Transcript

MRS SANI JACKSON:

So my job is a regulatory consultant. So I work within a consulting firm, and my main role is, basically, to implement regulatory change in the financial services industry, but also help firms implement compliance policies and procedures. My background, in terms of how I got into this job, is I studied economics at the University of London Queen Mary's, and then started with Deloitte on the graduate intake scheme in regulatory consulting. So I've kind of been doing this ever since I came out of university.

The types of organisations I interact with are very broad, especially when you start somewhere like Deloitte, which is a large consulting firm. As a junior, you just get thrown on whatever projects you have to do. So I've done retail banking, investment banking, asset management, hedge funds, wealth managers. I didn't do insurance because insurance regulation is very, very different. So that skill set doesn't really translate very well. But across the, what we call, the capital markets, that being investment banks, and the retail markets being your high street banks to asset managers, it's the same regulation that really applies to all of those institutions at a different level. So really, I touch all of those types of organisations.

As I specialise throughout my career, I am now more asset management focused. And asset management, that's basically your hedge funds, your pension fund managers, your wealth managers. It's that type of firm.

I think someone who is studying economics or financial services or an MBA or business studies, and the definition of value is different for each type of organisation. And across my work especially, what we are now seeing is that we really expect the boards to set that definition and the tone. And depending on even whether you're a charity or whether you're a listed company where the value is potentially very closely linked to your share price, or even an asset manager where the value is maybe linked to what's the best outcome for your investors, you have to think about how do you get there.

So it's not just - it's a very complicated definition, basically - the definition of value based on the organisation. And we expect the boards to define that, and then the tone to come from the top, and really, that definition of value then to really cascade down and be implemented across everything that that firm then eventually does in terms of their policies and procedures, in terms of their marketing strategy, in terms of how the HR policies are implemented, in the way that they remunerate their staff, and the way that - we talk a lot about risk appetite as well. So really, we expect firms to set the value and then define the risk appetite that they have in relation to that value. And that then drives all the policies and procedures, and even their reporting and their risk metrics, and things like that. But I can't give you a definition of value because it varies across firms.

So in terms of value across different firms, what we tend to see - this is very much just specific to my industry and my experience. So the retail banks, they do tend to put customers first. So I think what firms need to understand now is maybe traditionally, value used to be seen in the bottom line, and your share price, or your profit and loss, or your retained earnings, or whatever dividends you could pay out. But what firms are now starting to understand is that unless you put customers first, or investors first, or whatever is the consumer, essentially, that is buying your product or your service, your profitability is really, really closely linked to that.

So if you're too profit-driven and you don't care about the outcome to consumers and investors, then you will never get that profit. Because really, the value is in driving the loyalty and the repeat customers and that repeat business, which will then automatically drive profitability. So it's a real shift change in the way that, especially the financial services sector is looking at value, even if you take the definition of value as being how profitable is my company. They now realise that that's not just a CFO sitting there and cutting costs and doing balance sheet and P&Ls. It's really about looking at how do you drive profitability through the products and services that you're offering to the market.

In terms of helping firms change their mindset in the way that they look at value and the way they operate, there tends to be different drivers. And I think, as with everything, if your status quo works, then why are you changing? So if you're an asset manager, and you're making good money, and everything is working - yes, I might have high staff turnover but frankly, I don't really care, because I can still hire the talent. Why would I change?

So the drivers that we tend to see in my industry is either regulatory - so the regulator comes and says: you guys are unethical, you're not doing the right thing, you don't have investors' interests in mind. The credit crunch happened. A lot of pension funds lost lots of money. Local governments lost lots of money. So regulation comes in, and that's the driver.

Another driver is - and we are actually seeing this a lot in the asset management sector at the moment - is investor attitude. So investors care. So, again, even if you as a board and as a company don't care because your bottom line is still fine, you might have investors coming to you and say - and we are actually seeing this a lot - that investors are asking: what are your compliance policies and procedures?

How can you evidence to me that you have my interests at heart? Because I manage a pension fund and guess what? My clients are elderly people, so I have a fiduciary duty to my clients. I am your client, and you're asking me to put 100 million into your fund so I need to know that you will look after this 100 million in an ethical way with the values that I have which are aligned to my pension clients.

