The Interview: Keith Hale

Having spent his entire career in technology, Keith Hale is currently steering corporate services and trust market digital solutions provider TrustQuay on a growth journey. Here, he sets out how he expects the sector to evolve – as well as his expectations for the further digitalisation of the financial services sector as a whole

Tell us about your background and upbringing, and how that set you on the way to where you are today.

I was born in the UK, in Hertford, from where I went on to study electronic engineering at Bachelor level, followed by a Master’s in information systems. That was in the 1980s and early 90s, but I’d always been interested in technology, even before university times – and before such a thing as digital natives existed. 

I remember coming second in a young programmer of the year competition in the early 80s – which pointed me toward a career in technology. The other big influence was my father, who was quite entrepreneurial.

So I developed this dual interest in technology and building and growing businesses. And I’m lucky, because having always wanted to be building businesses and building them in technology – that’s what I’ve done.

Did you enter the world of technology because you foresaw the boom, or was it a coincidence that you entered such a rapidly developing area?

I vividly remember the first time I saw a computer coming into my school and thinking:”Wow, that’s cool, I want to get my hands on that.” I was immediately engaged – programming was the main thing you could do with a computer in those days to create stuff. Then my father bought an Apple II and I was away. 

So it was very much that my interest in technology came first and then the industry boom followed. I’m delighted the boom followed, obviously, but that wasn’t the reason I got into it.

My father actually warned me to be careful about going into technology – he said the bubble would burst, which he happily reminded me of in the dot com bust period in the early 2000s. 

I pointed out we are in the middle of the digital revolution, but he was sceptical. So that’s still an ongoing joke in the family – it turned out pretty well for me in the end.

What impact did that background have on your career and the route you have taken since then?

I really see my career so far as being three chapters – and I’m currently writing the fourth chapter. The first chapter, post-university, is what I call the ‘learning the ropes’ part of my life.

After university I worked for a relatively small technology company, which meant I did pretty much every role – programmer, business analyst, project manager. That was the learning the ropes chapter, throughout the 90s.

The second chapter came at the end of the 90s, when I launched a start-up with 10 friends and colleagues. The company was Netik, and we built that up to about 200 people before we got sold to Bank of New York.

That was a great experience, partly because I lived in New York and San Francisco, as well as in the UK. I learnt an awful lot about building a software company from scratch and I also learnt a lot about what not to do.

And then, from 2010, I did what I call a scale-up rather than a start-up – taking an existing company from a couple of hundred people, and doubling it in size.

The company, Multifonds, provided fund administration software, based in Luxembourg. I left in 2018, a few years after we’d sold it to another larger public tech company, Temenos. 

As I say, the fourth chapter is being written at the moment – the TrustQuay chapter – which we hope will recreate successes I’ve had in prior guises.

So what’s the story behind TrustQuay, what’s the USP and why is this such an exciting chapter for you?

We provide end-to-end – or front-to-back – software for the corporate services and trust market, and to a certain extent the alternative fund administration market.

We’ve got 460 customers globally across 30 jurisdictions. In the Channel Islands specifically, we have more than 60 customers in Jersey right now and about 35 in Guernsey. 

So we’ve got about a quarter of our customer base in the Channel Islands and it’s obviously a massive centre for trust and corporate services. 

What we think is that we’ve got the best technology and the widest global coverage, combined with the strongest team for our niche, which is corporate services and trust software. So that’s our differentiator – the coverage, the team and the best technology functionality associated with it.

How was the company founded and what’s the roadmap for evolving the business?

TrustQuay brought together two businesses. One was Touchstone Wealth Management, which has been in Jersey for many, many years and was headquartered here, and the other was Microgen. 

We bought the two businesses together because we really felt that they offered a strong proposition as a joint entity.

We agreed the deal in November 2019 and signed it in February 2020 – and when you consider the timing of that, with Covid-19, we’ve actually done remarkably well. In the midst of the pandemic, we’ve signed another 34 customers and delivered 33 projects. 

