The emerging might of equity trust
Hugo Van Vredenburch, CEO at Equity Trust is a well liked and respected man in the industry with only praise coming his way. Even competitors agree he is a “people person” which is indeed a badge of honour. This really is no surprise, the Dutch are great: they are funny, go-getting, ballsy, bright and focused – that is if you can broadly brushstroke a whole nation.
However, I know first hand that people have exited Equity Trust exasperated. Also that the newspapers in Jersey have been giving them hell about redundancies. A print article claimed ninety ‘let go’ but Hugo Van Vredenburch says “no, this is not the case, it was seven enforced with a further thirty applying for exit packages.” Independent sources also confirm that the Jersey Post numbers were an aggregate of phased figures and not a big bang exit. Whatever the details, a scar is perceivable in Jersey which will take time to heal. In Equity Trust’s defence: “they aren’t the first trust company to have troubles in the island” and new shoots are being seen with inspired hiring including the well respected figure Phil Austin. Phil was formerly Chief Exec of Jersey Finance who is sure to restore future equilibrium and respect.
Hugo Van Vredenburch says in the first few minutes “just fire your questions at me” and I think this is telling. He wrestles life to the ground and asks for the next opponent. As former COO of the global equities division at GS responsible for Asia, New York and London he is a formidable man. His experience spans Head of Equities in Asia and Japan and head of distribution in the European equity division. Although he officially joined Equity Trust in August 2005, he had been involved with finance behind the scenes for the group so knew the management team well.
Hugo didn’t leave Goldman Sachs and join Equity Trust straight away. He exited Goldman Sachs with no future plans. The reason? “I felt I’d done all I could do.” After some time floating (with his enormous fortune gathered from GS undoubtedly) he assisted in the ABN AMRO purchase and through this contact, later struck a deal with the Equity Trust and Candover team to head up the operation. Before joining, Hugo put in some due diligence; checked out historical performance; spoke to competitors (Fortis and Citco) and also people at Equity Trust. He concluded: “The trust business is an interesting one and it is an interesting time for the trust business.”
Hugo takes me through the history of the group. “Equity Trust originated in Holland in the seventies formed from a management buyout from Insinger de Beaufort (a Dutch bank which is thought to be why the strong continuing Dutch connections). Since then Equity Trust have gone on to purchase Matheson Trust and Standard Chartered’s and ABN AMRO’s trust business too.
Hugo says “We’ve been growing like a weed.”
Hugo is the first to say that when he arrived the business “was like a federation of little businesses and countries.” He adds “my first task was to bring the business together to create a working, global entity.”
Continuing Hugo says “Equity Trust is large, we have a thousand people in twenty six locations and have
now formulated the business into five distinct streams.” He adds “The five businesses are: private wealth admin in Jersey; a corporate business in the Netherlands and Luxembourg; fund admin for alternative investments like hedge fund and private equity; a structured finance business for securitisations and finally a wholesale incorporations business which deals with the sale of companies to intermediaries.”
Hugo comments “Forty percent of our business is private wealth in Jersey, Guernsey, Geneva, Hong, Kong, Singapore and BVI. On analysis Jersey wasn’t focused enough but we are addressing that.” He says further “We are not going to commoditise the trust business and we are not looking for clients of a specific uhnw value. I think that is the wrong way to look at the business. We want to work with clients who need complex help. A single structure with small fees is not something we are interested in.”
Criticism has been levelled at Hugo for his non trust background. Some say in the current, client culling that good clients are being handed to Herald Trust who are much more valuable than Equity Trust realise. Hugo counteracts this saying “We know what we are doing, we have careful measures and benchmarks and the understanding of profitability of every client has been assessed properly.” As to how intermediaries will react to another ‘industry cleanse’ he says “we have been up front and honest about this with clients, it is the only way. We have explained ‘we are not the best trust company for you’ we cannot help you without charging fees you will not be happy with.'” He adds pragmatically “There are always going to be a few pissed off people.”
