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Welcome to the Guernsey Finance podcast page.
Our podcasts bring you all the latest news and insight from Guernsey, the global finance specialist, as well as audio from some of our online events.
brandon 0:05
Hello and welcome to the We Are Guernsey podcast where we bring you interviews with leaders from the global finance industry, as well as news and developments from Guernsey's financial services sector. My name is Brandon Ashplant and I'm a senior strategy and technical executive here at Guernsey Finance. Guernsey is a leading global finance centre. The success of the industry here is underpinned by economic substance, political stability and asset security and we are committed to the cause of sustainable finance. To find out more about guernseys success in sustainable finance, tune into our sister podcast, the sustainable finance Guernsey Podcast. Today I am delighted to be joined by Alex Scott, Chairman of Schroder's family office service, which incorporates Cazenove Capital, the Wealth Management arm of Schroder's based in Guernsey. A graduate of the University of Oxford with a master's in philosophy, politics and economics. Alex also holds an MBA from IMD business school in Switzerland. Alex is a fourth generation family business owner, and so knows a thing or two about succession planning and how to do it correctly. Over his career, he has held a range of roles within the wealth management industry. He also co founded and chaired the Institute for Family business in the UK. He is now a director of the Global Family Business Network, which boasts a 17,000 strong network of high net worth families and their businesses. So without further ado, welcome to the podcast. Alex.
Alex 1:37
Great to be here. Good to be with you, Brandon.
brandon 1:40
Brilliant. I've done quite a bit of an intro there on you. But could you just tell us a bit about yourself and your career? Yeah,
Alex 1:49
I'll pull out. Obviously, you've covered that pretty pretty clearly. But I'll pull out some characteristics. I mean, I mean, one of the ways I can describe myself is primarily a family business owner. But I've sold to family businesses as well. And I've had an entrepreneurial career in the middle of that. So I'm a kind of odd mix of other family business owner, fourth generation, but also I've undertaken entrepreneurial activities, primarily in the financial services sector, because that's where the original family business came from. And that's where I'm where I remain, although I have a portfolio career now where I'm a trustee or director of various family companies. And indeed, one of the characteristics, as you mentioned, is I've been a successor but now I've been succeeded. So I've been through the process of both ends.
brandon 2:42
Absolutely. So just while doing some sort of extensive desk research and into you and your life, but also into Schroder's and its long history, I was quite amazed to actually learn that the firm is still more than 40% owned by the by the family who founded it more than more than 200 years ago. Now. How does this legacy sort of feed into the work that Schroeder's do today, hey, how does that continue?
Alex 3:08
I first of all, describe it in one word, which is empathy. And if I roll back, it was really important to me as I considered a possible place for business, as we decided that we were going to sell it then Schroder's was a was a standout choice, because of its family ownership. And I think that that shines through in terms of his values in terms of its its long term horizons, in terms of its approach to people. But most important of all, it's it's focused on clients, you get alignment in a family business that you don't necessarily get in a in a publicly quoted company. And I think that you get empathy with the underlying client, because the owners themselves our clients, and so they understand how the process works. And they lived through it, too. So I think this sort of alignment element, in terms of the business being family owned, is is is a strong element. And for me, it shines through and that's why I'm there.
brandon 4:09
And sort of talking to the particular issues of the day, I suppose, you know, when an issue that's come to light in recent years, in the family office spaces, of course, this idea of achieving and then maintaining, if you like, good governance, when you speak to families that are trying to get to grips with their governance issues, what is the first piece of advice you typically give them?
Alex 4:34
I have to go back to my own experience. And what I would say is that the critical piece in terms of government, governance, is the engagement of those who you both trust and they are objectively respected and successful, but I'm not part of the family. Because I think it gets really hard to get objectivity and governance and it gets really hard when it's when maybe two members of the family have different opinions that becomes personalized. If you triangulate with other people there who've been through these things before, who can facilitate the meeting, then I think that you can hope to have a governance process that is both effective and fair. So the first thing I see is, is get to a place where you can trust outsiders and engage them. And you'd be surprised how, first of all, how interested they will be in helping you and how much value they can add?
brandon 5:34
And are there any sort of, I guess, every family office is different? And there's, you know, it's very dependent on where the wealth, I guess, you know, originates from in your case, it was, as you say, financial services. Is there any kind of common disputes that are, I guess, a crux point? Or is it purely down to kind of internal family politics?
