Beverly Chandler interviews Alan and Gina Miller, who, when it comes to challenging the institutions that formed them, have fearless form, both jointly and separately…
Alan and Gina Miller founded SCM in 2009 under the banner of offering investors fair fees and access to transparent investment solutions. 2012 saw them launch the True and Fair Campaign, calling for 100 per cent transparency of fees and holdings, and introduction of a Code of Ethics for the UK investment and pension industry, while 2015 saw them take a tilt at charities, with A Hornet’s Nest, a report that reviewed UK charitable spending, and found it wanting. This was followed in 2016 by another damming charity report in 2016, Lifting the Lid, which targeted charity shops.
If all this wasn’t enough to engender a great deal of animosity from the powerful elite who felt under attack, Gina is now, of course, most famous for her recent role as lead claimant in the legal action against the Prime Minister, arguing that individual members of the Cabinet have no legal power via the Royal Prerogative to trigger Article 50 of the Lisbon Treaty to leave the EU without prior authorisation of Parliament and MPs.
As the popular press would have it, Gina effectively blocked Brexit.
Theresa May’s government duly appealed and at the time of writing, the outcome of this remains unclear with a Supreme Court judgement expected in mid to late January.
Poking a stick into these issues has engendered personal attacks and threats to the safety of the Millers and their family. What drives this independently wealthy couple to do any of it?
Alan describes his initial motivation in founding SCM as a simple one. “After I retired from New Star in the summer of 2006, and after the meltdown in the markets, I was looking for people to manage our own family wealth. I wanted to find a reputable organisation that offered investment in a low cost, transparent and diversified way and the more I looked, the more I saw there wasn’t any,” he says.
He describes the standard of service for often extremely loyal private clients at the time as providing the worst performance, worst service and the highest fees. “Clients got the short end of the stick,” he says.
The high profile pair have endured a toxic dust of media sparkle which has resulted in them being described as a hedge fund manager (up there with banker as a term of insult in the popular press) and former model (ditto).
Alan launched the first UK long/short equity hedge fund in 1997 which charged the 2 and 20 fees that hedge funds charged at the time, but he managed all sorts of other money along the way, starting off in pension funds, managing parts of the British Telecom and Post Office pension funds, and then managing pension funds, investment trusts and unit trusts at Gartmore, Jupiter and New Star.
The discovery of ETFs gave Alan a chance to ‘see the light’ on fees, transparency and diversification, offering a path to achieving low cost, active investing. The SCM portfolios are 100 per cent invested in ETFs, giving them one of the longest track records in ETF managed portfolios, going back seven years.
The firm does not disclose its assets under management and has no outside shareholders, but its SCM Long Term Return Portfolio has achieved a return of 100.9 per cent since inception in 2009.
“We give investors an efficient, actively managed portfolio offering, in which we invest alongside them. This was something we wanted to put into practice for ourselves and if people wanted to join us, that was even better.”
Gina adds: “Everything I do is driven by my belief in conscious capitalism. It’s all about the principal and ensuring honesty.”
This belief was formalised by the 2012 launch of True and Fair Campaign, which has not made them many friends in the financial services world.
Gina says: “As an industry we should be putting our house in order, but whilst people talk about this, very few put it into action. But because we are independent, we are able to stand up and speak and give investors their basic rights of knowing how much they are truly paying and what they are actually investing in.”
“It’s about principal but also trying to put something back to help others,” Alan says. “We are in a lucky position that we can act on what we believe in. A lot of these industry practices might be deemed fraudulent in other industries; we won’t give up until the consumer is treated with respect by the investment and pension industry.”
The True and Fair Foundation charity report followed on as a natural target for the Millers. “It doesn’t matter what the industry is, there must be more scrutiny in the social contract with individuals,” Gina says. “It’s supposed to be the sector of angels, where people don’t ask questions or delve too deeply? But why shouldn’t you – it’s perfectly legitimate to ask where a generous donor’s money is going?”
November’s publication by the FCA of its Asset Management Market Study interim findings, which was heavily critical of the investment industry, has been welcomed by the couple.
“The FCA report represents everything we have been fighting for,” Alan says. “All these years we have highlighted closet indexing, securities lending, research commissions, conflicts of interest re consultants and advisers, cartel-like behaviour and misleading fund and industry statistics. This FCA report has vindicated our work, and their numbers back our numbers.”
The pair have been targeted by fund management trade bodies and firms, in what Alan describes as an attack of “amateurish shoddy propaganda”.
“But this report has made it all worthwhile and consumers will be better off now that the regulators are addressing these issues,” he says.
It was the same motivation that saw Gina bring her legal action challenging the government’s right to trigger Article 50.
“It was the same reason I do everything,” she says. “Transparency, accountability and scrutiny. We have a process of law and Parliamentary sovereignty and only Parliament can grant rights and only Parliament can take away rights. The government cannot bypass Parliament. This was the elephant in the room that no one else appeared to be prepared to confront.”
Gina expresses herself as very disappointed that the government appealed the case. “The government should not be appealing, but drafting the bill,” she says.
And now, this daughter of the Attorney General in Guyana, which was a British colony until 1966, has the support of Scotland and Wales and a letter of support from Northern Ireland. “My legal team and I are confident that we will win as this case is about the letter of the law,” she says.
This foray into high profile legal action does not come as a surprise to her. “I always thought it would be possible that I would fight for the rule of law,” she says, citing her family life with a lawyer father who fought for social justice all his professional life, and her early upbringing under a British constitution.
But there is no plan to move into politics. “I will never take a role in politics,” she says. “There is still a lot to do in financial services and the charity sector.”
Alan agrees: “We are very pleased that a huge number of the issues we have highlighted in investment management have been properly addressed for the first time. It is the mark of a sea change by the regulator whereby the numerous, shoddy industry practises have been exposed for what they are.”
Gina concludes: “We are of course proud that our children can see that as two individuals, their parents have achieved a huge amount.”