Schroders determined to provide a balanced diet

Rupert Robinson, chief executive officer of Schroders Private Bank, is gradually weaning his clients away from a diet feeding exclusively on its parent company’s funds towards a much broader menu of investment solutions. His mission to offer customers the financial equivalent of a balanced diet, making the most of both local and international cuisines, is clearly paying off at his bank’s Wood Street headquarters in London, just round the corner from Schroders’ global fulcrum in Gresham Street. Schroders Private Bank has gained net new money of £600m (€673m) during the last 18 months, with private client assets now exceeding £12bn. And despite the perception that the group has a UK-biased clientele, he spends much of his time dealing with wealthy local family groups in Zurich, Milan, Singapore and across the Caribbean islands. The bank has offices in all of these regions. When Mr Robinson arrived at Schroders in 2002, together with new CEO Sally Tennant, who now runs UK private banking for Lombard Odier, he came fresh from the buyout of Beaumont Capital. His job was to shake-up the traditional, though sometimes backwoods-looking investment process deployed for Schroders’ small but ambitious private banking unit. Ms Tennant gave him a free hand to re-examine the whole system of portfolio construction. “When I came here, one of my initial objectives was to assess the whole investment proposition,” remembers Mr Robinson. “This meant a long hard look at the future of portfolio construction, asset allocation, risk management and an assessment of which underlying ingredients were being used to bake the cake.” It was no secret that he was a passionate believer in the multi-manager approach, which he had successfully championed during his 17 years at NM Rothschilds, and that he would try to develop something similar at Schroders. Initially, a deal was signed with Russell Investments, with the US group charged with selecting managers for the London bank. The new system was touted as a major breakthrough in the early days of open architecture delivery. But while the partnership was talked up to clients and the financial press, Schroders’ investment staff were busy developing their own internal multi-manager solution to replace what was seen as a stopgap. “We entered the relationship with Russell because at that time, within our private bank and within Schroder Investment Management, we didn’t have a multi-manager research capability of sufficient quality and credibility. We worked with Russell for a period while we put these pieces of the jigsaw in place.” It was always Mr Robinson’s ambition to help broaden the bank’s investment proposition beyond the purely proprietary-led offering, so he coined the politically acceptable description of “Schroders Plus” to describe the bank’s private client offering. This philosophy, deploying Schroders funds for the areas in which the fund house excelled and hiring external groups for other investment areas pacified the traditionalists, who believed Schroders products should be at the core of all offerings, while keeping pace with the reformers who wanted a broader range of investment houses represented in portfolios. There was still a reluctance among both private and institutional investors to go beyond the comfort zone in terms of investment instruments, let alone fund management groups. “If you go back eight or nine years, the multi-asset class investment proposition was at a relatively embryonic stage,” says Mr Robinson, who has since succeeded in adding hedge funds, private equity, commodities and foreign exchange overlay into his clients’ portfolios. “The proposition we offered to many clients in those days was much more traditional in look and feel.” Schroders has seen many new clients sign up during the financial crisis, attracted as much by the bank’s strong balanced sheet as the group’s investments track record. The £25m average client size means the bank is competing head to head with more international names such as Swiss banks Sarasin and Pictet and American names Morgan Stanley and BNY Mellon, rather than UK centric brokerage operations. Mr Robinson sees the key part of his client advisers’ role as evaluating which kind of investment products customers should actually pay substantial fees for. Despite the droves of private clients queuing to exit hedge funds in 2008, he maintains the alternative industry has done more good than harm, especially in 2003, when the global equity market was down 50 per cent, yet Schroders’ long-short fund of hedge funds lost just 5 per cent.