I ask what Hugo will bring to the Equity Trust table. He comments “At Goldman Sachs whilst I was there, the business went from 6,000 people to 24,000. I know how to manage that type of growth.” He continues “There was traditionally a private client business but no corporate expertise in funds admin. I will bring more focus to that.”
So where is Equity Trust now? “We are getting a lot of business through the door with no effort at all.” He comments further “We are the outsourcing partner for professional services firms globally” and his favourite saying “all parts of our business are growing like a weed.” Continuing he says ” We are bringing in a lot of business from South America and the non dom’ community is still as strong as ever.” To the sticky subject of Jersey, Hugo comments “We are not ‘culling’ in Jersey, we are simply downsizing the business. It was never properly integrated after recent mergers which we are working on now.” He comments further “Jersey is an important part of our business but just one piece of the jigsaw puzzle.” Then adds “Geneva and Guernsey are thriving.” Of the general history of Equity Trust Hugo comments “I think we have done too many acquisitions with not enough attention to integration.”
And crystal ball gazing for Equity Trust? “the trust business is exciting” he says “we plan to grow with further acquisition and organic growth. There are a lot of licences floating around and it’s a very fragmented business. When I did my research before joining, I discovered that the big players like Fortis and Citco only had 5% of market share between them. That means there is likely to be further
consolidation. I believe sole jurisdiction trust companies will struggle to service the complex, uhnw corporate and funds clients. He adds further “We are being pushed to deliver on costs so technology will also play its part.” Continuing Hugo says “We have a very large tech project in place which will revolutionise the way we bill clients. It will bring greater consistency to clients working with Equity Trust and allow staff access to our global information resource.” He concludes “I have a healthy respect for what technology can do for us.”
All of the management team at Equity Trust have a stake in the company. The sums are: Candover, 60% Insinger 10% and the management team 30%. There are also big plans afoot for a stock exchange float in 2008. I
ask what Candover are like and Hugo says enthusiastically “they are very supportive, they know these things are much harder than they look.”
So is Hugo just a money man? Out to cash in on the trust business and walk away? He says resolutely not. “I love the business and just doing it to make money doesn’t interest me. I love the entrepreneurship – I can build something significant here. We now have a portfolio of distinct products which are running successfully. We have the worlds leading trust company and plan to be the best. The only area that needs some work is structured finance.” He adds further “its funny, many people have a view that trust is a backwater but I compare it to the brokerage business from the eighties. It was little regulated, it didn’t rely on technology and the business was fragmented but just about to get global. Capital requirements (because of regulation) are now becoming a barrier to entry. The trust business is going to be tech driven and multi jurisdictional.”
I wonder what Hugo thinks of the increasing law firm race to be ‘on every island especially with many having significant trust arms?’ He says “their offering is not a fraction of our capability.” Slightly moving off theme he continues “We are talking to many people who want to drop their trust business because of conflicts of interest. Many private banks worked out that a trust structure would make clients more sticky but it was a loss leader.”
And their USP? “I believe that everybody who walks through the door of the intermediary says ‘we are great’ but no-one has the breadth of experience we do. It’s a competitive advantage. We offer top notch client services and don’t say ‘buy this,’ we say ‘where is your client going? Tell us about them.’ We will then sit down, take an enormous about of time thinking about issues and come back with a unique offering.” He adds “95% of our business comes through intermediaries.”
Luxembourg comes up in conversation and Hugo is happy to champion their corner “They have a great double taxation treaty from a corporate perspective and the authorities are very consistent. Their rulings stick and stay.” He adds “Everyone is trying get monetary advantage but in my opinion, a lot of money goes to Cayman and Luxembourg and there isn’t really any reason to move.” He adds “business is coming more and more onshore which is being driven by funds. People want to be close to their money.”
Of the future of the trust industry Hugo is clear “We want to be the worlds leading trust company up there with Fortis and Citco. There will be polarisation with eventually be a few top players and some boutiques but as long as the business comes to one of our jurisdictions we will be happy. Clients coming through our door are much more demanding these days, better informed and we are responding to that. Asia is a hot spot for us and despite recent press reports of single millionaires rather than multi millionaires that is not our experience. There are some serious uhnw’s there worth tens of millions. Other hot spots are the Middle East, Eastern Europe and South America.” He thinks then adds “Panama is booming for instance.”
