Belfast Telegraph

'We had to make the decision to shape up or ship out when it came down to our Belfast operations'

Stephen Felle of stockbrokers Davy Private Clients tells Margaret Canning about Brexit, the firm's growth and why he still gets a buzz from his job

By Margaret Canning

Opening a new office of a stockbroking firm in 2007 might seem like a kamikaze move. But Stephen Felle of Davy Private Clients thinks that if they hadn't taken the plunge to open in Belfast then - unaware of the tumult that was to follow for world markets in the credit crunch - it might never have happened.

Stephen is chief executive of Davy Private Clients UK. The Meath-born father-of-three has led the Belfast office and its growth through four acquisitions and has also overseen the opening of a London office for Davy.

He lives in Dublin with his wife Michelle - the marketing director of Musgrave, which owns a wholesale business as well as retail names like Centra and SuperValu - and their three sons. They have 10-year-old twins, Joshua and Cillian, and Richard, who's six.

Dublin-based Davy Group is the top wealth manager on the island of Ireland with overall assets under management of over €14bn (£12bn) and around 670 staff.

In Northern Ireland, its most recent acquisition was a big-hitter as it acquired the wealth management business of Danske Bank - made up of 1,100 portfolios - for close to £10m. Davy has also bought over PFC, Graham Corry Cheevers and Square Seven Financial Planning in Northern Ireland in recent years, with its four deals making it roughly the third-biggest wealth manager in the province.

"We first started negotiations with Dankse in March or April and reached agreement on a deal in early July," Stephen says. "There were tough elements to it. We're trying to get the best deal for Davy while they naturally wanted the best deal for Danske. But they are very fair people to deal with."

Danske Bank brings around £500m of assets under management into Davy. "It also gives us a partnership with one of the most, if not the most, prominent names in banking in Northern Ireland," says Stephen.

"And we have also entered into exclusivity so that we can become wealth managers for their high net-worth clients."

Following the Danske deal and the transfer of 10 staff, they now have 77 staff and around £1.8bn in assets under management.

That's up from £120m in assets before its acquisition trail began. "We had to make the decision to shape up or ship out and thankfully made the decision to shape up."

By pursuing a career in financial services, Stephen followed in the footsteps of his father, who worked in Bank of Ireland as a bond trader but died at the age of 42.

After a degree in economics at University College Dublin, Stephen worked for NCB Stockbrokers. He then joined Goodbody Stockbrokers, before leaving for rival Davy in 2004. Three years later, in the throes of an economic boom and months before the worst financial crisis the world had experienced since the Great Depression, the Belfast office opened. "In hindsight, it probably looked liked bad timing come 2012 or 2013, but if we hadn't done it then, we possibly would never have done it," he says.

"We opened in 2007 with the same view which went with the global economic outlook and the Celtic Tiger outlook at that time."

Four years later, the world looked very different. "But the tougher and braver decision was to sit it out through the downturn. And in 2013 we had to look at the business we had built up.

"It was small and sub-scale in both the Davy context and the Northern Ireland context and we knew that if we wanted to have a meaningful presence we would have to invest quite significantly.

"We wanted to have £1bn of assets within five years but we have greatly surpassed it, though the decision some time ago could have been to close it."

Earlier this month the Dublin operation announced the launch of a $50m private equity fund for its private investors.

And the attitude to investment among clients - who are high net-worth individuals - tended to differ in Northern Ireland compared to the Republic when it first opened. "Ten years ago we noticed that there was a much higher risk/debt appetite in the Republic of Ireland versus Northern Ireland," says Stephen.

"Ten years on, and a swingeing recession later, we see a similar level of investor conservatism in both north and south."

He says attitudes to wealth on both sides of the border are similar. "The vast majority of our clients are conservative about preserving wealth and making sure it's there for the next generation. They are not flaunting their wealth."

His first task is to get to know a client. "We'll do a full assessment on attitude to risk and people certainly are asking much more probing questions about what can go wrong.

"There is more awareness as to the risks due to the bruises of the FTSE falling by 40% in 2008."

Discussion of risk is timely as he reveals Davy is beginning to regard UK investments as more risky thanks to Brexit and the lack of definite progress in talks between the UK and EU. We speak the day after the Chancellor's first full Autumn Budget, in which Philip Hammond revealed downward revisions for GDP growth.

"Brexit is now emerging as not a friend economically of the UK and even less so for Northern Ireland," says Stephen.

"The border has become a stop issue in relation to moving onto the matters of what the divorce cheque will be. It has become a pawn. I'm somewhat dismayed that there doesn't seem to have been any joined up thinking or cohesive thinking between north and south. Brexit poses its own challenges for the Republic even excluding the border issue, and the absence of local governance here in Northern Ireland means it's the worst possible time for there to be no meaningful channels between Northern Ireland and Dublin.

"In terms of Davy's own business, it hasn't hurt us, but in terms of where our money is invested for clients - many have invested in UK equities and other UK investment instruments like gilts, private equity, and real estate.

"As we head into 2018 we're somewhat more cautious in light of what's happening and we're particularly cautious on the UK. So we'll look away from the UK and instead at the US and European markets at greater speeds than we might have seen.

"An orderly run-up to 2019 is what we had all expected after the initial shock had subsided.

"We thought it would all have been worked out and would have been shocked to think that here we are, 18 months later, with nothing resolved."

Financial services has been in the news for the wrong reasons with the expose of dubious tax arrangements overseas in the Paradise Papers. He says tax planning and working with tax advisers and accountants is part of Davy's work.

"We've seen some celebrity and high profile names being bandied about regarding the off-shore structures that they had used. But in terms of the mainstream, high net-worth clients we might deal with in NI - the entrepreneurs, business owners, retirees, employees - we have a huge level of tax compliance.

"Some of the more opaque structures the Paradise Papers have sensationalised wouldn't be something we'd use in Davy."

And he says he still enjoys stockbroking. "The two elements of the career that really appealed to me 20 years ago still do now.

"Firstly, there's the investment side of it, and the fact that an occurrence today - something as tangential as political vote in Germany or an oil spill in the US - can have an instant effect on people's investments, the values of pension funds and stocks and shares. That excitement had always interested me.

"Then there's the whole people part of it. Our offices in Belfast, London or Dublin have the most brilliant analytical brains who can try to predict what might happen and enjoy communicating it. That's the bit of it I love.

"Now I tend to be more involved in the management, strategic and executive bit but I love the client side - getting out and meeting people, understanding their business and how it is that they became successful or wealthy."

Looking back, he reflects that he had a gradual introduction to stockbroking through his father. "It was easier then. The advice I've been given is to always hire people that are brighter than you. The calibre of person that we see now is much higher than it would have been."

The profession does bring some stress. "If a doctor makes a wrong decision it has serious consequences for a patient and for us there can be financial consequences which mean that a client can't retire at age 60, or can't buy that holiday home or help their children out.

"We really take that responsibility very seriously."

Growth in its London office will be next. "To date that's been organic growth but to gain a meaningful footprint in wealth in London it will have to be by acquisition. Belfast as our UK experiment, if you will," he says.

"And if we buy something in London in 2019, Belfast will remain the operation hub for finance and legal compliance."

Belfast Telegraph

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