Stonehage and FF&P on their merger, their future and whether they’re more like Harrods or Westfield


Attentive readers of Spear’s won’t have been surprised to hear last Thursday that another two of London’s independent wealth managers – Stonehage and Fleming Family & Partners – were pairing up, the latest in a long line this year.

Uniting under the less-than-catchy banner of Stonehage Fleming Family & Partners (SF&P for short), the new company will have £7 billion of assets under management and over 500 staff across seven countries. Soon after the news broke, Adam Fleming (pictured above left), chairman of FF&P and board member of SF&P, and Giuseppe Ciucci, group CEO of Stonehage and now of SF&P, told Spear’s at their Suffolk Street headquarters why they had come together and what that means for their future.

‘There are things we’ve got,’ says Fleming, ‘that Giuseppe hasn’t got that would make sense, like private equity and the advisory side, and we’ve also got a big fund management business in Zurich. There are a lot of things he’s got that we think our clients are going to love,’ like Stonehage’s equity business to complement FF&P’s fixed-interest desk. FF&P will adopt Stonehage’s ‘key adviser’ concept, hommes (and femmes) d’affaires to give strategic advice and troubleshoot.

Ciucci says that the internet has played some role in this marriage: ‘The internet era will destroy a lot of business models as it is doing in our world; if you think about it, people pay too much for investment advice, there are too many conflicts of interest, the fees are too high in hedge funds, so the internet will bring all of that down because it will create enormous competition.’

This means wealth management firms need to be more like shopping centres, offering everything a client could want, and that might be created through mergers: ‘You go to a shopping centre for an experience, partially amusement, partially informative and so on; this is what a multi-family office wants to achieve: it wants to be a shopping centre for these complex families.’ You won’t just get independent investment advice but also legal and tax services, philanthropy advice, art advice and so on.

<p>So is SF&P more like Westfield or Harrods?

‘If you have to look at the technical business models,’ says Ciucci, ‘Harrods would struggle with the online concept – you would have to be more of a Westfield. However, in our context we definitely are a Harrods.’

‘I think it’s Harrods meets Elon Musk,’ says Fleming, referring to the constantly innovating co-founder of PayPal and Tesla Motors and CEO of SpaceX, which is trying to take customers into orbit.

In contrast with some of the other firms who have paired up, Fleming and Ciucci don’t cite the regulatory burden – easier to bear across a larger firm – as a merger motivator. The opposite, in fact, says Ciucci: ‘Our response to regulatory issues is to have fewer clients but rather have larger clients… then you have less of a regulatory burden because you know exactly what they’re doing then.’

In the new firm, the management and staff will own 70 per cent; the next largest shareholders are the Fleming family, Standard Chartered and Wafic Saïd. This means that the Fleming Family are going from 50 per cent of their current business to well under 30 per cent of the new one; does that indicate that the FF&P way will have to cede to Stonehage’s?

‘Shareholdings are not important from that perspective,’ says Ciucci, ‘whether it was 50/50 or whether it’s 75/25, it’s still a partnership between the Fleming family and Stonehage, mainly represented by myself.’

Fleming takes this up with perhaps greater candour than anyone in the room expects: ‘Can I as, as it were, the person at risk here just give my take on this? I think that at the end of the day all of these things are based on trust and you never 100 per cent know… All I can say is that we’ve had a good record as a family of choosing our partners and I would put this partnership right up there as making huge sense, and again having not zero risk but very low risk that what we think we’re going to do together isn’t going to transpire… I think it would be crazy of Giuseppe to say, “Right, that’s it, this is where we’re going,” and we go off in a completely different direction.’

This candour reappears when Spear’s asks if either firm had talked to another partner about merging in the past five years. As soon as Fleming starts to speak, Ciucci shoots a glance for a fraction of a second at the PR.

‘Certainly we looked at a number of opportunities and at one point were quite close to taking over another, being the senior partner in another outfit, and that failed – I always think these things are meant to be so it wasn’t meant to be. We’d been actively looking around to go to the next level and this arose, as I say, probably three years ago.’

Ciucci, perhaps now the veil has been torn, speaks about Stonehage’s search too: ‘We are very, very difficult and selective only because of our own culture, and I spoke to one party who, when he reads this will know who he is… We spoke for a very, very long time and couldn’t quite agree on how it would work, but I greatly admire him and that’s it.’

There is no shame, I think, in these admissions. But given the spate of mergers and acquisitions – Lord North Street and SandAire, Ingenious and Thurleigh, Schroders and Cazenove, Quilter and Cheviot – was there at all a feeling that either firm didn’t want to be the final firm standing by themselves, the last girl at the dance, so to speak?

We wait for someone to break the awkward silence.

‘Certainly not,’ Ciucci says. ‘I have global ambitions and this was a great way of scaling it up.’ He says they were ‘opportunistic’ (in a positive sense) and that factors like amity with the Flemings, a shared commitment to a limited number of clients and expected synergies made the merger desirable.

Not that Fleming is under any illusions about how (or whether) mergers work: ‘I think it’s an acute observation that, to be frank, most mergers don’t work and sometimes are born out of desperation. But we are profitable, pay a dividend, we’ve got £20 million in the bank. So I would hate for “desperation” to enter our lexicon… It’s also born out of a history of doing things with partners: you get to know when it’s the right time and the right person.’ He can cite a history of successful Fleming family partnerships, from starting Jardine Fleming in Asia in 1970 with the Keswicks to alliances in Zimbabwe, Botswana and South Africa (where Stonehage are also strong).

This heritage of global expansion will be emulated by SF&P. Indeed, says Fleming, ‘Tomorrow – the world.’ ‘We really think that there is an opportunity in the space that on an international scale hasn’t been done and that’s what we’re busy working on,’ says Ciucci.
There must be something of a race going on, Spear’s suggests, given that other mergers have made a big play of their global ambitions. ‘It hasn’t even started yet,’ says Ciucci, ‘but you need scale. Why everyone becomes unstuck is because they don’t, they’re too scared to invest, too scared to go to America, too scared to go to Asia – but the banks do it, that’s normal for them. In this space people don’t do it because they don’t have a banking licence, the margins are wafer thin, it requires a lot of investment.’

But with Stonehage already in Switzerland, Jersey, Israel, South Africa and America, and FF&P in Liechtenstein and Guernsey, a fair global network exists already and will only grow, they say. Asia is a natural extension: ‘I don’t think we’d be able to resist the temptation of going to Hong Kong,’ says Ciucci. So they want to be the first global multi-family office? He vigorously agrees. The race is on.