Alec Hogg Interviews Ian Kilbride on BizNews. “First Appleton now Warwick”
I’m with Ian Kilbride, the man who started Warwick. Ian, you’re from the UK – how did you get to South Africa?
I was working, Alec, in 1990 in Manchester for a stockbroker called Henry Cooke Lumsden. I became slightly obsessed with elephants. I thought they were going to become extinct. I took seven months off, joined a bunch of guys from London on a 30-year-old Bedford army truck. We left in January 1990, and 22 countries later, in July 1990 – I arrived in Cape Town.
You’ve never gone back?
Well I go back because I’ve got to go and watch Everton every now and again, but I stayed. I did the usual thing, which was I fell in love with a South African girl and decided to stay and get married. We have two fantastic boys. It didn’t work out in the end and I’m now since remarried and I’ve got two great step-children as well, so there’s four of them. They’re all great friends. They all call each other brother and sister, so we have a lovely family life. I got a job originally working for a small asset management company because I needed to make some money, and a year or so later, realized I could do it better myself and so I went on my own.
That’s about the time we met, when you had a company called Appleton, which old timers will remember used to sponsor the very first business radio show in South Africa, at SAFM.
I used to live in Hout Bay, and I was driving home from the offices of Warwick, which used to be the Appleton offices. I kept hearing every evening this radio show and different sponsors and often no sponsor. I remember phoning them up and saying, “How much does it cost to sponsor a show?” They told me and then I said, “Well how much would it cost to sponsor the week and how much would it cost to sponsor for the year?” They said, “We’d better send somebody out.” They did and we did a deal and we sponsored it from that day onwards.
It’s been interesting, the Appleton story. You developed and you grew the business, then listed it on the stock market. Looking back – that didn’t have a really, good ending but take us through the story there and perhaps some of the lessons that you learnt?
We started in January 1992 from a flat in Camps Bay and grew quite quickly around the country. We were offering private client asset management and it was relatively new. I think we were probably one of only two or three people doing it. A lot of people were tied up at stockbrokers and therefore it was a very easy market for us to get. We ended up with offices in Johannesburg, Durban, Port Elizabeth, and Cape Town. By 1998, we were looking to list the company. There was the market correction in 1998 which stalled that listing. That forced us into looking for an alternative partner to join us in a listing. I think I made a mistake in the choice of partners that we went with. We then did list in early 1999. My dream was that I wanted to take it internationally and I’d found a company in London that we bought 40 percent of, a listed company called Ambient. The idea was that we would sell them our offshore business and that would give us about 80 percent of the listed vehicle. We would then reverse our listed South African vehicle into that and we’d end up with an offshore London listed company. I’d been given commitment by Lehman Brothers, the CEO, he was going to back us to go out across the UK to buy up small asset management and private client companies. But the board in South Africa didn’t really want to do that. We had an altercation and I walked away and, in the end, that was the end of that. It took us a while to come to an agreement, as to what exactly or whether they should buy me out but in the end, they did buy me out.
There are a few parallels with my own story – also listed in 1999, also a disagreement with the board, also left. What did you do though – it was your baby, and you’d invested a lot of your time and energy into it? Did you go off to a cave and lick your wounds?
I think initially, you’re quite angry because you can’t understand why they don’t share your vision or why they’re trying to pick holes in you. At the same time you’re also going well, I’ve got to pick myself up and I’ve got to get on with it. There’s the old adage of, it’s not the fact that you get knocked down – it’s how quickly you get back up. I had a lot of good people around me, who helped me get back up and then it was like well, what am I going to do? I did the usual thing is that when I got paid out I thought I was a genius. Well look at this and look what I’ve done. Then you realize actually that I was really only given one talent and that was actually to build wealth management companies, so the management who had retained Appleton had not done particularly well. The thing basically, ended up in the hands of PSG about 18 months later, so several of those guys also contacted me, and they said, “Do you want to start again?” I said. “Well, yeah, it looks about the right time”, so in 2002 we started Warwick. It was a big learning curve because you also realize that people that you thought you could rely on, people you thought were your friends, were actually just people who were seeing you as an opportunity.
