Listening to the chorus of woe-laden commentators, it might seem that our current economic woes are the worst in human history.
But Paul Manduca, chairman of FTSE 100-listed investment advisory firm St James’s Place (SJP), ranks it “six or seven” on a scale of up to ten.
On the unfortunate mini-budget that led to the defenestration of Liz Truss and Kwasi Kwarteng, he says: “I don’t think it was a very serious crisis.
Cool head: Paul Manduca is chairman of St James’s Place, an investment advisory firm listed on the FTSE 100
This came as a big shock, especially in the UK where inflation and interest rates rose more than markets expected.
“The pound plunged and approached parity with the dollar, but recovered quite quickly. The storm was exacerbated by the war in Ukraine and fuel issues.
“The markets are signaling that we can get out of this now. Inflation will come down next year,” he said, adding, however, that volatility will remain.
Manduca, 71, has certainly earned the right to be heard. In the Square Mile, where careers – and memories – are often short, he’s been at the top for nearly five decades, first rising to prominence in the 1980s as a fund manager.
Most recently, he chaired reinsurer Aon UK before becoming chairman of the FTSE 100 Prudential group for eight years until 2020, when he took over as chairman of St James’s Place.
At Pru, the jury is still out on whether the group’s restructuring to focus on Asia that began under his tenure is a masterstroke or a dismantling of a former British big name.
Manduca also spent six years, from 2005 to 2011, as a senior independent director at the Morrisons supermarket chain, where he became close to legendary founder Sir Ken Morrison.
Morrisons has been floundering since being sold to US private equity group Clayton, Dubilier & Rice last year in a £7billion deal.
So what does Manduca think?
Morrisons’ stock price hadn’t gone anywhere for a long time because there’s been a squeeze in margins in the retail sector,” he says.
Although he accepts that the decision to sell rests with the shareholders, he clearly feels a sense of regret.
He mentions the close relationship Morrisons had with farms and fisheries and the freehold estate of shops built by Sir Ken, “which is now being dismantled” due to the debt incurred as part of the deal.
Paul Manduca, 71 years old
Family: Married to Harley Street eye doctor Ursula. Two sons – Mark, 39, a former investment banker, now chief investment officer at GXO Logistics in Connecticut, US, and Nicholas, 34, director of wealth manager Kleinwort Hambros.
Lives: Knightbridge, London
Education: Harrow/Hertford College, Oxford.
Discs: MercedesGL 350.
Favorite book: Dark Towers: Deutsche Bank, Donald Trump and an Epic Trail of Destruction.
The entrepreneur most admires: Steve Jobs.
Who would he invite to dinner? Tsar Nicholas II of Russia, who lost his empire and that of the Romanovs (he needed advice).
“Listen, I wish the new owners good luck, but I’m a little sad.”
How would Sir Ken have felt? ‘Oh, I think he would turn in his grave. There is no doubt about it.’
While the late founder’s disapproval doesn’t in itself make them “bad landlords,” Manduca wonders if “in today’s climate, is private equity the ideal property, with lots of debt to pay off? »
Morrisons lost its place in Big Four UK supermarkets alongside Asda, Tesco and Sainsbury’s this year when it was overtaken by Aldi. Fellow German discounter Lidl also expects to overtake Morrisons before long.
Yesterday’s most recent figures showed Morrisons sales were down almost 5%.
“It despairs me a bit. It’s sad because at one point it looked like we could challenge the Big Three,” Manduca says.
‘Ken was our brand. He was one of the great grocers. I liked what he put in the stores.
Does he still shop at Morrisons? ‘I don’t really have one, no. There is not one that suits me, and I had a discount card. They wouldn’t let me keep it.
It’s hard to imagine Manduca pushing a cart full of baked beans. He comes from the Maltese aristocracy and was educated in Harrow, followed by a degree in modern languages at Hertford College in Oxford, but he does not play the big one.
We meet at Spencer House, a magnificent 18th century mansion in St James’s, central London, although he is quick to point out that SJP has only a few rooms in the building and will be moving to new offices in Paddington in the spring. Its head office is in a modern office in Cirencester.
SJP, which manages £143bn of investments for 868,000 clients, was co-founded in 1991 by Lord Jacob Rothschild, who has a lease on Spencer House. The company has more than 4,600 independent advisors.
Its share price has fallen by around a third this year and assets under management fell in the first half due to global market reversals, but new business has been strong with more than £9bn of new investment net by customers.
The company faced bad publicity a few years ago after revelations about lavish rewards, including cruises and gold cufflinks, which were offered to partners as incentives to boost sales.
After a review, pay and benefits have been revised and Manduca says largesse is a thing of the past.
“We don’t do cruises anymore and we don’t give out cufflinks anymore,” he says, conceding they “probably lasted too long.” SJP has also been the subject of controversy because it used disgraced former fund guru Neil Woodford to manage £3bn of assets for its clients.
However, he had banned Woodford from taking risky bets with his clients’ money and dumped him in 2019 before the collapse, and claims none of his clients have lost.
Debt burden: Morrisons lost its place in Britain’s big four supermarkets this year alongside Asda, Tesco and Sainsbury’s when it was overtaken by Aldi
Manduca argues that the perception that SJP charges high fees is incorrect: “The average client pays around 2.2% and you can’t compare our advice with robo-advisors or platforms, it’s completely different.”
“Look at our customer retention rate, which is around 97%.
“The average length of a relationship [between a customer and an adviser] is 14 years old.
One of his biggest concerns is that people need financial advice and don’t always get it. SJP caters to the well-heeled, with a target market of people with £50,000-£5m to invest – but those with less money often struggle to find good advice.
“It starts with financial education which we haven’t been very good at in schools.
“A lot of well-educated people don’t know what an ISA is. Earn it, save it, invest it. Those are the principles we need to get across.
Does Manduca think the UK’s ambitious middle class, who make up SJP’s clientele, has been unfairly targeted in Jeremy Hunt’s recent budget?
And, with spiraling inflation, especially for expenses such as tuition fees, is the very existence of the middle class threatened?
“There is a huge savings gap,” he says. “I suspect the real estate market has bailed out a lot of people, who have downsized.
“If property prices were to fall – unlikely due to housing shortages – but if they did, then you really would have a problem.”
Regarding the budget, he says: “We are in a very tight corner in the UK. We have huge expenses for public services, especially the health service. No one fully understands why there hasn’t been more of a rebound in the UK in terms of returning to work.
“You have to go to people who have money, so the budget was unavoidable.”
So far, he says, there are no signs of clients withdrawing their savings or reducing their investments, although they are asking for more advice.
Married to Ursula, a Harley Street ophthalmologist and father of two adult sons, Manduca has, entering his eighth decade, a demanding schedule at all ages.
He wakes up around 6:30 a.m., grabs a quick bowl of cereal, and is at his desk at SJP around 7:30 a.m., to embark on a series of meetings, often followed by a working dinner in the evening.
“I’ve enjoyed my whole career, but I always want to feel like I’m adding value,” he says.
He recounts a meeting years ago in Chicago with a trader, who said, “Do you know, every day I get up and look in the mirror and say, ‘Are YOU adding value? ? and said, ‘It’s funny, but I never forgot that. I think presidents should just ask themselves from time to time, “Am I adding value? »
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