Shares are in chaos but top broker reveals… We’re busier than ever

Legendary investor Warren Buffett once remarked: ‘Only when the tide goes out do you discover who’s been swimming naked.’ The so-called Sage of Omaha was referring to investors who get found out when the stock market is tumbling and the economy is crashing.

Richard Wilson, the boss of giant investment broker Interactive Investor, has a different use for the famous phrase. He thinks that now the tide is going out during the coronavirus crisis, it is exposing the true nature of some of Britain’s bosses.

Prime examples of dubious decision-making have come from Tim Martin, the chief executive of pubs chain Wetherspoons, who was forced into an embarrassing U-turn after initially refusing to pay staff when the Government asked pubs to shut.

And Sports Direct boss Mike Ashley had to apologise after lobbying the Government to keep his stores open, triggering a backlash from staff concerned about their safety.

‘It’s like Warren Buffett said about the tide going out,’ Wilson says. ‘You can’t hide from your behaviour at that point. You know who’s wearing a swimming costume. There have been a few test questions that some [bosses] have passed. And some frankly have failed.’

The Scot, who is speaking over the Zoom video conferencing website from his family home in Oxfordshire, adds: ‘A couple of major retail names who would otherwise be regarded as proper folk have cancelled all their supply contracts and said to suppliers, ‘If it’s not shipped it’s your problem.’ In terms of awful behaviour, that’s a moment you can never undo.’

Wilson, who took over in 2017 and usually stays during the week near the company’s headquarters in Manchester, says his own company quickly reassured staff there would be no lay-offs or pay cuts, but admits it is easier because Interactive Investor can withstand the pressure and remains profitable.

The low-cost investment platform allows private individuals to buy shares or funds through trading accounts, Isas and self-invested personal pensions (Sipps). It also publishes a wealth of investing information and tools.

The company is owned by American private equity firm JC Flowers and Wilson says they have been very supportive owners, not least with an ambitious growth plan that is rapidly taking shape.

Wilson is close to completing a deal to buy smaller rival The Share Centre for £62million in a deal valuing Interactive Investor at £675million, having already snapped up TD Direct Investing and Alliance Trust Savings over the past four years.

That has helped grow assets under management from £3.5billion to £36billion (after the Share Centre deal is done) with customer numbers now above 300,000, making it the second largest private investor broker behind FTSE 100- listed Hargreaves Lansdown.

And the coronavirus crisis has created the most work for Wilson’s staff during its history. He says trading volumes are two to three times higher than normal and Interactive Investor is signing up record numbers of new customers. He speculates that people are spotting more opportunities amid the stock market volatility.

He also believes that during the crisis, people are getting round to things they have been putting off, such as sorting out their financial affairs. This is especially true for young adults, who are now starting to think more about financial security as layoffs and furloughing of staff leaves many rent-paying millennials with reduced or no income.

‘I’ve got four children who are all in those circumstances,’ he explains. ‘They’re in different parts of the world, they rent, one has been furloughed, one’s lost their job, one’s concerned about this and that, one’s doing very well,’ he explains.

But they are looking at their arrangements about planning ahead. All of a sudden things you take for granted you can’t take for granted. One of them called me last week to talk about a pension account and he’s 23. When I grew up, those sorts of considerations didn’t cross your mind,’ he says.

‘That culture of taking care of your savings, it’s becoming part of your day-to-day conversation, we never really had in the UK because it was all defined benefit, final salary pensions. That’s all changed, and now I think for this generation coming through, saving for the future is right in front of them as a problem they have to face.’

Born in Edinburgh, Wilson grew up in a small town just outside Stirling and went to comprehensive school. He went to Heriot-Watt University before taking ‘the first job going’ at Lloyds Bank.

He then made the trip down to London to join Societe Generale, were he stayed for 13 years and worked between London, New York and Paris. 

Wilson then became chief technology officer of Fimat, a derivatives broker that was a subsidiary of SocGen, which merged with another firm in 2008 to form Newedge, where he became chief executive until 2014. 

He then took a completely different path and went into clinical trials, helped with the turnaround at Co-op Bank for a year, and even launched a project replacing a slum in Mumbai.

While Interactive Investor is coping well with the crisis so far, Wilson predicts some of the start-up challengers such as Nutmeg will struggle. And that’s putting it mildly.

‘They’re busted,’ he says. ‘The problem that most of these guys have is they appeal to a younger, new audience who don’t have any money. They tend to attract headline figures that are quite high in terms of nominal customer numbers, but in terms of the sustainable business that has traction, it’s a very long haul for them to become viable.’

He predicts more will shut down in the coming months. ‘The disruptors usually have the effect of disrupting. It doesn’t mean they survive the process,’ he says.

Wilson says a stock market float for Interactive Investor is a possibility, but not for another year at least. I wonder whether a large bank might come along and snap up the firm before that.

‘Scale players who believe the UK marketplace is a good place to be will look at these sorts of businesses and say, ‘I want one of those’,’ he says.

‘There is a lot of [profit] margin to go after and a hungry consumer that’s not well served and is overcharged so it’s a great place to invest and our sort of business is a great vehicle to do that.’

That sounds like a come-and-get-me plea if ever I heard one.