Interviews  >  The interview: Trevor Falle

Technology is redefining wealth management, and we must nurture young talent, exploit opportunities in Africa, and encourage businesses to constantly evolve. Trevor Falle, Group Director at JTC, tells it how it really is

You’ve worked in the financial services sector for over 35 years. What significant changes have you seen during that time?

While living and working in London as a relatively young person in the 1980s, I saw Black Monday, the Big Bang, and the introduction of the Financial Services Authority firsthand. I didn’t fully understand the impact of what was going on at the time. The tech bubble bursting, the credit crunch, various debt crises are, of course, a different matter, and we’re still seeing the ongoing reverberations from these.

On the wealth management side, pricing has changed dramatically over the years. The cost of wealth management services has been under pressure for a long time, but is now both more realistic and more transparent. There will always be pressure on the levels of pricing, though, as well as the disparity between what businesses charge and what people think is fair value.

There’s also been the rise of the passive movement – index funds and ETFs. Apparently, 80 per cent of active funds don’t exceed their benchmark – added to which, charges for passive management are a fraction of the cost of active management.

And then there’s technology and the internet. The availability of information is limitless now, and so management of one’s information sources is critical and, by necessity, a dynamic process. I could spend all day reading and avoiding making decisions!

As for the Channel Islands in particular, we have to talk about the relentless push for transparency on tax issues – as we are all painfully aware, there’s been massive pressure on us in the last decade. Yet we must be careful to protect the fundamental principle of confidentiality or privacy in one’s personal affairs. Because of the minority, the industry is distrusted (and with some good reason) and regulation is the inevitable result. I wish it weren’t the case, but while many industry participants complain, we have to accept that we only have our collective selves to blame.

For me there’s a revolution going on at the moment. Banks have fallen from grace and they struggle, largely due to their scale, to provide a quality personal service, and this combines with technological advances in delivering financial services without personal interaction. There’s just so much happening – it’s such a complex industry and we practitioners still assume far too much. At the top end, people are better informed and have had to learn more about the management of their wealth. But in the middle to lower end, most members of the public don’t even find the subject interesting. I think there’s a lot more work to do on education, and so the role of advisers and managers will remain key.

You took early retirement, but were lured back to the industry. Why?

I was downsizing really. I retired at 57, but I didn’t intend to sit around doing nothing. What I really wanted was to work on the subjects I enjoyed most, which are investment in general, emerging markets and Africa in particular. This coincided with my long-standing friend, Nigel Le Quesne, the Chairman and CEO at JTC, wanting to formulate an African strategy for his business.

So JTC’s needs matched my retirement aspirations. Perhaps more important was the JTC value system closely mirrored my own, from employee engagement, the entrepreneurial spirit and proximity to clients, to a genuine emphasis on helping young people make a success of their lives. I consider myself a ‘sleeves rolled up’ kind of chap, and I wasn’t ready for more passive non-executive roles at that stage.

Development of young people is something you have spoken about passionately elsewhere. Why is it important to you?

In my opinion, the most rewarding part of any executive’s work is contributing to the growth and advancement of those forging their careers. In my experience, if you give people responsibility, they take it and generally positively surprise you. Today, educated young people display so much more initiative and confidence than my generation, who were relatively subservient and existed in hierarchies. Today’s young people are too impatient for that nonsense – they’re independently minded and prepared to challenge. That forces change to happen. They take responsibility for their own careers and don’t allow the wrong behaviours to frustrate them. This is good for the industry and for the islands.

Is capturing a slice of the emerging markets critical to the Channel Islands, or has that all been overplayed?

I’d definitely say it’s essential, but it’s not for the fainthearted and is something that requires long-term commitment and appropriate funding. The key for me is time zones – it’s so simple in my view. When it comes to Africa, the Channel Islands have a big share of the continent’s international financial services business – historically private client work, but now increasingly more corporate and funds work. So we’ve stolen the march on other jurisdictions, perhaps with the exception of Mauritius, which has adopted a different strategy. And the long-term opportunity is absolutely phenomenal.

For me, the time-zone challenge when dealing with the Far East is almost insurmountable from a Jersey point of view – although Jersey Finance might not agree, and there are exceptions.

I’m an emerging market fan, and I plan to spend the rest of my working life involved in this area – most notably Africa. I find it much more stimulating and challenging than focussing solely on developed markets. And the returns, while more precarious, are infinitely more attractive.

Technology is increasingly prevalent in financial services, but in the attempt to cut costs and gain a competitive edge, is traditional wealth management going to suffer?

First and foremost, we need to remember that we’re in a service industry. The whole concept of trust is very difficult to deliver over an electronic platform. Undoubtedly, through technology and modern communication media, the traditional wealth management model space is being redefined. And the solution will differ depending on the nature of the client – their location, investable wealth, investment appetite and objectives. Ultimately, the market will determine pricing while the cost of delivery will remain a key factor.

While technology will never be able to satisfy all the sophisticated financial needs of individuals and organisations – which require human intervention if only for interpretation and education – the shortcomings of current models require revolution not evolution – that’s completely new thinking and not just adaptation of old models. We really are now on the cliff edge of technology delivering a significantly enhanced real-time solution in wealth management.

Do you have a view on the islands’ fintech ambitions?

I’m delighted that the States of Jersey have committed themselves so substantially to the idea that the island’s digital environment is of parallel importance to financial services, because I think it bodes very well for the local industry. I’m also impressed that the authorities have embraced the concept of cryptocurrencies.

The combination of our financial services expertise and those of Digital Jersey should work really well. And there’s every sign they’re making progress.