Alex 5:55
I think that it's probably normally about decision making, who influences decisions? How would how are decisions made? Who gets a say, and, if you like, the more idiosyncratic and personalize that processes, the more likely there is to be friction. So the best practice will always be to move towards a process that that is transparent, enables people to have a say, and to think they're being heard. But it's also a fair process and the decisive process. And if you engage non family people in that, then it it dissolves any personal history or animosity that might still be there. But I think the behaviors and the decision that can be far better if you've got third party people in the room too.
brandon 6:49
Certainly. And I guess, part of the conversation that is happening now more than ever, but it's kind of, I guess, always been there is this Yeah, this conversation around the importance placed on building a diverse and well represented set of family business employees, whether it be balancing gender, or, you know, maybe ethnicity and so forth. It's good to see that Schroder's recently reported that the company has met its representation targets with 35% of females now holding senior management positions globally. How important do you consider representation in order to get internal good governance into that sort of good place? You know, when when advising families and family offices?
Alex 7:31
Well, I think it's, I think it's really important, it's easy to say that it's difficult to do. And the reason it's difficult to do is again, you need objectively to find people get people in the room around the table who have the right experience and talents to enable you to do that. But also, I think that, as the constituency within the family grows and changes both regenda areas and and, and experiences, lived experiences, then getting as close as you can, and governance to that is the best outcome. It's an objective, and it's not easy to do, as you can see throughout the financial services sector.
brandon 8:07
Certainly, and sort of just sticking with this topic for the moment, Gen Z finance, conducted some research a couple of years ago that assess the role, and representation of women within within family offices, and crucially, how women can be provided with the opportunity to hold senior positions. Unfortunately, you know, the numbers are quite low. And this is applied to family offices operating across the globe. I think our statistics at the time sort of said, There's only 3.5% of family offices employing a female CEO on average, across the board. And then if you extend that across, that's lower than you know, the fortune 500 companies. Some of that research assessed ways to address the gender imbalance, and also what the I suppose the popular and less popular methods are to kind of address this. Do you think quotas should be implemented? Or do you prefer to see sort of more cultural change within the family office at that grassroots sort of bottom up level?
Alex 9:09
Well, that's a pretty depressing statistic that you've thrown out there. And it's clearly not ideal. I don't think quotas will help. But I think things are changing. And I think cultures will change. And I think there's there's a process that's underway that will be that will be that will result in a more diverse leadership. And certainly, within the Schroder family office, we've got a far more diverse team than your statistics would state indeed, that the team has led by two women. So I guess I would say, rather than quotas, I prefer to see cultural change. I think that may come about because of demographic shifts and the fact that inheritors themselves are going to be they're going to be more of them on the US functional family grows. And they're going to be multi gender and multi background again, as they as they marry different people and the whole the whole mix of the family changes. And I hope that that will happen in the family office as well, because the family office doesn't need to reflect and engage with the structure of the family. So work to do that.
brandon 10:22
Certainly. And I guess, sort of a particular area that has sort of piqued the interest of many is this sort of sub issue of good governance, if you like, which is succession planning, and what the common, you know, what the common pitfalls are there? So, you know, from your perspective, what are the common pitfalls here with families? And again, what what advice do you often find yourself giving to family offices, struggling to establish clear and executive lines of succession within within their family from one generation to the next?
Alex 10:51
Yeah, well, again, you use the word family. And that seems to be critical that it's, it's just really hard within the family, when you're within a family system, and you've grown up with people and you've seen behaviors from from nought to 60. People change, and sometimes one's views of them don't. So the critical thing there is to again, try and get some objectivity into your view and understanding of what's within the family. I'd say that if you want people to succeed, because that's the other thing you actually want people to want to succeed. And they need to be intrigued and interested by whatever it is, they might succeed too. So that's a challenge for the senior generation to make sure that they're engaged and interested. And having got this group, or hopefully group and maybe just one person. Again, one needs to assess that talent and capabilities difficult to do if they're members of your own family, it's really hard to be objective about them. So I think one needs to assess those skills. And as one understands more the competencies that are required in leadership going forward, you can help them develop those skills and get trained. So yeah, it's a cliche, but it's a process, not an event. And if you see succession as an as an event, and if you put a bit of you, it's going to go wrong, because you'll just flick a switch and the person won't be ready, you won't have the right person place. If it's a process, you can work through this, you can develop people you understand, they will understand and you understand what's required. And the other bit of advice I say is, it's never too early to start.
brandon 12:32
Interesting. And this is something we touched on sort of, you know, earlier in this conversation, this idea of common disagreements, are the dividing lines between generations or, you know, between genders, perhaps, but that kind of commonly, you see play out into into kind of conflict space, or are they actually very, you know, is it just the case that every family office is different, and therefore, every family office has to go through a different process in order to get their succession planning, right?
