Schroders Plc · LSE:SDR
Schroders — Investor Day (May 2019)
84 slides from Schroders's investor day presentation, May 15, 2019
Slide 1: Welcome to Schroders Investor Day 2019
Welcome to Schroders Investor Day 2019 Peter Harrison, Group Chief Executive 15 May 2019
Slide 2: Investing for growth
Investing for growth Closer proximity Expand Grow Private to consumer core business Assets and Alternatives Rebalance business towards Grow Wealth offering Target client longevity private markets Technology 1
Slide 3: Moving closer to our end customer
Moving closer to our end customer Start End Speaker Presentation 09:00 09:10 Peter Harrison Introduction 09:10 09:40 Peter Hall Wealth Management at Schroders 09:40 10:10 James Rainbow An introduction to Schroders Personal Wealth 10:10 10:40 Susan Soh Schroders in Asia: a business strategy for a dig
Slide 4: Wealth Management at Schroders
Wealth Management at Schroders Investor Day Peter Hall, Global Head of Wealth Management 15 May 2019
Slide 5: The Wealth Management sector has attractive features
The Wealth Management sector has attractive features Growth Longevity (yrs) Revenue margin (bps) 7% 14 80 6% 12 70 60 5% 10 50 4% 8 40 3% 6 30 2% 4 20 1% 2 10 0% 0 0 Wealth Management Asset Management Source: Schroders and Oliver Wyman “Trends and Opportunities in UK Financial Advice” March 2019. Gr
Slide 6: A strong franchise across the UK wealth management spectrum
A strong franchise across the UK wealth management spectrum… Charities HNW Affluent £65bn client assets with 705 advisers £32bn client assets £13bn client assets £20bn client assets 135 advisers 320 advisers 250 advisers Source: Schroders. Press release announcing joint venture of 22 October 2018. 5
Slide 7: …generating significant profits…
…generating significant profits… Full year 2018 Annualised proforma 2019 Schroder Schroders £m Benchmark Capital Wealth Management Wealth Personal Wealth2 Net income 268.9 20.9 289.8 68 Costs (182.4) (14.0) (196.4) (51) Profit before tax1 86.5 6.9 93.4 17 Source: Schroders, correct to 31 December 20
Slide 8: …and achieving a turnaround in growth
…and achieving a turnaround in growth Net new business and annualised net Net new business as percentage of average AUM new revenue NNB ANNR £bn £m 6.0% 1.6 16 1.4 14 5.0% 1.2 12 4.0% 1.0 10 3.0% 0.8 8 0.6 6 2.0% 0.4 4 1.0% 0.2 2 0.0 0 0.0% (0.2) (2) -1.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -2.0% 2017 2018 201
Slide 9: Unique strengths across the spectrum
Unique strengths across the spectrum Charities HNW Affluent – Differentiated, aspirational brands – Unique distribution access LBG client referrals – Benchmark technology – Schroders multi-jurisdiction Multi-jurisdiction capability Benchmark platform booking Schroders global investment expertise – S
Slide 10: Cazenove to build upon existing strong franchises
Cazenove to build upon existing strong franchises… …and capture new opportunities Private client City Charities Family offices Entrepreneurs lawyers/ professionals accountants Winner 2019 Total Wealth Number one in 101 families with One in four SME Solutions HNW UK charities £10.6bn AUM banking rela
Slide 11: Schroders Personal Wealth designed as a standalone JV
Schroders Personal Wealth designed as a standalone JV, drawing upon LBG’s customer base and Schroders’ investment expertise and technology Targets growing need for financial advice in the UK, particularly in pensions for affluent individuals Standalone business with independent Board and entrepreneu
Slide 12: Benchmark Capital to offer award-winning technology to the JV
Benchmark Capital to offer award-winning technology to the JV and a complementary channel targeting the affluent segment SEI Fusion Enable Custodian Investment Core advice platform and platform front end Visualisation to SEI Winner Client portal Professional Adviser Awards 2018 Best Network Azure cl
Slide 13: Priority 1: Strengthen organic growth further
Priority 1: Strengthen organic growth further Recruitment Freeing up Culture Retention capacity Source: Schroders. 12
Slide 14: Priority 2: Offer institutional quality investment proposition
Priority 2: Offer institutional quality investment proposition Segregated Sustainable Private Funds at portfolios investing Assets Institutional rates Cumulative performance to 31 December 2018 (%) 1 year 3 years 5 years Cazenove Capital Sterling -1.4 15.7 27.9 Balanced Portfolios – Direct Equity AR
Slide 15: Priority 3: Leverage digital as competitive advantage
Priority 3: Leverage digital as competitive advantage through scalable and efficient platforms Client Prospecting Onboarding Client reporting management Scalable and efficient multi-jurisdiction platform Source: Schroders. 14
Slide 16: Priority 4: Build a unique model in Asia
Priority 4: Build a unique model in Asia Independent asset Bank partnerships managers HNW Affluent Source: Schroders. 15
Slide 17: Priority 5: Pursue acquisition opportunities selectively
Priority 5: Pursue acquisition opportunities selectively Good track record of successful acquisitions Criteria for potential acquisitions: and integrations: – C.Hoare & Co – Provide a new capability or enable long-term growth – Discretionary assets from long-established UK wealth manager – Have a go
Slide 18: Our goal
Our goal “ Become a top 3 player across charities, HNW and affluent financial planning in UK Wealth Management, drawing upon our: – unique sources of growth – leading brands – global institutional investment expertise. Be known in our target client segments as the best people to help as trusted advi
Slide 19: Any questions?
