4th April 2016

RC Brown launches ‘incubator’ service for boutique start-ups

Discretionary manager RC Brown has launched a service to help wealth boutiques to get off the ground.

The ‘incubator’ service will offer a temporary or permanent home for investment management start-ups which don’t have the money or infrastructure to get their businesses up and running swiftly.

It is designed to remove the obstacles associated with setting up a business, offering regulatory and compliance back up IT systems and a well-resourced back office.

The charging structure will be tailored to client needs, with the annual cost as a rule of thumb 30 basis points of funds under management. There are also ‘modest’ start-up costs linked to things like company specific branding and reports.

RC Brown is targeting firms with at least £25-30 million in assets under management. It will not take equity stakes in new boutiques, but is prepared to provide short-term financial assistance if needed.

‘We believe this service offers a neat and speedy solution for the growing number of teams who wish to set up their own investment management boutique, but who might not have the necessary infrastructure, regulatory capital or back office resource in the initial stages,’ RC Brown chief executive Alan Beaney (pictured) told Wealth Manager.

The new service is a direct rival to Raymond James, although it will not be extended to advisory firms.

New businesses will be able to maintain a separate identity. Should they choose to leave the agreement, they will not be subject to exit penalties.

‘This service enables start-ups to get up and running more quickly, giving them the freedom to focus on investing, servicing clients and launching products earlier than they could have done had they done absolutely everything on their own,’ Beaney said.

‘It is flexible in that we can tailor the services for the specific needs and time frames of the particular client and when they are ready to go it on their own there are no nasty surprises regarding the costs of doing so.’

The incubator service has been successfully piloted by Coram Asset Management and Alpha Portfolio Management. Coram decided to strike out on its own earlier this month, while Alpha has opted to continue on a more permanent basis with RC Brown.

Beaney said there is a pipeline of interest, but stressed his firm will be very careful about who it takes on.

‘The risk comes from a compliance perspective and it’s our Financial Conduct Authority registration that is on the line,’ Beaney said.

‘We want to see business plans and ethics and make sure they fit in with our standards. If we don’t like how they do business, we will not provide the service.’