Alex 13:03
Well, I think what you just said is correct, everyone's different. But I think that the, the critical element is to ensure that the process is deemed to be fair. In other words, A or B might not like the outcome of a succession process. But it can seem to be objectively fair, even if you don't like the decision, and you feel that the right the right characteristics have been taken into account. And it's not just a family decision, but there's some interaction with a third party, then I think, it might be disappointing, and you might be dealing with the evaporation of someone's dreams. That's what people can fall out about. But I think if it can be seen to be fair, then you can move on and beyond. So So I think the problem, we aren't common ones, because there it also is idiosyncratic and personal. But I think that one can get around that by a process that can be deemed to be fair.
brandon 14:05
So it's kind of back to this point of the overarching theme, I suppose, is objectivity.
Alex 14:09
Yeah. And going back to my own experience, that's worked really well for us. And it won't work for every family. But all I can do is relate what I see and what I've seen in other families as well.
brandon 14:18
Certainly, as part of these conversations, we often hear that, you know, there is a dividing line between generations when it comes to managing the climate and climate change. Of course, you know, this isn't completely true. And there are, of course, because people on both sides of the island. And they hold, you know, various different views across the spectrum, if you like, if you see it in that sense, across different respective age groups, how often do you see these discussions coming up and with respect to building a proper succession plan?
Alex 14:48
Well, I think it won't surprise you that we see these discussions coming up time and time again. I said before, I think it's really important for a senior generation to create an asset and an opportunity that the subsequent generations are interested in and want to get involved with. So, the risk is ignoring these conversations as they emerge and not not listening or not responding to them. And I do think this is one of the really interesting periods in the investment world where, you know, we just used to think about risk and return. And now we can think about values as well, we can overlay a family's values into the construction of a portfolio, so you can begin to connect with the generational changes, you can begin to connect with the values that the underlying family members have, in a way that I think is, is really, really very exciting. And, and I think, you know, we can see that climate change is right is raising higher and higher everyone's agenda. I mean, it ought to be it must do through companies and families. And we work with many families in setting a climate strategy, which which could be a kind of Paris aligned strategy, which we'll look at higher impact investments. And then we work with family and advisors and trustees, and wealth managers, because they've got a critical role in this dialogue as well. And they've got a critical task to play in facilitating the discussion and finding solutions to this. So I think it's a really exciting time, actually, where you can blend the concerns we all have about climate change, with our approach to investment.
brandon 16:33
Certainly, and when it comes to the, you know, being patronizing, the upscaling or the education side, is that something that families are quite keen to roll out within within the internal sort of structure, if you like, you know, not just applying it to, you know, the cliche that we've talked about the old, the older generation, but also the younger generation who, perhaps are less keen on the idea and not so convinced?
Alex 16:55
Yeah. Look, I think that, so first of all, it was a lot of very different views within the family, then then it's important to understand them. And it's important, again, to have a governance forum in which you can come together and discuss these because of the family's values are represented by a strategy, then you need to get to understand the facts Saturday in the first place. In the case of my own family, we took the opportunity of moving to traders to radically look at the structure of our liquid portfolio. And that involves getting an eight to 10 of us in the room to work through a statement of what our investment values are, and we're and there wasn't. there was consensus was there wasn't unanimity there. So I talked about fairness before I talked about process before, I think you can do this with the family and think and think about their values in the context of investment. If there's a process that's deemed to be fairly as inclusive, it's a really interesting process. It went it took us about three or four months, I think, to not that we were not people who were wrangling we've got we've got busy lives as well. We did end up with a statement, which was consensual, and which reflects multiple generations. So it's quite it's quite an empowering and engaging process to go through. So I think that I think the most important thing is not that there are different views. But there's a dialogue held and people are listened to.
brandon 18:25
And from discussions I've had with your your guns based colleagues, they describe how Schroder's ESG considerations are fully built into business practices as standard and that that's brilliant to hear. Because while that is more common, it's not always the case. What does this look like in practice? And what is possible for families who are looking to go beyond managing their ESG risk to make a positive climate? No, when they're looking to make that logical next step? What is you know, what does that look like?