The big lessons from the breakup that you had with the company, given that you’d taken a company together to another partner, and then you were the one who ended up leaving.
I think the biggest lesson is choose very carefully, who you choose to go into business with. Choose very carefully, who you invite onto your board. Choose very carefully, those who you are sharing your dreams and aspirations with because suddenly it becomes theirs, and they think they can do it without you. Going into Warwick, the second time around, I’d learnt all of that and also realized that we couldn’t do what we’d just done at Appleton. Appleton was born out of cold calling. It was born out of a different type of sales environment that was not going to exist in the future, so we had to find a unique way of building the company. That’s when I stumbled across the idea of, what we call today, the Lifestyle Network. We are the largest sponsor of bowls and croquet, bridge and senior golf in South Africa.
Senior golf, not as in Gary Player but senior golf as in retired guys who play golf. So Warwick got involved, and we sponsor events and we sponsor a lot of bowls clubs, croquet clubs, bridge clubs, and events. From that, people get to know who we are and then they join us and accept our wealth proposition.
Why that market because they do say that wherever you go in business you must look for a niche, and try and dominate it? Why did you go there?
Well because I think that, the type of service we’re trying to offer, always wanted to offer, appeals to the retired market. I mean they are people who have made their money and they are very clear on what they want. They want capital appreciation that outstrips inflation and they want income, so you’ve got to give them both of those things. If you’re dealing with a younger market then there’s a lot more variables going on, and it’s a lot easier for us to go ‘let’s tailor a product that suits that market space’ and it’s the right space and it is the people that have the money.
We’re sitting here at your offices, which are some of the most spectacular in the country. It’s office accommodation at the Alphen Hotel….it is unusual. A little bit like you, a little bit like what you’ve done. How did you come by this?
It was a funny story, in that our offices were in the Waterfront in Cape Town and we wanted a larger place, and a guy said to me, “There’s this company called Health and Racquet that have a head office on the Alphen Estate, and they want to get out, and they’re going into town. Do you want to go and see it?” I came down in January 1994, and just literally said yes – it’s got to be. It was very different then. It wasn’t as sophisticated and as well organized an estate then, as it is today, but if you just look where we are – it personifies what it is we want to reflect to the client. It is stable. It is secure, and it is very beautiful and it is very service orientated. You can walk across the beautiful lawn outside and go to the deli called La Belle. What we’ve tried to do in each region, where we have an office, as much as we can is try and reflect that feeling. It’s like an old-world, almost an English style of wealth management.
This used to be the Appleton offices as well.
Yes it was, yes.
How did you manage, when you started again, to get the offices back?
I kept the office and the bottom line is that, for a while, I sublet it. Then as Warwick grew, I put them into part of this office and then they grew and grew, and now they’ve pushed everybody else out. So this office here is entirely Warwick and then the offices down the side here, we’ve got the upstairs and the end part of what’s called the great cellar.
How big is Warwick today?
It’s probably about twice the size as Appleton was, at the time I sold out. It’s 125 – 130 people, nationally. We are probably one of the largest companies in South Africa in terms of new monies flowing into us every single month. We have specific targets that we want to meet which would hopefully double that by the end of next year. We have a very simple game plan, between 2016 and 2020, which is called Vision 2020. The idea of that is to keep growing and keep doing what we’re doing – do it better but not try and be all things to all people. How big is it? It’s as big as it needs to be but not as big as it can be.
Is the idea you had being worked out now? You wanted to globalize, you wanted to go international…
No, I think also, you probably felt it yourself with your own original plan. Every plan has a time, and it had its time. It was a perfect time to do that but that time has moved on. I know that. I have to accept that. That moment was missed. That fabulous opportunity was missed, so what I’m looking to do here is to grow a very, very strong South African company, which has got an ever stronger, international presence. We operate out of Guernsey and, also Mauritius. We’re looking at Dublin. One day we may go onto the mainland of the UK but I mean it’s a very different world today, and a lot of the ideas that I had then have since been done by other companies. In fact, I’m meeting one in about an hour’s time, who are basically a reflection of what we should have been and what we could have been but no, I think you have to adapt. You have to basically reconcile yourself to that plan was for then. I need a new plan for tomorrow.
