Rising compliance costs, growth bottlenecks and business succession plans sealed the deal to sell a controlling interest in Newton Ross to the acquisitive Alvarium group, according to a co-founder of the long-established Auckland independent advice firm.
Mike Newton, who launched the firm with business partner Wayne Ross in 2003, said the Alvarium offer provided a solution to a number of challenges and opportunities facing the advice firm under the new regulatory environment.
Newton said the compliance burden for the firm’s discretionary investment management service (DIMS), for instance, has ramped up considerably.
“I spend about a full day every week with DIMS compliance,” he said.
Newton Ross invests clients money through its NZ DIMS structure, which Alvarium also took a stake in under the agreement revealed last week.
In a note, Newton Ross told clients that while the firm had developed into a “substantial business” – with assets under management understood to be over $500 million – that to expand “efficiently and effectively from here will require additional resources”.
“This includes bringing on additional advice capacity, adding to our investment capabilities and beefing up our governance and regulatory response capacity,” the note says. “Rising expenses means scale is becoming increasingly important particularly, in a smaller market like New Zealand.”
But Newton said the injection of Alvarium capital would also set up the boutique advice firm for a more sustainable future.
“With Alvarium coming on as key shareholder it has also enabled both Wayne Ross and Mike Newton to unlock some of the business value now to provide financial security for their families,” the note says. “Both Wayne and Mike will continue as shareholders and work on in the business over the coming years. We have no intention of retirement, but we also need to be realistic given our ages to ensure there is a sensible plan for long term succession that will eventually come.”
Currently, Newton Ross has four financial advisers and two support staff.
While Alvarium would immediately take on some of the compliance burden and provide bespoke investment research – including environmental, social and governance (ESG) analysis via its Pathfinder subsidiary – Newton said the deal would not affect the group’s advice process.
“Alvarium understand our business well and most importantly understand the value proposition of offering boutique individualised and specialised investment services that our clients seek,” the client note says. “They are not a bank or a sharebroker or insurance company.”
For the time-being Newton Ross would retain both the advice business title and the NZ DIMS brand, the note says, although that “may be reviewed over time to use a common group name”.
Co-founded by Andrew Williams in 2009 (who moved from the UK to NZ in 2017), Alvarium is a global concern advising on $27 billion across a wide range of assets from 10 offices in North America, Europe and the Asia Pacific region.
The firm established a base in NZ in partnership with Tailorspace, the investment arm of the Christchurch-based Gough Family Office. After first buying over half of then alternative asset manager, NZAM, in 2017 Alvarium purchased a similar share of Pathfinder in 2019.
In March this year, Alvarium restructured the NZ business, bringing all managed fund assets under the Pathfinder brand, creating an approximately $500 million entity including a fast-growing ‘ethical’ KiwiSaver scheme.