, Atlantic has registered more than 100 clients and intermediaries for the service. Atlantic is confident of gradually increasing its assets under management by winning new clients through its strong customer service ethic. Mr Baughan himself continues to run money personally for certain clients. He says: “You don’t lose clients through poor performance, you lose them through bad administration, through not getting their name right”. He expects all his wealth managers to abide by a three-stage private client mantra:

• If you don’t listen to your clients, you don’t deserve to have any.
• Never take your clients at face value, but listen for their nuances. What clients say they want is often not what they need.
• Understand your client’s awareness of risk. You never really know a client’s risk intolerance until you have accompanied them through a bad market. At Atlantic, a key part of establishing a good relationship is to get an idea of not only the client’s needs, but also of his or her level of investment expertise. While some might be financial gurus, others need more help. Pouring cold water over competitors obsessed with collateralised debt obligations and merger-arbitrage strategies, Mr Baughan relates how his investment chief, Peter Clark, once made a presentation to a prospective client. The man, an eminent television drama scriptwriter, had already endured three hour-long presentations from major investment banks on the same day. “Stop me if you don’t understand anything,” ventured Mr Clark to put the prospective client at his ease. “Well there is one thing that has been bothering me all day,” replied the scriptwriter. “What exactly is an equity?”

From blue button runner to Invesco chief Bryan Baughan did not begin his financial career in the most conventional fashion. He started out in the early 1960s as a primary school teacher in the quiet idyll of the English countryside in Kent. Ironically, with limited income and little investment knowledge, he found the simple rural life a struggle. “My wife was working as a nurse and we couldn’t afford to buy a house, so I decided to seek my fortune elsewhere,” says Mr Baughan. He headed for the City of London. Joining stockbrokers Govett Sons & Co in 1965 as a lowly “blue button”, it was Mr Baughan’s job to run around relaying messages on the trading floor of the London Stock Exchange. While Mr Baughan was tearing up through the ranks, Govett merged with Hoare & Co in 1970, creating the well-known international stockbrokers. By 1977 Mr Baughan was a partner in Hoare Govett. He became a major player in the wealth management arena in 1982 when he was appointed managing director of the Hoare Govett Financial Services Group, which gave independent advice to private investors globally. Mr Baughan broke out on his own in 1988, founding the private wealth management firm he runs today with the backing of Amvescap subsidiary Invesco. To get the company, then known as City Merchants, up and running, Mr Baughan poached 10 of his Hoare Govett colleagues. They are still with him now, including investment chief Peter Clark, operations director Peter Gregory and senior portfolio manager Paul Gibson. The firm, now going by the name of Atlantic Wealth Management, runs E10bn for investors worldwide. In his spare time Mr Baughan enjoys the typical City pursuits – “good food and wine”, watching rugby and playing golf “badly”. However, his feet remain firmly on the ground. He lives with his wife in Maidstone, Kent and is chairman of governors at a local school. Both children can be said to have followed in their father’s footsteps. While his son works for BNP Paribas, his daughter teaches French in a Kent grammar school.