Any questions?
Slide 20: Schroders Personal Wealth – launching June 2019
Schroders Personal Wealth – launching June 2019 Investor Day James Rainbow, Chief Executive of Schroders Personal Wealth 15 May 2019 For professional investors only. Not for retail clients
Slide 21: The new business has generated a lot of interest
Communications 20 The new business has generated a lot of interest In the press… On social... 2,183 700 positive 3,475 1,358 articles 1,463 neutral mentions tweets online Source: Kantar Media and Brandwatch 1 October 2018 – 7 May 2019.
Slide 22: There has never been a greater need for financial advice
Market background 21 There has never been a greater need for financial advice Changing approach Pensions Great An ageing to retirement complexity wealth transfer population In 2018, the percentage of 1.25m people working today Annual inheritance forecast to For the first time in history, people aged
Slide 23: Adviser numbers gradually rebuilding after RDR
The advice market in numbers 22 Adviser numbers gradually rebuilding after RDR – but the picture remains very fragmented Number of staff advising Average number of advising staff per firm 30,000 6.00 27,080 25,997 26,339 25,611 26,311 5.08 5.11 5.12 25,000 23,865 23,640 23,864 5.00 4.66 4.62 4.77 22
Slide 24: A societal need for advice and the challenges of delivering it
Making the case for more access to advice 23 A societal need for advice and the challenges of delivering it – Vanguard research shows investors who – March increase in FOS compensation limit use an adviser have an average return 3% (to £350,000) continues increase in p.a. greater than those who DIY
Slide 25: Significant change in mix of fees and commissions since RDR
The advice market in numbers 24 Significant change in mix of fees and commissions since RDR £4,000 £3,000 £2,000 £1,000 £0 2013 2014 2015 2016 2017 Commission (Net) Fees/charges Other revenue Source: FCA June 2018, Autus Data Services.
Slide 26: How do you charge your clients?
Very few use fixed fees and hourly rates as the sole method of charging 25 How do you charge your clients? 60% 50% 40% 30% 20% 10% 0% £ based on an hourly rate £ fixed fee % of AUM/advice A combination of up to all three 2014 2015 2016 2017 2018 Source: Schroders Adviser Survey, November 2018.
Slide 27: AUM based fees
Post-RDR fee mix has shown advisers increasing annual fees 26 AUM based fees Average % fee based on assets 50% 40% 30% 20% 10% 0% 0.5% p.a 0.75% p.a. 1% p.a. More than 1% p.a. 2014 2015 2016 2017 2018 Source: Schroders Adviser Survey, November 2018.
Slide 28: Average client size remains critically important
56% of clients have assets >£200k while only 1% have assets <£50k 27 Average client size remains critically important 80% 70% 60% 50% 40% 30% 20% 10% 0% <£50k £50k - £100k >£100k - £200k >£200k 2016 2017 2018 Source: Schroders Adviser Survey, November 2018.
Slide 29: Nearly 80% of advisers see technology as an opportunity
Do you believe new technology represents a threat or an opportunity to your business? 28 Nearly 80% of advisers see technology as an opportunity. We agree. 80% 70% 60% 50% 40% 30% 20% 10% 0% Threat Opportunity No impact 2016 2017 2018 Source: Schroders Adviser Survey, November 2018.
