Artorius Wealth Management Limited - Pillar III Disclosure

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1 Artorius Wealth Management Limited - Pillar III Disclosure Regulatory capital and risk management Alfred Simmons Investment Management Limited became regulated in August 2015 following a change in legal status process. Artorius Wealth Ltd acquired Alfred Simmons Holdings Limited and therefore Alfred Simmons Investment Management Ltd outright. A Change in Controller approval was provided by the FCA and became effective on 7 th April 2017 whereupon Alfred Simmons Investment Management Limited was renamed Artorius Wealth Management Limited (FRN ). Regulatory capital likewise transferred between the legal entities, and as such the ICAAP transferred also. Artorius Wealth Management Limited ( AWM ) is a BIPRU Limited Licence firm with a Consolidation waiver, the direction is effective from 28/07/2017 and is valid until 31/12/2022. AWM may control and manage but cannot hold client money. AWM is classified as a flexible portfolio firm (a lower risk firm) in that it will be supervised through a combination of market based thematic work and programmes of communication, engagement and education. AWM is authorised and regulated by the Financial Conduct Authority. AWM has two Appointed Representative firms, Artorius Wealth London Limited and Artorius Wealth Manchester Limited (the ARs ). The management team is the same for all 3 firms and, so they are run with a unified strategy. AWM provides wealth planning and advisory services, together with a discretionary management service, to HNW and Ultra High Net Worth client s. Typically, our clients have more than 3m investable assets. Our clients tend to be of first generation wealth, selfgenerated through entrepreneurial business ownership or through working as senior financial professionals. AWM is privately funded by HNW investors. It is committed to growing a business with a long-term focus that will provide succession based planning advice and support to wealthy families (with investors in the business in many cases also being clients). No single investor owns over 10% of the business.

2 Consolidation Waiver This ICAAP has been updated in accordance with GENPRU which gives firms with a consolidation waiver an exemption from preparing the ICAAP on a consolidation basis as required by BIPRU 8.2.1R, 8.2.2R, 8.3.1R and 8.3.2R which deals with the consolidation requirements for UK Groups. This ICAAP therefore only applies to Artorius Wealth Management Limited AWM holds an adequate level of capital to comfortably cover the base minimum requirement of 50k we have assessed the firm to ensure it could be wound down in an orderly fashion (which would in the main be within a 3-month period). Notably, in a wind down scenario all our custodians have the capacity, if required, to take on client advice relationships. The Fixed Overhead Requirement exceeds the projected Wind Down budget. We have also carried out some stress tests to provide assurances that the firm could continue to meet its capital requirements in adverse market conditions. AWM s liquidity is adequate for its size and for the complexity of its business. The AWM balance sheet shows net assets of 925,000 and current financial resources of 773,621. The senior management team estimates the AWM s capital adequacy requirement, based on three months contracted fixed costs, to be 524,254. Senior management also consider it prudent that a buffer of capital of at least 20% headroom will be maintained in excess of the capital requirement. AWM will maintain an early warning system such that any reduction of the firm s capital to below the 20% buffer will be identified (whilst remaining above the capital adequacy requirement of three months fixed costs), this will present the senior management team with ample opportunity to ensure that the firms liquidity always remains within the bounds of prudence and of the regulatory requirements within which they operate. With a consolidation waiver in place and assuming AWM is operating under normal trading conditions and based on cautious estimates of turnover and costs, the senior management team confirms that AWM has capital in excess of its capital adequacy requirement. Were AWM to undertake any acquisitions of books of business, the senior management team would consider further fund raising to strengthen the capital base of the firm if necessary, as appropriate to the circumstances of the time.

3 A summary of the findings of the ICAAP analysis Pillar 1 We have assessed our variable capital requirement to be in excess of our base capital requirement and are therefore using this to determine our regulatory capital requirement for AWM. We have identified 13 weeks worth of fixed overheads totalling 524,254. This includes all costs which would be required for the businesses to continue to operate. Under GENPRU R the Fixed Overhead Requirement disclosure is a proxy for the Pillar 1 Operational/Market and business risk calculation. As per MIPRU 3.2 a capital requirement of 17,000 is allowed for in respect of our PII excess within the capital requirement. Pillar 2 The Pillar 2 requirements are discussed by the Risk and Governance committee which meets quarterly and assesses and evaluates the actual and perceived risks to the business. All risks are recorded on the Risk Matrix Register. AWM is fundamentally risk averse and does not look to take on risks which could threaten its business, it is recognised that the fact that many clients will be ultra-high net worth does bring with it some significant risks. The Risk and Governance Committee has been set up to proactively identify any potential risks to the business and to ensure they are effectively monitored by management, mitigation or removal. Risk management framework AWM has prepared detailed procedures to cover the governance and regulatory aspects of its business. These include: A comprehensive governance structure designed to accommodate a rapidly expanding business A compliance manual summarising the regulatory processes and procedures A compliance monitoring programme which has been designed around risks considered to be relevant to the firm. This is updated on an on-going basis through a process taking input from the Risk and Governance committee. The compliance monitoring programme also highlights the processes in place which are designed to mitigate identified risks. A Risk and Governance Committee chaired by the COO which meets quarterly and whose remit is to assess and analyse all risks to the group and ensure remedial

