Alliance Trust Stocktrade Acquisition and Sexism in the City

Yesterday (15/5/2015), Alliance Trust announced the acquisition of the Stocktrade service from Brewin Dolphin which will be integrated into the Alliance Trust Savings (ATS) subsidiary. The acquisition will cost ATS £14 million, and that cost plus an additional £8m of regulatory capital will be funded by the parent company with an injection of equity. This move will anger many shareholders of Alliance Trust who have expressed concerns about the expansion plans for the Alliance Trust subsidiaries, the capital required and the risks that imposes on shareholders. They allege it is rapidly turning an investment trust into a financial services business, and is being driven by the ambitions of CEO Katherine Garrett-Cox. These issues have been one of the points raised by the Alliance Trust Shareholder Action Group – see http://www.sharesoc.org/alliance.html supported by ShareSoc.

Stocktrade customers also have concerns about this deal. The Stocktrade subsidiary of Brewin Dolphin provides an execution only service whereas it has been clear for some time that the parent company wished to concentrate on discretionary, or at least advisory, stockbroking services which they find more profitable. However, Stocktrade are one of the few brokers who provide the very valuable capability of Personal Crest membership and some clients have expressed concern that ATS will force them onto the ATS platform and hence that capability will be lost. Personal Crest membership ensures you appear on the register of a company and have full rights therefore as a shareholder as opposed to the risks associated with Nominee Accounts (see the ShareSoc Shareholder Rights Campaign for more background: http://www.sharesoc.org/shareholder-rights.html ). The only comment so far from an Alliance Trust spokesperson was that “as with many aspects of this transaction, a number of the details have to be determined“. Stocktrade customers might also have concerns about a new charging structure being imposed as happens whenever stockbrokers take over clients – but it would appear some will be winners and some will be losers, depending on the size of their portfolios, how frequently they trade and the composition of their holdings – the devil is in the detail as usual. Clients need to look carefully at this, but neither Stocktrade or Alliance were necessarily the cheapest available stockbroking services on the market so it might prompt clients to examine afresh who they do business with unless ATS is responsive to their concerns.

The additional clients acquired from Stocktrade will, according to the Alliance Trust announcement, enable them to transform ATS into “meaningful profit in 2016” from what has historically been a loss making business, although they have failed to say what the profits are of the acquired Stocktrade business.

Coincidentally Katherine Garrett-Cox has just won the Veuve-Clicquot award for “Businesswoman of the Year” despite her involvement in the controversy over the future of Alliance Trust and the battle over the requisition to appoint new directors from Elliott Advisors.  There was also strong opposition to the pay of herself and the Chairman at Alliance Trust (£1.3 million and £120k last year). Mrs Garrett-Cox has suggested in a BBC Radio interview that the focus on her pay is because she is a woman and said “when you consider the numbers themselves they probably pale into insignificance compared with many of my male counterparts“. Many shareholders would not agree with that comment. Tim Ingram, a former director of Alliance, said “Ridiculous…. It is certainly not a gender issue at all. The problem is the company is low-achieving but it is awarding high-achieving pay“.

This is what ShareSoc Director Caroline Evans had to say on this subject:  “Gender and all other aspects of diversity are important issues that the business community certainly should be seeking to address. But the debate and media attention around executive remuneration is simply about value for money – or not.

Author’s comments: this writer totally agrees with Tim Ingram. If Katherine Garrett-Cox thinks that the complaints of shareholders arise from her sex then they are very much mistaken. They are more about the strategy of the company and the investment performance. Shareholders rarely complain about pay when a company is performing well and are listening to what their shareholders are saying. In this case, remuneration is just another issue that shareholders are unhappy about and quite rightly.

Roger Lawson

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