Slide 30: Giving you the best of all worlds
How we will work with our clients 29 Giving you the best of all worlds Your Personal Wealth Adviser + Technology that helps, not hinders + Simple and clear planning solutions – Able to consider your – 24/7 online access to your latest – Straightforward products, aligned circumstances and goals finan
Slide 31: No exit charges and no hidden fees
Unbundled, straightforward costs 30 No exit charges and no hidden fees Initial advice Ongoing advice DPM Platform Flat rate Tiered Flat rate Flat rate
Slide 32: Five transition states to the stand-alone Joint Venture
Transition states 31 A programme has been established to deliver the stand-alone Joint Venture through five transition states TS0 TS1 TS2 TS3 TS4 TS5 Customer Launch of Benchmark ACD authorised and Change Stand-alone comms JV OpCo comes online funds transferred of ownership Joint Venture – In-scope
Slide 33: Schroders in Asia: a business strategy for a digital age
Schroders in Asia: a business strategy for a digital age Investor Day Susan Soh, Country Head of Singapore 15 May 2019
Slide 34: Well positioned across Asia
Well positioned across Asia Significant depth and breadth in investment and distribution Asia and Australasia Australia Japan – Presence in 8 countries in the region China Republic of Korea Hong Kong2 Singapore2 Indonesia Taiwan – AUM and revenues of £90.9bn and £477.3m respectively1 – Over 40 years
Slide 35: Getting closer to clients in Asia
Getting closer to clients in Asia Strategic stake, partnership and acquisition over the past year Strategic stake in Partnership with Acquisition of WeInvest Maybank ThirdRock Source: Schroders. 34
Slide 36: The evolving landscape
The evolving landscape The financial ecosystem and the client are changing Technology Investors Regulators Distributors Digitisation of data Millennials demand Digital banks, non-FIs Scaling convenience Automation Open banking Emphasis on user Increased awareness journey of preferences Personalisati
Slide 37: The reinvention journey
The reinvention journey Strategy for a digital age Productivity Strategic Distribution Provider of enhancement acquisitions enablement solutions Efficiencies through Technology/digital Digital tools Transition from automation and capabilities supporting distributors a product provider to a digitalis
Slide 38: Getting closer to the end client
Getting closer to the end client Sparking smarter relationships AI as a AI augmented service Solutions Advisory as a service Model Portfolio Life goals Alternative risk Services profiling Platform as a service WeInvest SchrodersGO Digital training Schroders strategic capabilities Over 200 years’ Ove
Slide 39: Platform as a service
Platform as a service Platform Support intermediaries on their digital transformation journey as a service WeInvest SchrodersGO Digital training Wealth technology provider Chat bot for client servicing Digital sales training End to end digital investing Phase 1: Investment 101 experience for RM assi
Slide 40: Advisory as a service
Advisory as a service Advisory as a service Partnering with intermediaries to enhance wealth advisory Model portfolio solutions Life goals solutions Alternative risk profiling (risk-based) (goal-based) Support financial advisors, Traditional products are Complement traditional risk institutions and
Slide 41: Aspirations – AI as a service
Aspirations – AI as a service AI Harnessing client data in an open banking environment AI augmented solutions In-house data science and robotics teams Banks’ data Integration of anonymised client data into our investment solutions Open API Third party apps and services Source: Schroders. 40
Slide 42: Examples of B2B2C partnerships in Asia
Examples of B2B2C partnerships in Asia Through client-centric solutions and digital tools Invest IQ as alternative KYC Tool Client-centric solutions SchrodersGo, digital training rollout Local distributor. Source: Schroders. 41
Slide 43: A client-centric solution with a Singapore bank
A client-centric solution with a Singapore bank Investment capability Life goals Digitalisation Where the client is truly at the centre of an investment solution Source: Schroders. 42
Slide 44: Maybank: a life with principles
Maybank: a life with principles ESG, Shariah, Sustainability, Philanthropy Leverage Financial Prohibited Purification Interest-taking ratio instruments activities deposits Source: Schroders. 43
Slide 45: Strategic benefits
Strategic benefits Get closer to the end client by delivering customised solutions focused on solving client-specific problems Improve the longevity of the intermediary – client relationship, by becoming the financial partner for life Increase cost efficiency of our business by using technology Sour
Slide 46: Any questions?
Any questions?
