Charlotte Ransom’s firm aims to disrupt the wealth management industry by offering lower fees and a more digital service to customers with nest eggs.
Charlotte Ransom retired when she was 46. But the former head of private banking for Europe, the Middle East, Africa and Asia at Goldman Sachs was not ready to “lie on a beach” when she stepped away as a partner at the Wall Street giant in 2012.
She got a part-time role as adviser to an online food retailer, but it was not for her. “We were sitting around the table talking about how to pack the vans for maximum efficiency — a fascinating hour in which I offered zero help,” Ransom, 60, recalled.
So in 2015, she set up investment manager Netwealth, which played more to her background in private banking. It manages money and offers financial advice to customers typically in their fifties with at least £50,000 to invest. They are not quite the super-rich clientele she advised at Goldman; they are more likely to be the “sandwich generation” with young adult children and elderly parents.
Ten years on, Ransom has just moved Netwealth’s 51 staff into a new office off Tottenham Court Road in central London. She reckons the business will break even in 2027 but has faced challenges in meeting her initial goal to have £5 billion under management in 2025.
Instead, the figure is only £1 billion. So what are Ransom’s plans to get more money through the door?
The business is being set up at time when customers are less likely to want advice from men in “3-piece suits” in “wood-panelled rooms” but want more of a digital service, with the human interaction they receive in meetings with Netwealth’s staff.
Her backers, who have pumped in £56 million, are some of the biggest names in the City. They include Sir Harvey McGrath, the former chair of Prudential; Lord (Stuart) Rose, the former Marks & Spencer chairman; and Lord (Michael) Spencer, a former Conservative Party treasurer. The business is chaired by the ex-Jupiter fund manager Edward Bonham-Carter. Chief economist is Gerard Lyons, the Brexiteer who advised Boris Johnson when he was mayor of London.
The aim is to be different to behemoths such as St James’s Place by offering lower fees. Ransom said clients saved at least 1 per cent compared with rivals.
“This is the elephant in the room,” she said. “It’s the law of small numbers because 1 per cent doesn’t sound terribly high” but it compounds over ten years.
The savings are achieved by digitising processes in the “middle office” — where transactions for customers are processed — rather than denying individuals face-to-face meetings.
The fees are charged on a sliding scale and the percentage a client pays will fall the more money they have under management. There is also “network service”, whereby a client can add up to nine family members or friends to the service to drive down the fees; each person still has their money managed separately.
Customers get to pick between “risk levels” of one to seven where one is in “cash” paying a rate of interest, up to risk level seven where about 90 per cent of the funds are invested in global shares and returning 8.6 per cent a year since creation.
Netwealth operates in an environment where “advice” — recommendations on how to invest — is regulated by the Financial Conduct Authority, and “guidance”, which is not classified as formal advice, is less regulated and is therefore less expensive.
Its fees depend on how much customers have to invest but for those seeking advice it ranges from about 1.4 per cent to 1 per cent. Fees at rivals typically range from 1.8 per cent to 3 per cent. A client can also add up to nine family members or friends to reduce fees, but their money is managed separately.
While this regulatory system is being reviewed by the Financial Conduct Authority, to try to provide more support for individuals in deciding how to invest their money, Ransom said Netwealth’s business model would not be impeded as it already operated both “advice” and “guidance”.
City minister Emma Reynolds has said that one way to get more people to buy shares would be to make changes to the regulatory regime so that it is easier for people to get more “guidance” on how to invest. The government also started a debate about whether Britons should be putting more cash into the stock market to boost their investment returns rather than just leaving it in cash Isas — individual savings accounts that allow people to save £20,000 a year tax-free.
Ransom is cautious about withdrawing cash Isas altogether: “I would not prevent people from having their Isas in cash.” But, she said, they should be helped to understand that they could move some of the savings into stocks if their circumstances have changed and they can invest more for the longer term. Naturally, such a move would benefit Netwealth.
For now, many of her clients are still grappling with the fallout of October’s budget: the rise in national insurance contributions, if they run small businesses; the new inheritance tax on pension funds passed on after death; and the imposition of VAT on school fees.
“On their minds now is: how do I think about inheritance planning, am I going to be able to educate my kids — or grandkids — through private school? If I’m running a business, how am I going to cope with the national insurance rises?” she said.
It is making customers think about how to manage their cash but, for her part, Ransom said she now had enough investment to see the business through to profitability in 2027. Eventually her backers may seek an exit. She reckoned this would happen through a flotation in London.
“At some stage, we will want to list. I can see no reason why we would list anywhere other than the UK. Our clients are British. We are not looking to expand internationally.”
Retirement, it seems, is still some way off.
Please note, the value of your investments can go down as well as up.
Netwealth offers advice restricted solely to our services. We do not consider the whole of the market, nor offer advice in relation to tax compliance, insurance products, or the transfer of defined benefit pensions.
