Tackling the tough issues

Whether he’s talking with his most valued clients or instructing his youth football team, Alan Davidson likes to take the same approach — be clear and concise, always.

“I think what I do in business and what I do on the football pitch kind of complement each other,” says the head of client service operations at
Martin Currie and the manager of the boys at Edinburgh City football club.
Since 1989, Davidson has been working hard to keep the clients of Martin Currie pleased. He stresses that communicating in a clear and concise manner is mandatory in the investment management business, but also extends beyond the boardroom. In order to get the players on his football team to receive his instructions, he makes sure the boys hear his message loud and clear. And it’s paid off. As a result, he’s had an excellent season in his fifth campaign with the Edinburgh City club.

Tell me about your career path, starting with the history of your education?
Although I did well at school, I didn’t attend university. In fact, I finished school on a Friday and started work on the Monday. I began with the Bank of Scotland on the securities side when I was 17 and two years later moved to Martin Currie, where I’ve worked ever since.

What was your function at the Bank of Scotland?
I looked after the Martin Currie unit trust with the bank, so when a position came available at Martin Currie, I was already familiar with them. When I joined in 1989 there were around 65 employees, today there are 265.

Having joined this industry at such a young age, did you realise when you were in high school that you were interested in the investment industry?
Accountancy and finance were subjects that did interest me at school. I started in banking initially, followed by asset management, probably because of my numerical skills. It was a flip of a coin as to whether I would go to university or start work, but the opportunity to earn a few pounds aged 17 was probably too great to resist. I don’t think there was as much pressure then to have a degree under your belt. Today, when we interview for entry-level positions, the level of academic achievement is very impressive.

Martin Currie is an employee-owned ‘big boutique’. How different is working in this environment as opposed to a large corporate structure?
Very different. In its broadest sense, the term ‘The Big Boutique’ means having the solidity, professionalism and robustness of process of a large company, combined with the distinctiveness, client focus and personal ownership of a small company.  Managing equity portfolios is our only business, so we have no distractions from other business lines. We have a very open, challenging culture, you would be unlikely to find within a large organisation. Our chief executive and executive committee provide a verbal report to all staff every six weeks in our ‘town hall’ meetings. Debate and scrutiny of the company’s activities are actively encouraged and a vital component of our culture. We also publish formal reviews of our business plan every quarter, and all members of staff receive a copy. We try to weave a focus on clients throughout the whole fabric of the organisation.

Do you feel this strategy of the employee-owned big boutique will become a future trend for investment firms or do you think the big banks will always rule?
There has certainly been a shift in investment talent from large to small firms, and we have been a major beneficiary of this. At the same time though, many boutiques don’t work out how to pass ownership from one generation to the next, and end up getting bought by bigger players. We’ve worked out how to transfer ownership, which explains why we’ve retained our independence for 127 years.

One of the biggest challenges you face at Martin Currie is to balance customisation with efficiency. Do you feel this an industry-wide problem?
It is certainly not unique to us, but it’s definitely an issue. Over two-thirds of our clients are based outside the UK, and they cover a wide range of organisations. You find that particular types of clients, for example UK charities, have common needs. So we tend to organise clients by type, identify common requirements and look for the most efficient way to deliver them. Of course what tends to happen is that we develop reporting solutions to meet the needs of our most demanding clients, which in time become available to other clients who want them.

Martin Currie is known for outsourcing its back office and reducing its reporting times, do you consider Martin Currie to be the leader in this area?
This is a well-established industry trend, so we are certainly not leaders in this respect. Outsourcing the back office was right for us and for our clients, because we needed a robust and scalable operational platform that could support the rapid growth in the business. As well as outsourcing our back office we also replaced our performance measurement and client reporting systems within a two-year period, so we had to manage a lot of change over a short period. Today we can focus on managing money and servicing clients, which are our two core competencies.

Automated and standardised reporting — do you feel this is the hottest topic in client reporting?
I think accuracy and timeliness remain the hot topics. We’ve spoken about automation, but in the drive to speed up delivery, the danger is that it compromises accuracy. So, the challenge for us, with an increasing volume of clients who are increasingly sophisticated and more demanding, is to deliver what clients want, when they want it. We’ve raised the bar even higher for ourselves by completing the last quarter-end in just 15 business days. So maintaining the high standards we’ve set for ourselves will be our major focus in 2008. I think this is a topic for most of the industry and I would expect it to be prevalent for some time.

You have played a key role in the e-reporting function at Martin Currie. Give me your thoughts on online reporting?
In 1999 one of the largest pension plans in the US told their 50 investment managers that, in future, their reports would have to be delivered by e-mail. At the time, even turning a black and white report into a PDF seemed like a bit of pipe dream. However, our IT team pulled it off, and we were one of the first managers to deliver this. We already had a high quality website, so this made us think about how we could take reporting to the next level. Over the next 12 months I spoke to a range of clients in the UK and Europe, and even travelled to the US to interview clients and gauge their appetite for being offered reports online. The reaction was actually rather lukewarm, but there was enough interest to give us the confidence to proceed. We launched our online client reporting centre in early 2001 through a new secure area of our website. For some time there remained a certain degree of scepticism with certain clients and even colleagues as to how successful this would be.  But steadily the reporting centre became more and more popular as the benefits of speed, cost and efficiency became clearer, and concerns about security and confidentiality eased. Today, over 80 per cent of our institutional clients access their reports online.

What are your thoughts on industry software?
When we reviewed reporting systems four years ago, the clear market leader was Pages, offered by SS&C Technologies Inc. Looking at the system then, it could do most of we wanted, and it had the most established client base, which gave us the confidence that it would continue to be developed. Since then, Vermilion, Fund Works and several other suppliers have been building up stables of clients for their software. So when we bought Pages, it was a much easier decision than I would expect it to be now.

Is recruiting and retaining talent a problem in this field like it is in performance measurement?
We are fortunate in being able to attract and retain very good people. This is partly because of our employee-ownership, which has real cultural benefits, as well as enabling staff to build a long-term financial stake in the business. Our philosophy is, wherever possible, to nurture and grow our own people. Talent development is high on the agenda across the whole business, and we have a formal programme that develops people from the grassroots all the way through to director level. Whether you’re in client reporting or managing money, we consider it crucial to retain and develop our people.

Do you feel more independent training needs to be provided for client services and reporting people?
I think there’s a balance. Education in client reporting can mean formal training, but knowledge also comes from talking to clients, consultants, suppliers and peers. My aim is always to understand the issues that matter to clients and to establish where best practice is. I speak at conferences about client reporting, but I also attend these events to learn. Although I’m experienced in this area, things change quickly, and you cannot stand still.

How do you see content of client reporting evolving over the next few years?
I think the content of the reports will become a differentiating factor. On the data side, detailed attribution is becoming more important as clients seek a greater understanding of what is driving performance. I think clarity of language in investment commentaries is a real issue, partly because clients with such a diverse understanding of investment matters are reading the reports. We’ve held workshops for investment managers to try and eradicate unhelpful jargon and develop their writing skills. We don’t always get it right, but we are trying hard. Corporate governance also continues to be an important issue, and it is important we can provide our clients with documentation on, for example, voting records. Looking ahead, we can’t always predict what clients will want, but as long as we keep asking the right questions and listening to our clients, we should be able to stay ahead of the curve.