Slide 47: The digital asset manager
The digital asset manager #DigitalSchroders Investor Day Graham Kellen, Chief Digital Officer 15 May 2019
Slide 48: Enabling disruptive technologies
Enabling disruptive technologies We are at a unique ‘Super convergence’ point in technical evolution: a 4th industrial revolution Last 3 years focused on understanding and Our work over the next 3 years will be enabling enabling innovative technologies the adoption of the following: Big Intelligent
Slide 49: Digital strategy and innovation focus areas
Digital strategy and innovation focus areas Core area of organisational focus and support Customer Operational Business model People and experience processes digitisation organisation improvement digitisation strategy retraining Key enablers Analytics and data science FinTech and innovation Emerging
Slide 50: Customer experience improvement
Customer experience improvement 49
Slide 51: Technical sophistication – digitally savvy and native clients
Technical sophistication – digitally savvy and native clients Connecting with the increasingly connected client At work At In home the car With the At the game customer At the bar/ restaurant Away from home Consumer retail Source: Schroders. 50
Slide 52: Changing user experience
Changing user experience Experience is now a vital part of the ‘Product’ Every user interaction, client facing financial tool or service delivered must be: – Client-centric – Omni-device and touch aware – Intuitive and ‘smart’ – Frictionless – Engaging UI/UX – Cohesive holistic design – Consistent s
Slide 53: Customer engagement digitsation
Customer engagement digitsation Key area of focus – Content personalisation – Preference capture – Hyper personalisation of marketing – Digital interaction tracking – Client interaction data analysis – Machine learning based client action insights Source: Schroders. 52
Slide 54: Operational processes digitisation
Operational processes digitisation 53
Slide 55: Robotic Automation Programme
Robotic Automation Programme Intelligent automation results 2019 FTE benefits or equivalent by function 79 100+ 5 offices around the bots FTE globe have delivered benefits benefited to date achieved from RPA 10 200 POC functions staff on machine learning and trained to run using bots to natural lang
Slide 56: The Data Insight Unit's vision
The Data Insight Unit’s vision Using data science and machine learning to unlock the value in data for decision making Provide data science research service Unlock the value in data by engaging in research-on-demand to help our investment teams make higher-conviction decisions Make available new dat
Slide 57: Digital investment innovation
Digital investment innovation The fund manager toolkit is changing Analytics and insights Insights and AI and Robotics scalability ML Data platform Source: Schroders. 56
Slide 58: Business model digitisation strategy
Business model digitisation strategy 57
Slide 59: Our traditional role
Our traditional role Asset management 1980s–2017 The evolving role of digital in asset management’s client channel End Investor Distributor Product Manufacture Advised, XO, Robo-Advised, Bank, IFA, Wealth Manager, e.g. mutual funds Hybrid-Advised, DFM, MPS, Insurer Discretionary-Managed Near total f
Slide 60: 'Digital 3.0'
‘Digital 3.0’ Digital co-creation in the distribution value chain The evolving role of digital in asset management’s client channel End Investor Distributor Product Manufacture Advised, XO, Robo-advised, Bank, IFA, Wealth Manager, e.g. mutual funds Hybrid-advised, DFM, MPS, Insurer Discretionary-man
Slide 61: People and organisation retraining
People and organisation retraining 60
Slide 62: Digital skills programme
Digital skills programme Bridging the skills gap and creating a first class digitally-enabled workforce The digital training programme aims Design and evolve the transformation of the organisation to build: Masters – Digital confidence – Digital competence Lead and participate in the transformation
Slide 63: Technology enablement & acceleration
Technology enablement & acceleration Asset and Wealth Management leadership are showing a "surprising complacency about technological innovation" when compared to their Data AI & ML counterparts in the wider financial sector, according analytics to a report by PwC. Schroders can exploit this to our
Slide 64: Cobalt programme
Cobalt programme We believe that collaboration & innovation is key to solving industry challenges Schroders startup in residence programme brings innovative and relevant startups into the Schroders environment, develops their propositions and co-creates the future of wealth and asset management Sele
Slide 65: Digital strategy and innovation activity summary
Digital strategy and innovation activity summary Transforming Schroders • Client engagement digitisation strategy • Data & insights democratisation • Enhanced product & sales analytics • Foundry (data science work bench) strategy strategy • Co-creating Investment sales support • AI & Machine Learnin
Slide 66: Any questions?
Any questions?