When the pandemic hit, I did think: “Oh dear, this is going to be a problem”, because I had a business plan to execute on and we faced this huge disruption. But there’s a massive digital agenda in this market and to accommodate that we’ve delivered a new product, our client portal. 

Traditionally, we provided back-office and middle-office software for our customers. How a corporate service provider or trust company interacts with its clients, be it a trust or a corporate or an individual, has been very manually based without any digital portal or apps.

Enabling that kind of live ‘front office’ digital interaction is a major new driver for the industry and us.

Has that digital agenda been accelerated as a result of Covid-19 – particularly in the markets you are focused on?

We’ve all heard the talk about that one month in March 2020 moving the digital agenda forward a year. And you might argue that the year we’ve had since then may well have moved the digital agenda forward 10 years. 

That being the case, and given the industry we’re in, there’s definitely plenty more digitalisation and digital transformation to do – because the industry is quite old-school, frankly, in the way it interacts with its customers and the internal processes. In the second half of last year, we did sign more customers than I expected. 

I guess the other relevant thing here is that all our projects are now delivered remotely. Buying something as sophisticated as enterprise software is a big ask without actually physically meeting somebody – but that’s what’s happened. 

Ultimately, we are seeing a significant digital transformation. I think that would have happened with or without Covid-19, but it’s certainly accelerated it.

What are the longer-term growth plans for TrustQuay?

The important thing to recognise here is the market context. The corporate services and trust market has some 2,200 corporate services and trust providers globally, so the market is very fragmented.

There’s been significant consolidation already, but that is accelerating and there’s going to be a rapid reduction in the numbers. The market is growing but it’s consolidating. 

The other aspect is digitalisation. We did a survey last year, and the industry ranked itself only 5 out of 10 for digitalisation. And I think that’s a little generous. 

So, as the industry consolidates but digitalises, our ambition and our whole investment thesis is to enable that digital transformation in an industry that wants to catch up with other parts of financial services and other industries. 

That, primarily, is an organic story. We’ve already got a significant customer base, probably the biggest in the software provision market to this sector. And doing more for existing customers, attracting new customers and targeting other markets where we’re not as well-known are key elements of that.

In Jersey, we’re reasonably well known, but we’ll be looking to do more in markets such as Luxembourg and Singapore, where more new potential customers are. 

If an acquisition comes along, and fits neatly in, we may take that opportunity. But we’re not one of these companies that goes out and buys everything we can.

The intent is to build a world-class software company to service the corporate services and trust market, and expand more into the alternative fund administration market.

You touched already on digitalisation of corporate services and trust providers. But what other factors are driving the evolution of the industry?

First and foremost, there’s a regulatory agenda – with a number of essential and increasing hygiene factors that have to be adhered to. And this is really relevant to Jersey. To meet those requirements in an efficient, automated way is key and is the right thing to do. 

The example I think of is the economic substance regulation, where entities have to demonstrate economic substance within the specific jurisdictions – Jersey and Guernsey included.

What we’ve done is to build a rules engine in partnership with a global accounting firm to assess whether you are now in scope to meet these regulatory requirements. 

Because it’s automated, it’s 96% more efficient to do it with this piece of software than it is to process it manually. 

And when you break that down, it’s really logical. You’ve now got a computer doing something rather than somebody checking a bunch of different questions on a bunch of different data.

The second driver is increased demand for wider automation in general. Many tasks – not just regulatory – in corporate services and trust providers remain very manual and paper-based. Using automation to reduce the reliance on people increases accuracy, reduces the need for operational staff and is less repetitive and boring for those working in the business. 

And it should reduce costs for the business and for the end client. It can deliver the corporate service and trust provider increased margins and, ultimately, make the businesses more valuable. 

The staff are better off, the clients are better off, the organisation is better off, and the shareholders are better off. That is why digitalisation is so important.

That’s a compelling proposition, but does the traditionally manual nature of the industry make it challenging to persuade firms of the benefits of digitalisation?

When we surveyed the market, there were a couple of statistics that jumped out. Two out of three firms said their end-clients wanted an increased digital experience.