How old are you now, Ian?
I feel very old actually, but I’m 53. I turn 54 in July next year.
How long have you got still? Are you a Warren Buffett – are you going to be at it for the next 30 years? He’s in his mid-80’s.
There is sometimes when you think that I could do another ten, 15, or 20 years and there’s other times, when I wake up in the morning and I’m not sure I’m going to get through the week – I’m only joking. I’ve got a wonderful wife, who looks after me and, at the moment she’s got me on a cleanse, which means that she’s caring for me and making sure that I’m fit for purpose. I don’t know Alec, really.
Are you tap dancing every day? Are you enjoying getting up in the morning?
Oh, yes. I’ve got two sons, one is 18 and one is 14, and I would love one of those two to come into the business but I’m a realist. An 18-year-old – when could he possibly take over a business like this? Not for another what, 15 years or more? Am I up for that? I think I am actually. I keep myself relatively fit. I look after myself, I think and I’m hoping that the next five years will be better than the previous five years, and the five years after that will be even better than that.
Are you on purpose? Do you feel that you’re on your life’s mission?
I do actually, right now. I had a meeting earlier today, where I was explaining who we are and what we do and as I was actually saying it. I was thinking crikey, we’ve actually achieved that and we’ve done that, and it really does make a lot of sense about what we’re doing. It can never be perfect but I think as a person, I’m doing the thing that suits me the most. We would all like to have done something maybe more exotic, and I would definitely like to have scored a hat-trick for Everton or played rugby for England- and they need people right now – but those weren’t to be. I would have loved to have driven a racing car for a living or whatever, but those things weren’t to be. I’m from a very ordinary, a very working-class background in Warrington, which when I was born there it was in Lancashire. It is now in Cheshire because they’ve moved the border.
When you say working-class what is that?
Well, my dad played rugby league when I was a little boy. My dad was a bricklayer. My granddad was a bus driver. I’ve always gone to state schools. I’ve worked hard to get through school but I’ve had that encouragement from the family. My dad bettered himself through night school, and therefore kind of challenged me to better myself, so I went to the grammar school. I went to the university. I got the LLB honors. As an aside, my school was called Appleton and my university was Warwick. People say to me, “Why Warwick?” I said well, when I grew up I started at Warwick. Where from here? This is my last company. This is what I do. I live it. I do eat, drink, and sleep it. I’m always thinking about how to make it better. I’m always thinking about how to please our clients and, also our intermediaries, and our introducers more.
Basically, we literally operate with such levels of compliance here at Warwick that I think we’re really cutting-edge. We have internal, external compliance. We have committees that review constantly where RDR’s going. What’s coming after RDR? We try and place the company at least two to three years ahead of whatever is coming because we don’t want any shocks. We don’t want the clients to get any shocks. If we can make the client’s life better – it makes me feel better.
So it’s your last company – would you, (A) list again, or (B) consider selling because Warwick is at a size now, where I’m sure some people will be picking up the phone and asking?
I wouldn’t say that we don’t get enquiries. In the last year alone I think there’s maybe three people who’ve knocked on the door, and we’ve been very ‘thank you for the interest but I’m not interested in selling’. I don’t think you should ever say never. In terms of listing – yes, it’s always a possibility. We’ve got a fantastic management team and we’ve got a far more experienced management team than I had at Appleton. I’ve got a bunch of guys who would understand how that concept would work and how we’d work that better. I think one of the things is that I discovered, when running a listed company is the amount of time it takes out of your day, if you are still very, very much involved in the day-to-day activities of the company. As I’ve managed to get myself into a position now as a proper CEO and Chairman is that I know that I would have the time to do that, so I wouldn’t say no. It’s not on the cards. It’s not a plan. It’s not something that we’ve sat down and done any detailed planning about. What we do is just plan on growing the company, year-in/year-out and if something is right, at some point in time, then you have to consider it, don’t you?
You’re a financial services entrepreneur. When you at how welcome Anchor Capital has been made by investors. Similarly, with Sygnia, who were recently listed as well – it’s got to be in the back of your mind, at least that those valuations seem at almost to be bubble like, in certain respects and that’s always, as an owner of a business – that’s always the right time to be selling part of it, when the market rates you highly.