I’m probably the wrong age group to be asking about this, but I’m really very excited about it. I envy the next generation of ‘fintechies’ who have been born into such a revolutionary period in financial services. It has parallels with the late Eighties.

How can the islands compete with other jurisdictions, particularly those that offer a cheaper service?

We may be expensive, but we’re top-drawer. So provided we stay responsive, innovative and adaptable, we’ll continue to attract quality business. We don’t compete on price, we compete on service, stability and status. We operate in certain niches and pride ourselves on finding the best solution for clients. To a large extent, the client is jurisdiction-ambivalent if they’re getting the quality service they require.

There’s been a lot of M&A activity in the financial services sector across both islands. Do you see this continuing?

It’s very difficult for smaller organisations to survive these days. We’ve heard it for years, but when you think of the investment needed – in regulation, governance in general, technology, keeping up to speed with the rate of change in the industry, in training and employing good people – sadly, it’s almost impossible for small businesses to thrive with those constraints.

I think boutiques do generally tend to provide the best service because they’re more focused on the client. But the reality is that you have to create that boutique mentality in a bigger business backed by the necessary infrastructure.

At the other end of the scale, banks are de-risking and divesting peripheral businesses, which is an opportunity for the larger business to acquire bank books. The quickest way to build scale is to acquire, if you can do it effectively. The other key factor is the global wealth management proposition – you can no longer provide solutions from one location. If you want to provide a comprehensive service to an international client base, you need to be represented in multiple jurisdictions.

Sadly, sub-scale businesses can’t survive and will continue to be swallowed up – but hopefully by like-minded businesses who put clients first.

Are wealth managers having to innovate more to remain relevant – introducing new products, funds and alternative assets, for example?

A core portfolio for a client should be delivering something like two to three per cent over inflation at an appropriate level of risk, and that principle hasn’t changed in all the time I’ve been in the industry.

The introduction of passive investment has been a game changer, along with the recognition that most active managers don’t outperform. And it’s still very difficult to find a real distinction between most asset managers – ultimately, the only major differentiator is whether their process delivers or not.

So the new asset classes do add something, but not necessarily in one’s core portfolio until that asset class is commoditised in some way – take REITS and commercial property, for instance. Having said all that, what is exciting in the industry is the fact that access to these wider investment opportunities now actually exist. So my advice is park your core portfolio with an appropriate investment manager or combination of managers, and explore other opportunities with your risk capital.

What do you think are going to be the key characteristics of wealth management in the next five to 10 years, or is it not going to change very much?

I think the core concept of wealth management won’t significantly change, but obviously the revolution is around how it is delivered. What we have now is a new generation of educated young professionals in the industry who don’t fit into the kind of model that I came into 35 years ago.

They are people who are well educated, very keen to progress quickly, technologically savvy and who are going to challenge the status quo. They simply won’t allow the hierarchical environment that I was accustomed to to frustrate their career growth and development. I think this is really good for the industry and encourages change.

I still believe that individuals who aren’t qualified in financial matters will want to discuss their affairs with a professional, and it’s important they feel they can trust them and their judgement. But this has also got to translate into an efficient technological platform – that’s the challenge and it’s going to get solved in the very near future.

Is the Channel Islands message in wealth management still a compelling one?

The Channel Islands are the best in the business. We have the status, stability and longevity that will keep quality business coming to us in areas where we can demonstrate our capabilities effectively. I’m happy with that, and to those naysayers who complain about regulation – and I do sympathise with those smaller businesses, because it is a challenge – we’re past that. The regulatory burden has largely equalised across all the credible offshore jurisdictions now.

I do think practitioners need to stop being so introverted and spend more time and effort making business happen. There aren’t enough entrepreneurial island folk prepared to get out there and make a long-term commitment to building networks and business opportunities in remoter parts of the world.

The Channel Islands are in a very strong position. With real fortitude, our island governments and industry bodies continue to fight off ill-informed governments, supra-national bodies, NGOs and the like. In reality, our credentials as an international finance centre match those of the most sophisticated western nations. However, the brickbats will continue and we will no doubt face issues along the way. We are, without doubt, the most respectable, professional and best regulated of offshore environments.

In keeping with the islands’ traditions, we must keep evolving the laws, regulations and, ultimately, the services we offer to respond to this fast-moving environment – something that keeps me so fascinated and at my desk.

Do you think that being in such a strong position can lead to an element of complacency?

Absolutely. 100 per cent. It’s hard work. Some time ago, I calculated that over a 10-year period I’d spent three years travelling. You do what you have to do to build your business, and that’s the scale of investment people need to build a future for their businesses in Guernsey, Jersey or wherever. I think we’re in a good place and have earned our credibility over time, but we need to raise our sights, and go out and capitalise on it. We can’t rest on our laurels.

Should the islands be doing anything differently?

More of the same. Margins will remain under pressure, so outsource the labour-intensive work to cheaper jurisdictions, on- or offshore. Stay at the top of the reputation tables, be proactive and innovative in responding to the threats to our jurisdictions, and, most of all, stay close to clients and invest in staff.

For individual firms, don’t fixate on the Channel Islands. It’s no longer about single jurisdictions – it’s about being in locations that work effectively for your clients, and the strengths of particular places have polarised for reasons of competitive advantage. Firms can no longer provide an adequate solution from a limited number of jurisdictions.

Finally, one of my key mantras is ‘people buy people’. You must bear the cost (in a disciplined way) of being out in the market, building networks and understanding the real needs of your clients. Clients value nothing more than the commitment of their service providers over the long term. Don’t blame others for your shortcomings – get on and fix them. And most of all, employ the best people and invest in them.