PERSPECTIVE3-5 min to read

Podcast: Alex Scott in conversation with 'We are Guernsey'

The Chairman of Schroders Family Office Service, Alex Scott, shares his experience of succession and governance and the advice he gives to other families.

Podcast hero image - Alex Scott

Listen to the podcast to find out more. 

You may also listen to the podcast on:

Podcast transcript

Brandon Ashplant, We are Guernsey: 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 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.

Today, I am delighted to be joined by Alex Scott, Chairman of Schroders Family Office Service, which works closely with Cazenove Capital, Schroders’ wealth management arm 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 wfithin 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 Scott, Schroders Family Office Service: Great to be here. Good to be with you, Brandon.

Brandon: 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?

Alex: Sure, I'll pull out some of the key aspects. One of the ways I can describe myself is primarily as a family business owner. But I've sold two 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 a fourth-generation family business owner but I’ve also undertaken entrepreneurial activities. Primarily in the financial services sector, because that's where the original family business came from. And that's 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 at both ends.

Brandon: While doing some research into Schroders and its long history, I was quite amazed to learn that the firm is still more than 40% owned by the family who founded it more than 200 years ago. How does this legacy feed into the work that Schroders does today? How does it continue?

Alex: I’d 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 our business, as we decided that we were going to sell it. Schroders was a standout choice, because of its family ownership. I think that shines through in terms of its values, in terms of its long-term horizons, in terms of its approach to people. But most important of all, is its focus on clients. You get alignment in a family business that you don't necessarily get in a publicly-quoted company. And I think that you get empathy with the underlying client, because the owners themselves are clients and so they understand how the process works. And they’ve lived through it, too. So I think this sort of alignment, in terms of the business being family-owned, is very powerful. And for me, it shines through, and that's why I'm there.

Brandon: And talking to the particular issues of the day, I suppose, one issue that's come to light in recent years in the family office space is the idea of achieving and maintaining good governance. When you speak to families that are trying to get to grips with governance issues, what is the first piece of advice you typically give them?

Alex: I have to go back to my own experience. And what I would say is that the critical piece in terms of governance is the engagement of those who you both trust and who are objectively respected and successful - but not part of the family. Because I think it gets really hard to get objectivity in governance and it gets really hard when maybe two members of a family have different opinions – it can be very personalised. If you triangulate with other people 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 think, is to get to a place where you can trust outsiders and engage them. And you'd be surprised, first of all, how interesdecision-makingted they will be in helping you and how much value they can add.

Brandon: Every family office is different I suppose. And it's very dependent on where the wealth comes from. But are there any common disputes that are a crux point? Or is it purely down to kind of internal family politics?

Alex: I think that it's probably normally about decision-making. Who influences decisions? How are decisions made? Who gets a say? The more idiosyncratic and personalised that processes, the more likely there is to be friction. So the best practice will always be to move towards a process that is transparent, that enables people to have a say and to feel they're being heard. But it's also a fair process and a decisive process. And if you engage non-family people in that, then it dissolves any personal history or animosity that might still be there. I think the behaviors and the decisions can be far better if you've got third-party people in the room too.

Brandon: Certainly. And I guess, part of the conversation that is happening now more than ever, but I guess it's always been there, is around building a diverse and well-represented set of family business employees - whether it be balancing gender or ethnicity. It's good to see that Schroder's recently reported that the company has met its representation target with 35% of senior management positions globally now held by women. How important do you consider representation in order to get internal governance to a good place?

Alex: Well, I think it's really important. It's easy to say that, but 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 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 through genders and experience, then getting as close as you can in 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:  Certainly, and just sticking with this topic for the moment, Guernsey Finance, conducted some research a couple of years ago that assess the role and representation of women within family offices, and crucially, how women can be provided with the opportunity to hold senior positions. Unfortunately, the numbers are quite low. And this is applied to family offices operating across the globe. I think our statistics at the time said that only 3.5% of family offices employed a female CEO. That's lower than the Fortune 500 companies. Some of that research also assessed ways to address the gender imbalance and the popular and less popular methods to address this. Do you think quotas should be implemented? Or do you prefer to see more cultural change within the family office at a grassroots, bottom-up level?

Alex: 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 a process that's underway that will result in more diverse leadership. And certainly, within the Schroders Family Office team, we've got a far more diverse team than your statistics would state. Indeed, the team is 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…they're going to be more of them on the assumption that the family grows. And they're going to be multi-gender and multi-background again, as they marry different people and the whole mix of the family changes. And I hope that that will happen in family offices as well because the family office does need to reflect and engage with the structure of the family. So… work to do there.

Brandon: Certainly. And I guess, a particular area that has piqued the interest of many is a sub-issue of good governance…succession planning. What are the common pitfalls there? What advice do you often find yourself giving to family offices, struggling to establish clear and executive lines of succession within their family from one generation to the next?

Alex: Well, again, you use the word family. And that’s actually critical here. 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 0 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, they need to be intrigued and interested by whatever it is that they might succeed to. 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 – it may just be one person - again, one needs to assess their talent and capabilities. It’s 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 it's a cliché, but it's a process, not an event. And if you see succession as an event, 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 in place. If it's a process, you can work through this, you can develop people, they will understand and you understand what's required.

The other key bit of advice I offer is that it's never too early to start.

