High Net Worth Finance Insights

How to stay dynamic & flexible as a business executive

October 06, 2021 Enness
High Net Worth Finance Insights
How to stay dynamic & flexible as a business executive
Show Notes Transcript

Tony Keterman (CEO) and Mark Palmer (CCO) both of Hamilton Court FX discuss the current business climate with the CEO of Enness Global, Islay Robinson. Islay discusses the challenges he has had to overcome, how the property market has changed, where the market is going and how he has been able to strengthen his business model to ensure Enness Global are ready for any future economic shifts.


Enness started up during the global financial crisis in 2007 when the founders saw a problem in the property market and the economy as a whole. Banks stopped lending, property prices collapsed, people lost their jobs. When the pandemic started their first expectation was that all of the banks would withdraw from the market, they’d drop their loan-to-value requirements, they wouldn't lend to niche areas. And the property market would collapse. 

But this time, that didn't happen. Government intervention was one thing. So that propped up the market and the banks didn't feel like they had to stop lending, which is usually a natural reaction of banks. And then all of a sudden, people started buying houses. Everyone expected the property market to be dead, but the Government fired up the marketplace with the Stamp Duty holiday.

Then people started buying for security reasons; they started buying homes with gardens, with space outside the city where their children would feel safe. And now property prices are higher than they ever have been.  So in terms of what changed, lenders started lending more money, and it was phenomenal. And that's happened across Europe. As soon as international travel starts fully happening, we're going to see the Far East buyers come to London, London people going to France and this big movement of people internationally. 


Tony Keterman  

We're joined by Islay Robinson the CEO of Enness, which specialises in high net worth mortgage advice all across Europe. We thought this would be an interesting topic, due to the nature of his business and the environment we're in. Thanks for joining us. So the property market has, I guess, been on a rollercoaster in the last 12 months, given the pandemic, what would you say has changed over the last 12 months in the property market since COVID appeared in our lives?

 


Islay Robinson  

We started our business during the global financial crisis in 2007 when we saw a problem in the property market and the economy as a whole. Banks stopped lending, property prices collapsed, people lost their jobs. When the pandemic started our first expectation was that all of the banks would withdraw from the market, they’d drop their loan-to-value requirements, they wouldn't lend to niche areas. And the property market would collapse. 

But this time, that didn't happen. Government intervention was one thing. So that propped up the market and the banks didn't feel like they had to stop lending. And I don't really understand why - it's usually a natural reaction of banks. And then all of a sudden, people started buying houses. We had thought the property market was going to be dead, we thought we’d have to lay off everyone but the Government fired up the marketplace with the Stamp Duty holiday.

Then people started buying for security reasons; they started buying homes with gardens, with space outside the city where their children would feel safe. And now property prices are higher than they ever have been. We feared the worst, but the complete opposite happened. So in terms of what changed, lenders started lending more money, and it was phenomenal. And that's happened across Europe. And I think as soon as international travel starts happening, we're going to see the Far East buyers come to London, London people going to France and this big movement of people internationally. 

 


Tony Keterman  

It’s interesting for us to understand more about Enness given, obviously, that you're the type of company who deal with high net worth or ultra-high net worth people. And they probably would have had similar fears to you. Thinking, is this really happening? Are we actually going to survive this? What's going to happen to our business? So it would be interesting to hear from you the kind of information being fed to you from the individuals that you deal with; and the sectors that they're in. And did that give you more confidence? And how did you gauge what was happening in the wider economy, given all the different sectors and people you deal with?

 


Islay Robinson  

I think that the first thing that individuals and business owners did, and we did as well, was we thought our cash flow was going to collapse during this process. So we’d need to shore up our cash position, but also our income. So we went to the lenders and I think business owners at the beginning shored up their shops, and made sure that they were as well capitalised as they possibly could be to protect their business. So that was the first thing. 

But then certain industries struggled - so half the hoteliers, half the restaurant owners, retail shops, they had a defensive protectionist movement. Then other industries like online retailers, warehouses, property developers and so on became more aggressive through this period because there was more capital available. So there were winners and losers. And that information came to us quite quickly. As soon as people got over that initial shock, people decided what they were going to do, and there was real confidence in decision making, which I haven't seen in this market for a long time.

 


Mark Palmer  

Have you seen some special situations come into the market? I mean, we look at the London commercial property market, and we're in the middle of an office move at the moment. And it seems that there's almost a disconnect between the reality of a pandemic and the prices people are still trying to cling on to. In the residential market prices seem to be a one-way trend going upwards. But is there a risk that that changes over time?