Slide 67: Sustainability at Schroders
Sustainability at Schroders Investor Day Jessica Ground, Global Head of Stewardship 15 May 2019
Slide 68: Sustainability: A perfect storm
Sustainability A perfect storm Alpha generation Global Regulatory End client challenges pressure interest Environmental and Require finance’s More scrutiny on how Savers are increasingly social change is involvement to solve companies are being focused on accelerating creating a held to account sust
Slide 69: Social impacts are becoming financial costs
Social impacts are becoming financial costs As their role has expanded, large businesses face growing pressures Large companies have become 20–30% more important to Growing pressures to contribute to societies; economies and societies over last 20y irresponsible behaviour is becoming a liability % %
Slide 70: Sustainability growing in importance
Sustainability growing in importance Over 2/3 believe it will become more important Institutional Retail interested in sustainable investment funds e.g. climate change and good 2018 69% 29% 2% 2018 68% 24% 8% corporate governance 2017 64% 63% 26% 11% 2017 59% 33% 8% North America Asia 2018 83% 13% 4
Slide 71: Our experience and expertise
Sustainability at Schroders Our experience and expertise 20years+ A+ UN PRI annual assessment2 ESG integration #1 16 2,200+ 2017 ShareAction Responsible Investment Survey of European dedicated ESG engagements in 2018 asset managers3 specialists Top 5 With Across With 2017 AODP Global Climate 50 150y
Slide 72: But why is sustainability so difficult?
But why is sustainability so difficult? Variety of Performance Complex area of definitions and and transparency investment with a regional differences concerns number of different solutions Source: Schroders. 71
Slide 73: Majority find sustainable investment a challenge
Majority find sustainable investment a challenge Global Institutional response Why do you find sustainable 2018 investment a challenge? 51% 23% 21% Performance concerns 48% Lack of transparency and reported data 33% Difficulty measuring and managing risk 29% Cost Investment committee is not comforta
Slide 74: The broad spectrum of sustainability and ESG
The broad spectrum of sustainability and ESG It spans financial and social investments Financial benefits Social benefits Integrated Sustainable Screened Impact Philanthropy – ESG research – Best in class – Excluding – Specific social – Address societal – Voting – Controversy companies benefit chall
Slide 75: Schroders Sustainability Accreditation
Schroders Sustainability Accreditation Providing clarity on how ESG factors are considered Screened Integrated Sustainable Negative screening beyond Sustainability is a Sustainability is a cluster munitions and building block of the cornerstone of anti-personnel mines investment process the investme
Slide 76: Engagement
Engagement Increasingly important 2018 engagement topics Number of engagements Environmental Social Governance 2,500 Biodiversity Customers Accounting practices Climate change Data security Auditors Environmental policy/ 2,000 Health and safety Board committees strategy Environmental products and Hu
Slide 77: Can ESG be done passively?
Can ESG be done passively? Name MSCI pre event MSCI change MSCI post event Indexed, latest–100 Mining A +1 BBB 130 Auto BBB +3 CCC Industrial conglomerate AAA +3 BBB 120 Healthcare AAA +6 CCC Manufacturing conglomerate AAA 0 AAA Restaurant group A +1 BBB 110 Leisure BB +2 CCC Oil and gas AA +3 BB Fi
Slide 78: Expanding on traditional analysis
Expanding on traditional analysis Into poorly understood areas Traditional model Our model Governance Management quality Are the right How good are those structures in place? in charge? Regulators Customers How strict is the Does the company regime overseeing care about the end the industry? custome
Slide 79: Expanding on traditional analysis
Expanding on traditional analysis In an evidence based manner through Context Conventional data sources Themes Metrics 735 global ESG trends ~150 data points for 47 sub-sectors from 50 sources Unconventional data sources Companies Time 10,000 companies 2 years in the making covered Source: Schroders
Slide 80: Expanding on traditional analysis
Expanding on traditional analysis In an evidence based manner through Context 43.7 Context calculated Score: 41% Context analyst Score: 44% 0 70 Consumer good company vs. peers Customers Employees 70 Glassdoor employee rating: 60 3/5 compared to 3.5/5 for the sector Supplier 50 Employees 40 30 20 Go
Slide 81: But why is sustainability so difficult?
But why is sustainability so difficult? \ Investment Delivering Better Investment insight alpha stewardship focused A deeper A proprietorial evidence Active ownership to Products that meet understanding of based way of identifying mitigate the risks that can beneficiary how the world is winners and
Slide 82: Any questions?
Any questions?
Slide 83: Thank you for attending
Thank you for attending Any questions? Schroders Investor Day 2019
Slide 84: Important information
Important information These presentation slides may contain forward-looking statements with respect to the financial condition, performance and position, strategy, results of operations and businesses of the Schroders Group. Such statements and forecasts involve risk and uncertainty because they are