Listening to the chorus of doom-laden commentators, it may sound like our current economic woes are the worst in human history.
But Paul Manduca, chairman of FTSE 100-listed investment advisory firm St James’s Place (SJP), gives it a ‘six or a seven’ on a scale to ten.
He says of the ill-fated mini budget that led to the defenestration of Liz Truss and Kwasi Kwarteng: ‘I don’t think this has been a very serious crisis.
Cool head: Paul Manduca is chairman of FTSE 100-listed investment advisory firm St James’s Place
It was a big shock, especially in the UK, where inflation and interest rates rose more than the markets expected.
The British pound fell and came close to parity with the dollar, but recovered fairly quickly. The storm was exacerbated by the war in Ukraine and fuel problems.
“Markets are giving signals that we can get through this now. Inflation will come down next year,” he says, adding, however, that volatility will remain.
Manduca, 71, has certainly earned the right to be heard. In the Square Mile, where careers – and memories – are often short, he’s been at the top for nearly five decades, first rising to prominence in the 1980s as a fund manager.
More recently he was chairman of reinsurer Aon UK before becoming chairman of the FTSE 100 group Prudential for eight years until 2020 when he moved to the seat at St James’s Place.
At the Pru, the jury is still out on whether the restructuring of the group to focus on Asia, which began under his tenure, is a masterstroke, or a dismantling of a once great British name.
Manduca also served for six years, from 2005 to 2011, as senior independent director of the supermarket chain Morrisons, where he became close to Sir Ken Morrison, the legendary founder.
Morrisons has been floundering since being sold to US private equity group Clayton, Dubilier & Rice last year in a £7 billion debt-laden deal.
So what does Manduca make of it?
“Morrisons’ share price hadn’t fallen for anything for a long time because retail margins have shrunk,” he says.
While he accepts that the decision to sell was made by the shareholders, he clearly feels remorse.
He cites the close relationships Morrisons had with farms and fisheries and the estate of property stores built up by Sir Ken, “which is now being dismantled” because of the debts incurred in the deal.
Paul Manduca, 71
Family: Married to Ursula, a Harley Street ophthalmologist. Two sons: Mark, 39, a former investment banker, now chief investment officer at GXO Logistics in Connecticut, USA, and Nicholas, 34, a director at Kleinwort Hambros asset manager.
lives: Knightbridge, London
Education: Harrow/Hertford College, Oxford.
Drives: Mercedes GL350.
Favorite book: Dark Towers: Deutsche Bank, Donald Trump and an Epic Trail of Destruction.
Company leader most admires: Steve Jobs.
Who would he invite to dinner? Tsar Nicholas II of Russia, who lost his own and the Romanov Empire (he needed advice).
“Look, I wish the new owners well, but I’m a little sad.”
What would Sir Ken have felt about it? “Oh, I think he would turn in his grave. There’s no doubt about that.’
While the late founder’s disapproval doesn’t make them “bad owners” per se, Manduca wonders if “private equity is the ideal property in the current climate, with a lot of debt to pay off?”
Morrisons lost its place in the Big Four UK supermarkets alongside Asda, Tesco and Sainsbury’s this year when it was skipped by Aldi. German fellow discounter Lidl also expects to catch up with Morrisons soon.
Yesterday’s most recent figures showed sales at Morrisons were almost 5% lower.
“I’m a bit disappointed. It’s sad because at one point it looked like we could challenge the Big Three,” says Manduca.
Ken was our brand. He was one of the great grocers. I always loved what he put in the shops.’
Is he still shopping at Morrisons? ‘I don’t actually, no. There isn’t one that is convenient for me and I used to have a discount card. They wouldn’t let me keep it.’
It’s hard to imagine Manduca pushing a cart full of baked beans. Descended from the Maltese aristocracy, he spent his school days at Harrow, followed by a degree in modern languages at Hertford College, Oxford, but he doesn’t play the grandee.
We meet at Spencer House, a beautiful 18th-century townhouse in central London’s St James’s, though he’s quick to point out that SJP only has a few rooms in the building and is moving to new offices in Paddington in the spring. The head office is located in a modern office in Cirencester.
SJP, which provides £143 billion in investment for 868,000 clients, was co-founded in 1991 by Lord Jacob Rothschild, who has a lease with Spencer House. The company has more than 4,600 independent advisors.
The share price is down about a third this year and assets under management fell in the first half due to reversals in global markets, but new business has been strong with over £9bn of net new investment from clients.
The company was caught in a hodgepodge of bad publicity a few years ago after revelations about lavish rewards, including cruises and gold cufflinks, being scooped up to its partners as incentives to boost sales.
After a review, the rewards and perks were revised and Manduca says the generosity is a thing of the past.
“We don’t do cruises and we don’t give cufflinks anymore,” he says, admitting they “probably took too long.” SJP also drew controversy for using disgraced former fund guru Neil Woodford to manage £3bn worth of assets for its clients.
However, it had banned Woodford from making risky bets with his clients’ money, and dumped him before the collapse in 2019, saying none of his clients have lost.
Indebtedness: Morrisons lost its place in the Big Four UK supermarkets alongside Asda, Tesco and Sainsbury’s this year when it was passed over by Aldi
Manduca argues that the perception that SJP charges high fees is incorrect: ‘The average customer pays about 2.2 percent and you cannot compare our advice with robo advice or platforms, it is completely different.
‘Look at our customer retention, which is about 97 percent.
The average length of a relationship [between a customer and an adviser] is 14 years old.’
One of his biggest concerns is that people need financial advice and don’t always get it. SJP focuses on the well-to-do, with a target audience of those with £50,000 to £5 million to invest – but those with less money often find it difficult to find good advice.
‘It starts with financial education, which we haven’t been very good at in schools.
‘Many well-educated people don’t know what an ISA is. Earn it, save it, invest it. These are the principles we must convey.’
Does Manduca think that the aspiring middle class in the UK, which is part of SJP’s customer base, has been unfairly targeted by Jeremy Hunt’s recent budget?
And is the survival of the middle class threatened by rising inflation, especially for expenses such as school fees?
“There is a huge savings gap,” he says. “I suspect that the real estate market has saved a lot of people, who have downsized.
“If house prices were to fall – unlikely because of the housing shortage – but if they did fall, then you really have a problem.”
On the budget side, he says: ‘We’re in a very tight corner in the UK. We have huge expenditures on public services, especially health care. No one quite understands why there hasn’t been more recovery in the UK in terms of people going back to work.
‘You have to go to the people with money, so the budget was inevitable.’
So far, he says, there are no signs of customers withdrawing or cutting back on their savings, though they are seeking more advice.
Married to Ursula, an ophthalmologist on Harley Street and with two adult sons, Manduca, entering his eighth decade, has a schedule that would be demanding at any age.
He wakes up around 6:30 a.m., quickly grabs a bowl of cereal, and sits down at his desk at SJP around 7:30 a.m. to begin a round of meetings, often followed by a work dinner in the evening.
“I’ve enjoyed working my whole career, but I always want to feel like I’m adding value,” he says.
He tells of an encounter years ago in Chicago with a merchant who said, “You know, every day I get up, look in the mirror and say, ‘Are YOU adding value?’ and says, ‘It’s funny, but I’ve never forgotten that. I think chairmen should sometimes ask themselves: ‘Am I something to add?’
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