4 measures are put in place where required. The risks facing the firm are identified and considered both from the perspective of the likelihood of them occurring and from the perspective of their potential impact on the firm should they occur. This high-level risk register plan is reviewed at least quarterly but more frequently if needed. Investment in IT infrastructure to provide disaster recovery, efficient operations and high-quality investment research and monitoring, client risk profiling and a client database. A Client Experience Committee Group, chaired by the CEO whose remit is to review the advice policy of the business and outcomes of the policy for clients ensuring the clients interests are considered always with emphasis placed on treating the customers fairly. The mechanisms in place provide a decision-making forum where representatives of the firm can discuss advice propositions and technical points which may affect sales and operations with the aim of ensuring that clients receive the most appropriate advice and experience. An Investment Committee, chaired by the CEO whose remit is to review and assess new market developments / trends that may affect our investment strategy. The committee also ensures that our current house view and investment strategies remain fit for purpose identifying any changes which may be needed. An additional important role of the committee is to accurately measure the performance of client portfolios ensuring they remain within their risk tolerances. A Remuneration Committee chaired by the CEO whose remit is to review, assess and approve remuneration structures and any incentive schemes having due regard to best practice and relevant legal and regulatory requirements. The group employs a Group Compliance Officer and a Finance Team, providing required inhouse risk management on a daily basis. Business planning The firm has a comprehensive business plan which focuses on the delivery of quality services to our clients by means of advisory and discretionary services. The plan also covers the firm s revenue and cost budgets associated with developing its position in the marketplace. The business plan is reviewed annually by the senior management team, whilst the costs and revenues associated with developing the firm s position in the marketplace will be reviewed monthly as part of the firm s financial reporting process. The implications of the firm s business plan and the consequences of any review are fed into the firm s ICAAP process.

5 Capital management AWM is deemed to be a BIPRU firm, however based on the requirement for three months fixed overheads; the firm s capital requirement will be significantly in excess of the minimum requirement of 50k. The Finance Team prepares monthly management accounts, including a Balance Sheet, Profit & Loss Account and Cash Flow Statement, plus confirmation of adequate regulatory capital. The capital requirement is currently met using cash reserves. The Senior management monitors the capital positions on a monthly basis. Monthly management accounts are drawn up by the Finance Team and approved by the senior management team. Liquidity management The firm s liquidity tolerance The Firm has a conservative approach to liquidity management, holding cash to the equivalent of at least three months fixed costs with a 20% buffer, as measured under ICAAP, in immediate access bank accounts. Management of liquidity tolerance The firm produces a profit and loss account, cash flow and balance sheet on a monthly basis, which is signed off by the senior manager responsible. The firm re-calculates on a monthly basis its three-month fixed cost cash flow requirement, and the firm s three-month capital requirement is noted on the firm s monthly management accounts balance sheet. Liquidity sign off The senior management team discuss and sign off the firm s management accounts on a monthly basis. Material risks Risk Management Process The firm has a formal process for the consideration and identification of risk which is considered by the firm s Compliance. The firm s risk management process consists of the following steps.

6 a) Compliance monitor the risks faced by the firm on an ongoing basis and will recommend any changes that should be made to the firm s compliance monitoring programme, risk register, systems and controls and other means of managing or mitigating risk. These recommendations are made to the Risk & Governance committee, which will determine the acceptance or otherwise of these controls and recommendations. b) Annually, the firm will arrange for the compliance monitoring programme to be formally reviewed by an external source. The next review is in August and will be conducted by Threesixty Compliance Services. The firms risk register is reviewed quarterly by the R&G committee. c) Risk management and control is the responsibility of all staff, escalating ultimately to the senior management team. Compliance will be expected to ensure that specific actions which have been agreed to manage and mitigate risk are implemented, under supervision by the senior management team. d) Wherever possible, risk management processes will be embedded into the day to day management of the firm. The firm has identified some of the material risks which will have a significant effect, now and, or in the future on the firm s ability to achieve its business goals and objectives. These risks are listed below however, please read this in conjunction with the risk register. Competition risk AWM operates in a competitive environment and faces the risk of client loss from a failure to respond to market changes. AWM seeks to minimise this risk through its investment in its staff. AWM regularly reviews and benchmarks its remuneration packages in order to retain and recruit high quality staff.