I think if you got very, very high PE ratios, where people are effectively giving you a great deal of money. Where that company can bank a large amount of capital, which have an extremely strong balance sheet, and go out and use that to expand then that makes sense. But it’s not always the right time. I think things are very cyclical, and therefore if you don’t catch this particular train, then you can catch the next one and perhaps you’re even better prepared for that one. I think it would also be interesting to watch, from my perspective. Appleton was pretty much at the forefront of the listings of financial services asset management companies, and maybe we shouldn’t have been. I’d be interested to watch what happens to Anchor, particularly as to where does it go? I’m not too proud to learn lessons from other guys, so if Peter (Armitage) does a good job there and it grows, then maybe that is something that we can look at in the future.
Right now, I think we are very happy doing what we do. We’re a wholly owned family company, independent. We’ve got great relationships with institutions, who have given us great deals that we’re able to pass onto the client. We manage all our own assets. We write all our own client’s wills. We act as our client’s executors and all we offer is investments, the Will, being the executor and a bank account, which fundamentally we act as agents for two major banks.
You are wholly owned. Is it in one’s DNA that a family business is a place that perhaps can offer better value, not only to the owner and to staff but perhaps to clients?
I think there’s some very large family businesses, which are listed. Just ask the Ackermans (Pick n Pay). The fact that you’re listed doesn’t stop it being a family controlled company. If the DNA of the business is the family, then the investors want that family to stick around. I think there are a number of different reasons why you might want to list. It might be that you need to or you want to raise capital, in terms of acquisitions. It might be that at some point in the future, it looks as though your sons or your family aren’t going to join in the business, so what’s your exit route? Is your exit route to basically then incentivize the management team?
But just keep an open mind, either way.
Ian, when we have a look at the challenges that are faced, by financial services businesses like yours. You mentioned RDR a moment ago. Are you finding that there are others in the field, who perhaps want to get closer to you, acquisition opportunities, or merger opportunities, partnerships as a result of this change in regulation?
I said earlier that we’ve got this lifestyle network. That’s half of what we do. The other half of what we do is what we called the professional network, and the professional network is fundamentally IFAs who are introducing business to us on a daily basis, or IFAs that are choosing to get out of the industry. If they’re choosing to get out of the industry, then we have a proposition that we put to them – we think it’s the best in the country, the Warwick Merger Proposition. Where, fundamentally, we’d go in and we’d take over their investment clients. That is also been driven, to some extent, by RDR and that will be drive, no doubt also by the products examinations that will follow RDR. I think RDR changed the landscape in the UK and it’s going to change the landscape in Australia, and it is going to change the landscape here.
I think a lot of people are already aware of what they think it’s going to do, and they’re prepared for it. It is going to change the world of the individual financial advisor forever. We’re hoping to offer solutions to them, which brings them towards the Warwick, so we’re doing that every, single day. In every region that we operation in, we have a Professional Network manager and a Lifestyle Network manager and their objective is to grow both the networks, and they report in to a regional manager, who reports obviously in to the respective MD, so keep growing those networks, means that we keep growing a source of business into ourselves. But we’re, basically offering a solution to the IFA, to say we can be your investment offering.
How many of those deals have you done in the last year?
We’ve done about 50 mergers, all in all, of IFAs coming into the company. Of the mergers in the last year, we’ve done eight or nine, something like that. We’d probably want to do 15 to 20 next year, given the resources that we’ve put towards it and that’s more than a company of our size could actually wish for. If we obtain that, we’re growing at exactly the rate, or quicker than the rate that we’re used to.
Clearly, it’s a people business. What do you look for in your future partners? Indeed, what do you look for when you hire people?
It’s a totally different world than it was 15 years ago. We only take in CFP qualified or equivalent, within our CAT-1, which is called Warwick Private Clients. We’re only looking to hire CFAs into our CAT-2, which is Warwick Funds and Warwick Investments.
So get your qualifications first, before you even get in the door.
