The Interview: Bart Deconinck

Bart Deconinck has a long and illustrious career in financial services. In 2016, he took on a new challenge as Deputy Group Chairman of trust, corporate and fund services company Zedra. He tells BL what that entails and gives his outspoken take on the present and future for wealth management

Tell us a little bit about yourself.

After I finished my studies in theoretical economics and added a Masters in accounting, I started working at Ernst & Young. After a couple of years, I moved to what was then MeesPierson, a mainly Dutch merchant private bank, where I became the Finance Director and subsequently the Managing Director of the Belgium office. I stayed with MeesPierson for 13 years, ultimately becoming a member of the global board. 

Among my responsibilities were the worldwide trust activities, of which I became CEO when the firm acquired Intertrust. In 2006, I said: “Let’s do something new and let’s do it on our own.” So I started a company called Vistra with two people. 

When I left Vistra after the sale to Barings Private Equity in Asia in 2015, there were 3,000 people. But I firmly believe you should always want new challenges, which is why I find myself involved now with Zedra. It was a great opportunity and I couldn’t refuse to be part of something new. 

What does your role at Zedra entail?

Obviously there’s a fully functioning executive committee with a CEO, Niels Nielsen, who runs the day-to-day business. I find myself more involved with a number of other things. One is helping the board to set the strategy going forward. I would say that was my main task in the beginning, when we acquired the Barclays business. 

I’m also involved on the commercial side, with big relationships and with intermediary contacts. I’m heavily involved in all marketing matters, and everything to do with acquisitions. 

And then I also help wherever I can. We’re a small team, so if something comes up, I’m happy to jump in.

Where are you based?

I’m based in Monaco, but I travel constantly. You will find me in Monaco, in Geneva, the Channel Islands, in London, the Netherlands, Luxembourg… My typical week generally involves three to four days of travelling.

As someone who works in different places, do you think that private clients prefer to work with firms they are culturally or socially aligned with? 

There’s an element of that, although I wouldn’t exaggerate it. I think the one thing that’s important to clients is language skills. It’s sometimes difficult to explain to British people that the whole world doesn’t necessarily speak English well. It’s important that you have the right language skills in place. 

Yes, I do think the cultural differences are there, but what the client obviously needs is proactive and speedy service – so it’s not necessarily the case that a certain nationality wants a relationship manager from the same nationality. Indeed, you also have a lot of clients that feel more comfortable with a relationship manager who has a different nationality to their own. 

Where do you feel the Channel Islands fit within this? For instance, one thing some private clients struggle with is the concept of trusts.

I would say three things. First, the Channel Islands have a highly skilled workforce. In terms of technical service delivery, they are top of the bill worldwide.

I do believe, however, that people who don’t understand the concept of trusts shouldn’t have one in the first place. People must be comfortable with a structure and if they feel awkward about the trust, then we have to find other solutions – this might be foundations or company-based structures. 

The third point, and backtracking slightly, is that I think the Channel Islands could benefit from improved language skills. To give you an example, take the office of Zedra in Geneva. In that small office of 30 people, you will find 12 nationalities, something I’d argue you wouldn’t find in the Channel Islands.

I do accept there may be reasons, such as the restrictions on employment, but I think a more proactive focus on getting different language skills would be welcome.

Looking at Zedra, you have a global presence – do you feel that’s essential for fiduciary firms these days, or can firms with a more local focus still flourish?

It’s a bit of both. You have to be large enough to provide the service the client needs, yet small enough to give that personal touch. If a firm starts to get too big in a given jurisdiction, I’m a strong believer in breaking things up into separate business units or separate teams so that you create mini-businesses within your firm. 

That helps retain an entrepreneurial spirit and is reflected in how clients experience service. If you have a presence in 10 to 15 places, you can deliver for about 99 per cent of what the global need is.

Would you agree that if companies expand too quickly, one of the things that’s lost is the customer service element?

Absolutely. For me, a trust firm is like a Michelin-star restaurant. If the chef’s not in the kitchen setting the example, the rest will fall apart. You’re only going to get three stars if the owner of the business is in the kitchen. 

As senior management – shareholders, in the case of Zedra – we all directly meet clients and intermediaries who work for clients.

It goes wrong when companies shift into an overly corporate mindset, where the senior people who were very good at keeping clients happy all of a sudden get management tasks and administration for 80 per cent of their work. That’s the tipping point, where you see service going down the drain. 

Let’s move on to consolidation in the trust space. There are now fewer smaller trust firms than ever – will they be squeezed out altogether as firms look for globalisation and economies of scale?

Yes and no. Yes, the consolidation will go on. The compliance and regulatory costs of running a business like this have become much higher in the past 10 years, squeezing the smaller firms. Also the valuation of these businesses has gone up since private equity got involved, and consolidation will go on as long as you have buyers and sellers.

At the same time, as these companies become so big, pieces fall off again – people leave and start their own businesses. So I see it more as a cycle. 

As we mentioned, consolidation can lead to clients experiencing quality issues, so you will see the emergence of smaller, specialised boutique firms again.

You mention private equity – what’s your view on their involvement in the wealth management space? And why is it a route that Zedra chose not to go down?

As a free market person, I look at private equity in general as a good thing, because it provides liquidity. Also, when private equity gets involved in businesses, they tend to grow, so employment is created. 

But of course, it’s not quite that simple. The moment private equity becomes your shareholder, they are thinking how they can get out again – you have a window of three to five years. I do think businesses can benefit from having a private equity shareholder to get their house in order, if it’s not in order. 

