WHEN Anderson Strathern announced the hire of former Aberdeen Asset Management distribution head John Brett last year it was making a statement of intent about its wealth management arm. With Mr Brett as chief executive, the £1.7 million-turnover business could be transformed from an add-on service for the firm’s legal clients into a standalone entity capable of both introducing clients to and servicing clients of its law-firm owner.

Almost five months on and Anderson Strathern Asset Management (ASAM) has begun growing its expertise with the addition of a senior private wealth manager from Close Brothers Asset Management. More hires are expected, with Mr Brett looking to replicate the best practices of the largest asset managers in the business.

This, he said, is an obvious win for a law firm.

“The way that wealth management sits with a law firm is pretty much ideal, particularly if you have a large private client practice,” he said. “Wealth management to me rounds off the full suite of professional services you can offer. I hate the phrase one-stop-shop but in many ways this is a professional services one-stop-shop.”

Although ASAM offers discretionary fund management as well as financial planning advice, some firms, such as Shepherd and Wedderburn, have chosen to only offer the latter.

This, said Malcolm Rust, who heads the private client team at Shepherd and Wedderburn and is also a director of Shepherd and Wedderburn Financial, is because developing a fully fledged asset management business requires a significant investment of capital.

“We were fully regulated by the Financial Services Authority [now Financial Conduct Authority] for a number of years and in the mid-1990s we were running money in-house,” Mr Rust said.

“I had some reservations about that position because I don’t know if law firms are best placed to be fund management houses without throwing significant amounts of money at it.

“The chance is there to get something wrong as compared to the big fund houses, which have huge resources available to them - a law firm would struggle to match the level of diligence that is required.”

For Turcan Connell Asset Management (TCAM), the investment arm of the Edinburgh private client firm, the need to invest in further growth became particularly apparent when assets under management hit £1 billion, with the business spinning out on its own in late 2015.

Turcan Connell chairman Simon Mackintosh said that TCAM was set up as a separate company “for various reasons”, one of which was to receive investment from outside sources, something law firms are prohibited from doing.

A similar situation was faced by Thorntons Investments, the £2.4m asset management arm of Dundee-based Thorntons Solicitors, which was spun out by chief executive Stephen Webster in 2014.

“Thorntons Investments started in 1995, but there had been a huge amount of regulatory change from 1986 [when financial markets were deregulated] onwards,” Mr Webster said. “With the increasing amount of regulation the legal industry then came up against in financial services they had to get to a point where there’s scale and that means that you need to reinvest profits from business activities.

“That’s at odds with the partnership model of a law firm, where they strip out as much of the profitability as they can to pay themselves.

“My stipulation was that if existing equity partners wanted to be shareholders in the business that was fine but they had to do it on their own. We have 19 shareholders - I’m one and the rest are individual lawyers in the law firm.”

It is not a model that all firms will follow, however, with Mr Brett noting that while his vision is to grow ASAM’s £250m in assets under management he has “no desire to spin out of the law firm”.

“We would be giving up one of our great strengths, which is the brand and reputation of Anderson Strathern,” he said. “It’s a tough world in asset management right now and being able to provide the other [legal] advice is a wise thing.”