I think in the old days it was a case of hiring anybody and training them up. Now it’s a case of trying to find people who have already got a qualification and then finding a way of fitting them into the team. I see that in about two to three years from now, nobody is going to want anybody to talk to them about financial services unless they’ve got some kind of badge. Whether that badge is CFP, or something equivalent to that, they’re not going to want to sit in front of them because they want to talk to someone who’s a professional. They want to know that somebody has got a code of ethics that they’ve got to adhere to. They’re rather like, in the same way as a CFA, a CFP must ensure that to protect their own professional integrity, before even that of the company that they’re working for. So that allows us to sleep at night because we know that the guys are only giving good advice.
All right, a few short ones – favorite car?
Ever or now?
Let’s have one ever and one now.
Joe Royle – Everton centre forward. Now, I would suppose Ronaldo.
He doesn’t play for Everton though.
No but I wish he did.
Where does this Everton connection come from?
It goes all the way back to the actual founding year of Everton actually. I think it’s my great-great-great grandfather was an Evertonian, and we’ve always been that ever since. I mean, the Kilbrides weren’t very adventurous. What happened was that we were typical bog Irish, from County Donegal. When the potato famine hit in the 1840s the family fled to Liverpool because they were starving and then it took them about 100 years to get to Warrington, which was 30 miles down the road. But Everton is in Liverpool, and you’re either an Everton fan or you’re a Liverpool fan, and my family were Everton fans.
What ringtone do you have on your phone?
I’ve got a Samsung from about 1972 and it just rings.
What’s your favorite share?
Everton actually, I’ve done very well out of those.
Are they listed?
It’s an OTC.
If you were to take a South African stock, is there anything that appeals to you, do you have a favorite?
Well, I don’t want to second-guess the asset management team. Obviously, we’ve got our own models. I personally, I like Naspers.
You’re in good company Cy Jacobs yesterday was telling me it is still very cheap. Your favorite book?
I don’t really have a favorite book. I know that people come up with a title – it might seem a bit strange but, for some reason, one of the reasons I came to South Africa was because of Wilbur Smith, and then I hadn’t read any of his books for years, so I decided last year to actually read every, single one of his books. I’ve spent the last year, and I’ve just finished.
Which of those did you enjoy the most? His first one, ‘When the Lion Feeds’ – remember it was banned in South Africa, for years.
I think if you go back to the very early stuff of the Valentines and the Courtney’s – at the moment I feel as though it is getting written very much by, I think its shadow…
It’s a formula but he’s also writing with someone else. Yeah, I have no particular favorite.
Well, I suppose Apocalypse Now.
And if you were to have one TV series that you really enjoy that you could take with you?
My wife is going to deny it because she’s going to come up with something even more stupid but I like things like – there’s a British TV series at the moment called Lewis, which is set in Oxford. It’s a detective series. I could watch that until the cows come home.
Is there any biography that you’ve read that you felt ‘I’d like to be like him’?
I think what I get from biographies is that there are different aspects of a person that you pick up. I don’t think there’s any one particular person that I would go and say, ‘I want to be them’. I’ve often said to friends and whatever, when we’re talking. I’ve said I don’t really want to be anyone but myself really. I quite like my life. I like everything that’s happened, and I mean everything that’s happened to me. I think I’ve had a really interesting life and I think as Churchill said, “It was a great life but just the once.” I think there’s a lot more to come, so role models – yes, to some extent when you’re young, I suppose it’s your father and watching him aspire to better things. I suppose there comes a point where you’re on your own and you’ve just got to go and do it for yourself.
Last two – your favorite living person, not in your family but outside your family?
My favorite living person, gosh. These are quite tricky questions, aren’t they?
They’re meant to make you think a little deeper.
Yeah, can we come back to that one?
I’d thought you’d say the current Everton manager, but your favorite dead person?
I suppose Nelson Mandela.
Okay, back to living person?
Living person – somebody I know or somebody I’d like to know?
Someone you’d like to know. Mine would be Warren Buffett.
Yeah, I thought it might be, yeah. I think I’d like to know Richard Branson. I don’t think I’d want to be him but I think I’d like to know him. I’d like to have the ability to pick his mind and to hear the stories of how he got to where he is.