So there's a bit of a - from the bottom up, it feeds up the chain. So even if a fairly aggressive hedge fund doesn't care, because their clients care, they suddenly have to change the way that they look at value.

The way that we get firms to think about value is being multifaceted and to not be just a single input such as share price or performance of the fund in terms of basis points is that, when they see costs creep up in other areas - for example, if your operational system and policies and procedures are quite poor, you get trading errors. You get settlement errors. You get disputes with counter parties around transactions. That costs you money.

Equally, if you don't have decent HR policies and procedures or remuneration structures or incentives for staff, staff turnover - there's a cost element to that. You typically pay 20% recruitment fees to recruiters. You have to retrain staff that you're bringing on new. Any change management, any kind of change within an organisation has a cost associated to that. So you can define value through those negative drivers in some respects. Because if I don't incentivise my staff properly, if I don't keep my staff happy, there's a cost element to that.

So the other side of that is the value in keeping staff happy has a direct impact on my profitability. Equally, if my operational processes and procedures and systems and controls are rubbish, there's a cost element to that. So all-of-a-sudden, I see value in implementing and spending some money on having robust systems and controls and compliance procedures in place. So that's, I think - unfortunately, sometimes it takes something to go wrong before firms realise the value of investing in certain areas, because the opportunity cost and the financial cost is not worth it.

The way to see compliance and regulation as a value opportunity is, again, something that is changing. So I agree, 10 years ago it was seen as just a total pain and a bit of a necessity that you had to do, and you had to comply with it but it didn't help your business, and it was purely seen as a cost, and everyone always saw it as a cost.

Now it's changing, and it's different. And I think the regulators have been quite good in writing better regulation that is a bit more commercial. Within financial services especially, we've seen recent regulation that actually can be used to commercially make firms more efficient. So if we take GDPR as an example, on the face of it, it's a really annoying piece of regulation, because you now have to think about privacy and the way that you organise your data, and you're going to have to issue all these privacy notices to clients, and all this stuff.

But also, what it's actually made some firms do is rationalise their data and delete a load of data. So commercially, I do think it makes sense. And it makes firms more efficient. And it makes them question why they do things the way they do things, and is there a better way of doing things?

The way that I try to get folks to think about it in a more value-orientated and opportunistic way, is to really constantly be striving for improvement. And it's for them - it's trying to get them to understand that constantly striving for improvement is a good thing. And I think as humans in general, even on an individual level, people are always doing that, so companies should do that as well.

And that's the way that we tend to articulate it with clients, is that, OK, even if you don't feel like there's a need to change, and you don't see the value proposition or the value opportunity, if you link it back to bottom line, they get it.

In terms of how firms establish their internal values but also prepare themselves for external threats that are outside of their control, is a difficult exercise to do. So I think, irrespective of the external threats, firms definitely should just define internal values like we've already talked about. Because, I think, irrespective of what environment you're in, those values still stand. They are still important.

The values that you have around your product, your services, your consumers, your internal organisation, systems and controls, and staff - they are important. And actually, I think that your internal value foundation, if it's very robust and strong, will prepare you for external threats of any sort. So it makes it even more important. So be that Brexit or a new piece of regulation, or whatever it may be, like a financial crisis, if your internal values are sound, you should be prepared for those types of things.

I guess if we sat in 10 years time, in terms of the definition of value and what wouldn't have changed, I think it will still be profitability and bottom line. Because ultimately, that's what runs economies, and that's what capitalism is based on, and that's what drives tax revenue. So everything, I think, is still bottom line. Even if you look at governments, countries should be run like companies, in my opinion, as well. So that, I think, won't ever change, and maybe in some respects shouldn't change - that you should always look at profitability, and profitability is important.

I think as we've already talked about, the way that you define profitability and what drives profitability will change through those value propositions and the way that you look at businesses differently. In terms of what I tell students, where to be flexible in your mindset and where you want to be in 10 years time is just a different way of working. And I think the workplace is changing, be that flexible working hours, more entrepreneurial working relationships.

I just think the way that countries and cities and financial services now work is all changing a lot. There's a lot of remote working that technology is facilitating, Skype conference calls and meetings and things like that. This whole kind of commuter culture, I really hope, will change in 10 years' time where there's a more flexible working environment, and more efficient as well. Because a lot of time is lost in travelling that isn't necessary.