Schroders: Why ‘safety-ism’ is off the agenda in money manager’s turnaround
Schroders’ new chief Richard Oldfield will be tasked with reining in costs and boosting growth at the storied FTSE 100 asset manager
Peter Harrison struck a sprightly figure as he addressed a room full of City types in the days after Labour’s election victory in early July.
While uncertainty was still gripping the Square Mile over what the new government might mean for business, Harrison was unburdened by his announcement some months earlier that he would be stepping down from the FTSE 100 asset manager.
A global headhunt for his successor was well underway, and the 58-year-old grandee laid out a swansong vision for the future of financial services and lamented the troubles London had found itself in over the previous years.
“We’ve got a safety-ism that’s built into everything, every one of us that runs a regulated business – it’s aim off, aim off, aim off [risk],” Harrison told those in attendance at the Aquis Exchange.
Safety-ism has not been a feature of his leadership since he took over in 2016. Harrison, who began his career at Schroders as a graduate in 1988 and returned as investment chief in 2014, has shepherded Britain’s most storied asset manager through a period of tumult and ploughed investment into its private markets, wealth management and solutions businesses, a strategy designed to combat the industry’s shift toward lower-fee passive investing.
However, falling profit and a bloated cost base have left their mark on the 220 year-old firm. Shares in the company are down around 30 per cent since he took over and over 50 per cent from a peak in 2022.
Those woes were brought into sharp relief yesterday as Schroders, days before Harrison hands over the reins to finance chief Richard Oldfield, revealed it had shed some £2.3bn in flows over the summer and expected another £10bn more over the next three months.
The update marks the first time the company has broken out its fund flows by quarter and sets the stage for a potential change in direction under former PwC executive Oldfield. In a call with analysts, he gave a pointed summary of where his priorities would lie.
“What do I want to improve? Focus and execution. I’ve said that my initial priority is to focus on simplification, commercial discipline and flawless execution,” he said.
The comments were received by many as a euphemistic reference to swinging cuts and job losses. Oldfield’s background as an accountant and 30-year career at PwC have also fuelled speculation that his attention will be fixed on managing costs.
A statement alongside the quarterly figures similarly hinted at “cost-cutting to be unveiled”, said RBC analyst, Mandeep Jagpal.
While Oldfield said his role would be to “execute on the potential Peter has created”, equally pressing will be the question of whether to forge ahead on the same path or carve out a new one. Schroders’ private markets push is still gathering steam and it is set to shed flows from its lower-margin solutions business over the next quarter.
Its sprawling global presence and traditional fund management business are similarly seen as one area ripe for simplification in the push to cut costs, with Oldfield himself acknowledging the firm has “an awful lot of products that we deliver to an awful lot of clients in a lot of markets.”
“I want to make sure that we can focus on those parts of our business where we can really see growth,” he said.
Analysts were quick to point to Schroders’ cost base yesterday as they plotted a route ahead. Panmure Liberum’s Rae Maile drew comparison with the potential turnaround strategy at Abrdn, which called on its CFO to take the top job on the same day as Schroders.
“The difference is that Abrdn has too many people with the right ones not paid enough, whereas Schroders has too many people paid too much,” Maile told Morning Wire.
It will be a long in-tray after a turbulent period for the FTSE 100 investor, one that may trigger a sweeping change in strategy.
“Standing still is not an option for Schroders in today’s fast-changing market landscape,” Oldfield said in the update to the market.
But while Oldfield’s strategy may differ from his predecessor, safety-ism similarly appears to be off the agenda.