Brandon: Interesting. And this is something we touched on sort of earlier in the conversation, this idea of common disagreements. Are there dividing lines between generations, or between genders perhaps, but that kind of commonly plays out into conflict. Or 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: Well, I think what you just said is correct, everyone's different. But I think that 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 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 I think there probably aren't common ones, because 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:  So it's kind of back to this point of the overarching theme, I suppose, is objectivity.

Alex: Yes. And going back to my own experience, that's worked really well for us. 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: Certainly, as part of these conversations, we often hear that 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. There are of course people on both sides across different age groups. How often do you see these discussions coming up and with respect to building a proper succession plan?

Alex: 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 listening or not responding to them.

I do think this is one of the really interesting periods in the investment world. You know, we used to just 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 I think we can see that climate change is rising higher and higher up 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 could be a kind of Paris-aligned strategy, which will look at higher impact investments. And then we work with family advisers and trustees and wealth managers because they've got a critical role in this dialogue as well. 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: Certainly, and when it comes to the upskilling or the education side, is that something that families are quite keen to roll out within the internal structure? Not just applying it to, you know, the cliché that we've talked about of the older generation, but also the younger generation who perhaps are less keen on the idea, and not so convinced?

Alex: Look, I think that, first of all, if there are a lot of very different views within the family, 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 if the family's values are represented by a strategy, then you need to get to understand the strategy in the first place.

In the case of my own family, we took the opportunity of moving to Schroders to radically look at the structure of our liquid portfolio. And that involved getting 8 to 10 of us in the room to work through a statement of what our investment values are and were. There was consensus but there wasn't unanimity there. So I talked about fairness before and I talked about process before, I think you can do this with the family and think about their values in the context of investment. If there's a process that's deemed to be fair and inclusive, it's a really interesting process. It took us about three or four months, I think, not that we were wrangling but 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 an empowering and engaging process to go through. So 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: And from discussions I've had with your Guernsey-based colleagues, they describe how Schroders’ ESG considerations are fully built into business practices as standard and 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 impact? When they're looking to make that logical next step? What does that look like?

Alex: Well, first of all, you know, the internal piece. Schroders was one of the first 20 institutions to have their carbon targets formally validated by the Science-Based Target Initiative. That was February last year and they were then the largest investment manager to have done so. What does that mean? It means that this isn't just a statement, 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 towards the way the business is run, the way that massive resources are put into facilitating sustainable investment. So when it comes down to the families themselves, they're able to engage with this if they want to, they can engage with this big sustainable investment effort, and that's what we've done as a family.

And interestingly, we've seen more families thinking about their philanthropy with a climate lens as well. So there's an initiative called Impatience Earth, which has been funded by a climate-focused family foundation, providing consulting to other philanthropists with a view to drive the levels of 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 there's engagement, both in terms of the investment organization. And there's engagement from clients in terms of raising our collective knowledge and the tools to enable us to minimize our damage to the climate and the earth in terms of our investment strategies. And indeed, to make a positive contribution.

Brandon: Moving away from this conversation now to some other issues, the current state of the macro environment, the stagflation, war in Europe, it's an increasingly hostile political world order and all the ramifications that these bring. How are families preparing for the future, and what are they perhaps doing differently than, say, five or 10 years ago?

Alex: Well, we've talked about how they might be doing things 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 they've got the luxury of a long-term horizon. It's an absolutely critical element in terms of family thinking, family strategy and a critical advantage 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 I do, as both a threat and an opportunity. So thinking about them as an opportunity, how do we get exposure to these trends? And also, how do we minimize our impact on the climate at the same?

All families need to look long-term. There's a great quote 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. This ability to look long-term mustn't mean that we say we’ll 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, we still have to take informed decisions about which exposures we will take. But I think that the broad picture would be to keep it strategic, not tactical.

I think where the challenge may be is that many of the families we work with are very international. Geographical fragmentation is an issue that we don't really understand or know what’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: Interesting. So changing track now, Schroders has its wealth management arm, Cazenove Capital, here in Guernsey. It has been a well established brand here on the island for many years now. How important is having a presence in Guernsey?

Alex: Well, it's very important but let me go back a bit first and say that wealth management is an important and growing part of the overall Schroders operation. The Cazenove Capital brand is used 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. We're working with our most internationally-focused families. And we've got about 40 employees working in the local business and we manage about 6.5 billion sterling, much of which is on behalf of trusts and clients with a touch point in Guernsey. So it's a really important part of our thinking and our operation.

Brandon: Yeah, so it's always interesting to discuss the value of the Crown Dependencies, particularly Guernsey to the UK, and especially to the City of London in an economic sense. Do you think that the likes of Guernsey and other global finance centres are valuable to your business model and the work that you do?

Alex: Yeah, I don't even think so, I know so. So, I mean going back to your introduction, Guernsey’s success is underpinned by substance, stability, security and a commitment to sustainability. And as we work within Cazenove and the broader Schroders 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: Brilliant. Well, thank you very much for your time today, Alex.

Alex: It's been a pleasure. Really good talking to you, Brandon.

Brandon: It was fascinating to understand how families and family offices are dealing with good governance and how Schroders 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 We look forward to welcoming you back to the podcast but until then, it's goodbye from Guernsey.

Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.




Cazenove Capital is a trading name of Schroders (C.I.) Ltd which is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 2020 and the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended in the conduct of banking and investment business. Registered address at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3UF, (No.24546) . Schroders (C.I.) Limited, Jersey Branch is regulated by the Jersey Financial Services Commission in the conduct of investment business. Registered address at 40 Esplanade, St. Helier, Jersey JE2 3QB, (No.31076).

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.