Alex 18:57
Well, first of all, you know, the internal peace. Schroder's was one of the first 20 institutions, I think it was to have their carbon targets formally validated by the science based target initiative. That was February last year, and then the largest investment manager to have done so what does that mean? I mean, it means that this isn't just a statement, this is this is part of the company's culture. And you know, I'm a new guy there, because I only joined two years ago, and I see it I see it in the attitudes people have to, towards the way the business is run towards the way that that the massive resources that are put into facilitating sustainable investment. So when it comes down to the farmers themselves, they're able to engage with this if they want to the clients themselves, they can engage with this big sustainable investment effort, and that's what we've done as a family. An intro singly, we've seen more families thinking about their philanthropy with a climate lens as well. So there's an initiative called impatients. Earth, which has been funded by a climate focus Family Foundation providing consulting to other philanthropists with a view to drive in the levels of giving, of the of their giving in this area. So there are all sorts of initiatives going on. Lots of them are very new. But the important thing is that is that there's engagement, both in terms of the investment organization, and there's engagement in terms of the client in terms of raising our collective knowledge and our tools to enable us to, to minimize our damage to the climate and the earth in terms of our investment strategies. And indeed, to make a positive contribution.
brandon 20:50
Moving away from this conversation now to some other issues that sort of, you know, across the board, if you like, you know, the current state of the macro environment, you know, the stagflation. There's war in Europe, it's an increasingly hostile political world order and all the ramifications that these bring our families preparing for the future, and what are the what are they perhaps doing differently than, say, five or 10 years ago?
Alex 21:16
Well, we've talked about how they might be doing differently, because I think they've got an opportunity to impose their values on how they invest. But actually, there's not that much change, because because they've got the luxury of a long term horizon. It's an absolutely critical element in terms of family thinking, family strategy, and, and critical advantage, I would say in terms of how they can invest. So they'd all be aware of the trends that we all see digital disruption, climate, demographics, but I think they'll all see those as ideas as both a threat and an opportunity. So thinking about them as both thinking about them as an opportunity, how do we get exposure to these trends? And also, how do we minimize our impact to the climate? At the same time, it is one of the most fascinating and challenging initiatives that I've seen, I mean, so in other words, we we've all found these need to look long term, there's a great quote from from Bill Gates, which I'll just give you, where he says, We overestimate the change that will occur in the next two years, and underestimate the change that will occur in the next 10. So don't let yourself be lulled into inaction. So this ability to look at long term mustn't mean that we say we can work it out, when we see the results of what's going on. Now, we have to take positions, and we have to think about a decade out, and we have to still take informed decisions about which exposures we will take. But I think that the the, the broad picture would be keep keep it strategic, not tactical. I think, you know, where the challenge is to some families, then many of the families we work with a very international and we all know that geographical fragmentation is an issue that we don't really understand or know how it's going to happen yet. But if you've got a thoroughly global family and thoroughly global operations, there are some complicated times ahead. About which we will need to think carefully.
brandon 23:30
Interesting sort of changing track now Schroder's of course has its its wealth management, arm, cazenove capital here in Guernsey. It is it has been a well established brand here on the island for many years now. How important is having a presence in Guernsey?
Alex 23:51
Well, it's very important but let me go back a bit first and say that says that wealth management is an important and growing part of the overall Schroder's operation and Cazenove Capital brand is used in the, as you said in the UK and the Channel Islands for our wealth clients. And the business in Guernsey is a really integral part of this network, particularly for the family office service. And we're working with our most internationally focused families and doing that. And we've got about 40 employees working local business and we manage about six and a half billion Sterling, many of which is on behalf of trusts and clients with a touch point in Guernsey. So so it's a really important part of our thinking and our operation.
brandon 24:37
Yeah, so it's always interesting to discuss the value of the Crown dependencies, particularly Guernsey to the UK, and especially to the to the City of London in an economic sense. Do you think that the likes of Guernsey and other global finance centers are valuable to your business model and the work that you do?
Alex 24:57
Yeah, I don't even think I got notice. So, I mean going back to your introduction guernseys success is underpinned by substance stability, security and a commitment to sustainability. And as we work within Cazenove and abroad Schroder's with a with a very wide range of international clients, these characteristics are really important to them. So, we think Guernsey is a great place to meet their needs.
brandon 25:28
Brilliant. Well, thank you very much for your time today, Alex.
Alex 25:31
It's been a pleasure. Really good talking to you, Brandon.
brandon 25:33
It was fascinating to understand how families and family offices are dealing with good governance and how Schroder's approach the issues particularly the importance of building in good lines of succession. Thanks also to you for listening. If you enjoyed this discussion, we have a backlog of interviews on the We Are Guernsey podcast channel, you can check them out by searching for We Are Guernsey on your preferred podcast platform. We also have links to Alex and Schroder's in our show notes, so check them out to hear more from them. To find out more about Guernsey and its specialist financial services sector. Head over to our website weare guernsey.com We look forward to welcoming you back to the podcast but until then, it's goodbye from Guernsey.
Transcribed by https://otter.ai