 


Islay Robinson  

I think there's a one-way trend in residential property to a particular part of the market and that is houses with gardens, that's what people are buying. Or apartments with roof terraces. That's the residential market. Anything which is 20 storeys high or has shared access, that's not desirable now. So there's a two-speed situation in residential property. And I guess the same is correct in commercial. You can't really finance a hotel at the moment. So if you want to buy a hotel, it's in cash. If you want to refinance a hotel, you need to stack lots of security. And you're going to be borrowing at quite a modest loan-to-value. 

So an example is a well-run, profitable hotel chain but they'd invested heavily before the pandemic, which left them in a position where their balance sheet, their profit and loss didn't look as well as it could. So they couldn't borrow any money, even though it was a fantastic business. Whereas if you were buying an office block to turn it into houses, you're able to borrow quite easily. So special situations were really sector specific. 

But I agree with what you say - there is a real enthusiasm for some property types but other property types are struggling.

 


Mark Palmer  

And you mentioned travel and that at the moment domestic buyers are buying domestic properties and how that might change. Are you already starting to see inquiries coming and going from other parts of the world? 

 


Islay Robinson  

Yes, we've seen a huge increase in inquiries for the south of France, for the Balearic Islands and for Dubai as well. So the places, if there was another pandemic, where you would want to be. Dubai fared pretty well through this – they didn't suffer too badly, government reaction to the pandemic was strong, and they got their vaccine rollout quite quickly. So villas in Dubai are performing incredibly well, but the apartments aren't. So that's another example of that two-speed situation. 

France is struggling in some areas but the property type in the south of France, for wealthy people, is somewhere where you could easily stay for six months and be quite safe. So we're seeing interest for that area. The Spanish islands, Ibiza and Majorca, also fared quite well through the pandemic. You could go there and holiday during the pandemic and get back - so demand for those places is lifting up as well. You can't really buy anything at the moment, because the property markets are subdued, but I think as soon as there is the ability to do that, I think there'll be a huge uplift in those marketplaces.

 


Tony Keterman  

Interesting. Going back to your view at the beginning, where you mentioned it was almost like, let's batten down the hatches and let's survive as a business. How did you feel with the benefit of hindsight, looking back over the last 12 months, from that initial panic that you had, to where you are today? 

What do you think went well? What didn't go so well? And how did you keep your staff motivated? And maybe not let them panic? And if they were getting inquiries or speaking to customers, how did they not panic customers about what they could and couldn't do? How did you manage that whole thing, looking back at it now?

 


Islay Robinson  

We were all gripped with fear. Our families were panicking and we were left with a business which holds about three months’ worth of cash flow, which served me fine for about a decade. And then all of a sudden I saw property transactions drop, which means mortgages drop, which means my income dropped. We don't have recurring income. And so I thought, three months isn't going to be enough to get me through this. It was really a blank piece of paper situation. Where should we focus our attention? And where can we drive profitability? Because that's our job. It's allocation of resources. So we felt we had limited resources, and we had to allocate it to the bits which were going to bring in cash, because cash is the blood flow of any business. 

And so we started with a very extreme plan. And it was quite aggressive, because I thought that's how we had to play this having run the business through the financial crisis. We had to think about what happens if we need to make this bit of the business insolvent and wind it down; and can we move the assets to another part? That didn't happen, as I said, because we were lucky, and my industry, and the market responded very, very quickly so we didn’t see transactions fall off. 

And what I was amazed about, we always felt that we needed our staff in the office at 8:30am. And they weren't allowed to go home until 5:30pm. And that's what our business was, even though our customers were WhatsApp’ing us at 7am or in New York, so we were speaking to them after hours. Our staff took to the technology very, very quickly and this evolution in their professionalism they took care of themselves. And they came with us in the business. And that's what helped the business get through this, because everyone really picked up their swords and went at it.

 


Tony Keterman  

Given, obviously, what we know now and where we're at, what's your plan for the year ahead? And how do you build from where you are? And what's your view now? 

 


Islay Robinson  

We've just been inundated with opportunity after this. Our phrase is: never waste a good crisis. Well that's not my phrase, I think it was Warren Buffett, but there's a crisis here and people are changing, and people are moving, and there's opportunity as a result. 