But what was really compelling was that 69% of firms wanted to digitalise their business in terms of client engagement over the next two years – just to remain competitive. 

That’s really important. It’s not an easy sale; there is some conservativeness. But I think it’s becoming a more compelling sale. 

Technology was looked down on as this pesky thing you had to have for a while – and that was certainly my experience when I started in the industry 30 years ago. But it’s coming up the agenda. 

The other dynamic is that the market has moved in terms of how it charges its clients. Traditionally, you would get billed, like in a law firm, on the basis of time – because a lot of these businesses were spin-offs from law firms. But it now operates on much more of a fixed price for the entity you have or the process you have. 

If you’re using fixed pricing, you want to get the job done as quickly and efficiently as possible. That has really changed the dynamic over the past few years.

How far do you see the market changing in, say, the next 10 years – and how far do you expect the consolidation to go?

Well, you won’t have 2,200 players, you’ll probably have hundreds, and in Jersey you’ll have a handful of the global players and a reduced number of local specialists. 

I’m not going to guess the names but I predict around 20. I come from a long-only fund admin world and I saw that happen there over the last 20 years. The custodian banks merged into a top 10.

Similarly in this market, I think you’ll have those that will be almost like global factories – production lines of highly automated activity covering a load of jurisdictions, covering the very largest corporates, funds and very large family offices. 

There’ll also be this polarisation to what I call the ‘specialist’ providers, the providers that offer very high-value, high-touch services to clients who are happy to pay more and have specialist skills – and that might be in a specialist location such as Jersey or Guernsey. 

But you’ll need technology at your core whether you’re a global player or a specialist provider, because the global player is all about efficiency and coverage, and a single view of the client, while if you’re at the other end of the spectrum you want the technology to back up your personal level of service with digital client portals as well as automated risk assessments and filing. 

The big global players will probably still have more of a patchwork of systems and technology, because of their scale; the specialist providers will want technology that can do their soup to nuts processing– probably deployed on a software as a service basis.

Do you see the financial services sector as a whole moving in the same direction – with further, more rapid digitalisation and greater growth of fintech?

The term fintech is often used in the wrong way. People have this view that fintech has to mean a start-up and it has to be disruptive. But what we’re really talking about is ‘financial technology’. 

It’s not about disruption in that sense. It’s about changing the way people work and the way businesses reach and engage their clients – and the fact that we can all move in that way, rather than just a few ‘disruptors’. 

It’s like when Tesla came up with an electric car. Now, the whole industry is moving to electric cars. It’s changed the game. The same is happening in financial services and the same will happen in the corporate services market.

People will move to a digital-first, technology-driven operation that isn’t manual – and if you don’t, you’ll be left behind. 

Businesses will embrace technology in a much more meaningful way. How they engage with clients, how they automate processes and how they deploy software in the cloud will change in the next 10 years without a doubt. 

The reason is that digital can massively improve the client experience. If I’m a client of a trust company, I don’t want to have to rely on post, email and calling somebody to respond to a query. I want a secure portal or an app that will give me the data, so I can request and hopefully get a response in the middle of the night when I remember I need something done. 

As clients, we prefer to do that rather than rely only on a more antiquated, non-digital way of engaging. I still want to have my relationship manager doing the filing correctly, for example, but I want to have  a digital way of engaging too. It’s what the next generation of digital natives expects.

You’ve talked about how the islands’ corporate services and trust providers markets might evolve, but how do you view the islands’ longer-term strength?

The Channel Islands certainly have a strong position when it comes to finance. Almost all the global corporate services, trust and alternative fund administrators are already very invested and committed to the Channel Islands. Also there’s a wide selection of specialist local providers. 

But it’s the islands’ regulators as well as service providers’ ability to remain nimble and embrace change, particularly given the rapidly consolidating and digitalising market, that are key to long-term success. 

Working in new ways that are far more automated, and engaging with clients digitally as well as traditionally, could and should be a real strength and differentiator. That’s why I can see the Channel Islands continuing to prosper in the future, but only if change is embraced.