Whether private equity is a natural shareholder of a professional services firm, that’s something else altogether, as their view can be quite short term. That’s why we’ve decided not to go down that route, and is why we came together with a couple of families to invest our own money in Zedra. 

That gives us a couple of things. You have the longer-term view, so it’s more about setting the right kind of behaviours, making sure your clients are satisfied, and then the financials will follow eventually. When you don’t have the deep pockets that private equity has, you have to make more strategic choices. 

Coming back to client expectations – have you found that since the financial crisis, clients are more knowledgeable and are demanding more for their money? 

Clients have become more sophisticated, they’ve become more demanding, and they’ve also become very critical of wealth management services in general. I think that makes it more important than ever for the trustee to understand their clients and their risk perspective. 

I would say there’s much more knowledge and much more sophistication. But at the same time, the larger clients – and this is a trend that’s accelerating very fast – are getting more in-house expertise to help them select the right asset managers. This is why we’re seeing a tremendous growth of family offices.

Another element you’re seeing now is that clients are very much impacted by increasing geopolitical instability. That’s one thing I wouldn’t have had on my list three years ago, but now I see it as one of the main drivers. In the past, we would have had tax optimisation as the driver of setting up structures. We always had estate planning as a driver to transfer wealth to the next generation. 

It’s geopolitical instability that’s now becoming a big driver of how people want to structure and diversify their holdings and their assets across different countries – choosing safe and stable jurisdictions to do so.

If you talk to clients these days, that’s the emerging topic – not their investment returns, not taxes any more as that’s been dealt with. It’s how do I protect my money; how do I make sure no one is going to take it back from me?

Are your clients asking for advice around Brexit? And what’s your take on the whole situation?

My personal take on Brexit is that it’s totally bonkers. Obviously the people have voted, but I think it’s bad for the UK and for Europe. Both should have done much more to avoid it.

I think the whole process in the UK with the referendum was strange, and that the EU didn’t give anything to the UK to satisfy the people. So both parties are to blame. 

It’s going to be bad for the UK, it’s going to lead to a loss of jobs, and I’m afraid that the UK, in terms of industrial strategy, isn’t ready.

Manufacturing strategy, for example, is just not ready to withstand the blow it will receive from Brexit. But we’re there now – it could have been avoided, but it’s going to hurt the UK, London and the EU. 

As for what it means to our clients, many have become reluctant to invest further in the UK – you see that mainly with regard to property. Everybody is waiting now.

Typically, the average Middle Eastern or Asian wealthy family wants to have something in the UK or London. They love London, but they’re in a wait-and-see mode. So we’re helping them understand that, helping them with property. 

There may be a silver lining in that the Channel Islands might be well positioned regarding Brexit. When the UK falls out of the EU, they are going to have to redo a lot of legislation, but a lot of that is already in place in the Channel Islands, for instance.

An ongoing area of concern is the regulatory and compliance burden. What’s your view on that? And are we near to being ‘complianced out’?

It’s fair to say that the regulatory burden has grown significantly over 10 years in terms of what you have to do – and it’s still going on. That said, it’s a necessary evil. You can’t resist it and shouldn’t get upset about it. It’s there and you have to organise yourself in an efficient way. 

The Common Reporting Standard is basically now implemented and the information will start to flow. What that means for our industry is that all the bad stuff is pushed out.

We find ourselves in an industry that’s totally above board, clean as a whistle – certainly compared with 25 years ago. We do client identification, we do KYC, we do constant monitoring on our client database against sanction lists, transaction monitoring of every amount that goes in and out of a structure. 

Where they may go further is in setting up ultimate beneficial ownership registers, which I personally think is a bridge too far. I believe it’s a dangerous development – these registers will end up in the public domain, and the whole idea of separation between ownership and the business goes out of the window. 

For the next 12 to 24 months, where are the biggest opportunities and challenges, both broadly and for the Channel Islands?

There are a number of things that are happening in the world. One, we have some European elections coming up. Two, we still have the problem of Greek banks, which appears to be in limbo until the elections are over. Three, interest rates are going up in the US.

All of this will have an impact on the valuation of asset classes. I don’t know how this will pan out, but there’s going to be volatility – so that’s the background. 

What you’re also seeing is a big generational shift for a lot of the structures we are running. A lot of children have become adults, so we’re seeing a shift in family businesses in wealth.

The baby boomers are retiring and the children who are 40 years old are getting control of the businesses and that’s happening at a very high speed. So that’s a challenge and an opportunity – a lot of work’s going to have to happen. 

As for Zedra – well, we’ve only been going for a year. We’ve worked very hard during that time to create a standalone company independent from the previous Barclays set-up. And on top of that, we’ve hired around 150 people and opened new offices. 

So we’ve laid a lot of the groundwork going forward. We have three big themes for the next year to 18 months. One is to further strengthen the company. That will mean considerable investment in IT systems – making our IT systems much more client-centric and much more secure – and that will include hiring more people. 

The second theme is to expand the business in new territories and new services. We’re investing heavily in funds services and we still want to add one or two more geographies to our map. And the third theme is to grow the business. As we add jurisdictions and add asset classes to our offering, we’ll be able to do more for existing and new clients. 

So while today the business is 80 per cent private clients, I expect in a couple of years’ time, we will be one-third funds, one-third private client and one-third corporate services. But you won’t see us taking on a private equity company any time soon – we will be doing this on our own.