So we've got a lender launching in a couple of weeks’ time where we're going to raise some money and lend into some of our more difficult situations, because there's a shortage of cash in some places but there's also an abundance of cash in other places. So we're going to match that together. We're faced with three or four opportunities to grow the business but, like you, it's how do you allocate those resources and not do one thing, which is going to affect something else. The lending business is quite interesting to us but we've also learned over the years just to stick to our knitting. We’re really good at big mortgages for international and complex and high value positions. 

 


Mark Palmer  

In summary, really more of the same of what you're good at. And then going into the next 12 and 24 months. Does the rebound continue at the pace that we're starting to see now?

 


Islay Robinson  

What a question: who knows? In the financial crisis of 2007 property prices collapsed. And then it took prime central London, for example, three or four years for it to recover. And then it collapsed again. In the property boom, before the financial crisis, that spiralled over four or five, six or seven years that was a prolonged situation. I think there's a momentum in the marketplace, where people are making their life decisions, feeling confident about the government's response and as a result, the economy. Maybe that kind of pent-up reticence for the UK through Brexit, which has been delayed because of the pandemic, starts coming through. 

And that would make you think property prices will continue rising. Lenders are lending, unbelievably, and there’s the return of 95% mortgages. There are more now, today than there has been over the last five years, for example, which means the banks are confident. But the government is still very, very keen to use property as a way of raising taxes. So stamp duty on foreign nationals, CGT changes, inheritance tax is preventing investment into London. That's usually the thing that drives the market. So we think property prices are going to continue rising, but like everything, there are things that could de-rail that quite quickly.

 


Mark Palmer  

You mentioned the B word there and we tried to avoid it, but Brexit. That hasn't been delayed because of COVID, obviously, it's happened and we're moving into this period. But do you think that's going to have a long-term implication?

 


Islay Robinson  

I don't know. During the referendum, the market slowed down considerably and investment into London stopped. That was a real pullback on the market. Then we were expecting the absolute worst, or we were led to believe that might happen, but it didn't happen. Nothing happened. This is just my limited view but then the pandemic came so that Brexit has just been held here. We don't actually know what that means yet. What do you think? 

 


Tony Keterman  

In terms of investment into the UK? It's one of those things - we still don't know what Brexit really means. I don't think we can fully understand where we're at. You know, financial services, for example, has had a raw deal. But is that going to be forever? We just don't know. I think it's virgin territory. I think we prepared for the worst. We set up an operation in Italy, to be fully regulated in Europe. But now there's talk that there will be a potential deal for financial services to passport their services into Europe. So who knows? 

 


Islay Robinson  

So we're doing the same thing - we do a lot of business in Europe - and we were previously able to do that through Jersey, but Jersey and Europe aren't really seeing eye to eye since Brexit. So, we're now setting up a business in France, which I don't want to do. And I've never wanted a business in France. It's expensive and difficult. And Italy is just as difficult but we feel that we have to do that. So again we just don't know what it means for the future.

 


Tony Keterman  

Interesting. Just one last question. Obviously, you mentioned, you're seeing more activity with houses with gardens. That indicates that people looking to buy flats in and around where they work, the demand for that is no longer there. So given businesses are somewhat moving out of the cities, do you expect that these companies will either cease to exist in city centres, or in central London. So if you're a big bank, or you're a private equity fund or a manufacturing business that had people living in London, because it was near the office, you're expecting central areas to become less densely populated, and businesses will start moving their hub. So, in essence, if Hamilton Court FX no longer exists in central London, where would we be? And, as you’ve seen, businesses are moving their headquarters. 

 


Islay Robinson  

From my experience, working from home is really good for me. I can get up in the morning, take my kids to school, knock out 1,000 Zoom calls, and see my kids after school. So it's worked quite well for me. And I think in my role, apart from being around the team, I don't need to be in an office, but that's me personally. But our team in London, they’re straight back to the office, they want to be around the bars and their colleagues and they want the buzz of Mayfair and all of those types of things, the social environment. I think it's great being outside of the UK, outside of London. So I think a lot of people are jumping on this idea that everyone's just going to move out of London. But London's got a special power – it’s one of the top three cities in the world. I think the regional London centres will become more important. What I mean by that is, for example, St. John's Wood High Street. For as long as I've known it there have been a couple of cafes but now you're getting better restaurants, you're getting local gyms, boutique retailers and everything else. I think there's a desire to move but not move as far and still be in London.

 


Mark Palmer  

Well, thank you Islay for spending the time and coming to speak with us.