So what does Hugo actually do I wonder? Does he sit in an ivory tower dolling out orders? “No” he says forcefully, “I spend fifty percent of my time with clients. It is the only thing to do. We must spend much more time at the coal face in my opinion.”
As Jersey has been a controversial area for Equity Trust I thought I would speak first hand to someone else within the organisation. Someone with Jersey experience to give this article a more local perspective. Phil Austin kindly agreed to speak to me at short notice. He undoubtedly commands respect throughout the world. He joined Equity Trust from Jersey Finance this year in a move that surprised the whole market. It was without doubt an inspired hire.
Phil says of his reasons for joining “I came to Equity Trust for two reasons: because it was a challenge and I believed it was a solid franchise. It is an independent trust company with preferred supplier agreements and with growth potential with banks divesting because of conflicts of interest.” He continues “People thought I was mad when I joined but then they also did when I left HSBC and went to Jersey Finance. I came with my eyes wide open.”
Of the Jersey operation he says “Jersey was the biggest office and had the lions share of acquisitions which had not had a clear plan to integrate which made performance suffer. It lacked leadership. As you know, we have plans to float Equity Trust so need Jersey firing on all cylinders which is my task now. I gave a number of presentations when I started and spoke to staff. Staff agreed we needed to change, so this is something we’ve embarked upon.” He adds “I’ve been pleasantly surprised in our ability to recruit serious people. For a recent HR role in Jersey, I got fifty six applications. I’ve now got the best compliance director in the market from Abacus, and an outstanding operations director form RBSi. All these hires have been recruited over the last two months and we are bringing in other key people too. He adds “I am trying to get people more client focused.”
And previous staff who have now left the business but continue to smart? “I would say yes, probably they weren’t treated very well. During the management buyout, I know some felt hard done by and some of these issues should have been addressed two or three years ago not left without attention. Its tough making people redundant but we understand our history and our moving one step back to reorganise the business.” He interjects “I like to think of a phrase Winston Churchill used, ‘success is going from failure to failure without losing your enthusiasm'” and you can hear him smile at the end of the phone. Continuing he says “If something goes wrong you
have to pick yourself up and carry on.” He adds, “We’ve only just got senior people on the board in the last few weeks which has really taken the pressure off for all of us.”
Phil continues “The catalyst for change was the management buyout.” Reflecting Hugo’s earlier thoughts: “Candover have been very supportive.” He continues “They have been fantastic and been prepared to invest money Jersey which was where it was most needed.” I comment that most private equity houses are known to be pretty tough and am almost surprised at their earnest endorsement. Phil says “They are tough cookies but Candover’s Charlie Green who sits on the Equity board has championed us all the way.” Phil shares a thought: “At a meeting on Monday, we agreed ‘you never know when you are at the bottom of the curve or on the way back up’ but we feel we are on the way up finally. By 1 Jan we will be back in business mode again. Our executive committee is now in place globally, I speak to Hugo every day and we are all talking from the same page.” He comments “With all due respect to the big institutional operations who give staff little discretion, we are much more entrepreneurial.” He adds “We have a blank sheet of paper to write on and are putting the building blocks back in place again.”
Phil continues “One of the things we need to work on is our profile and reputation in the business community. We also need to get staff moral up which will be a gradual process but we will regain their confidence. We are adding layers of HR, training and development to help this process. Although pay is important we believe we need to work on the whole area of employee welfare.” He adds further “Over a period of time people will start believing again.” Then adds seriously “We know we have to deliver. We have already gone some way to ward this with improved benefits and revised health packages.”
Phil Austin was formerly Chief Executive of Jersey Finance and Deputy Chief Executive for the offshore business of HSBC and ran Jersey, Guernsey, Isle of Man and Dublin which had 750 staff in Jersey alone.