High-flying Bird pilots new path at Standard Life Aberdeen

British Steel’s intake of apprentices in 1983 included an ambitious Scot keen to make his mark.

After qualifying as an engineer, Stephen Bird eventually switched from steelmaking to finance and spent two decades at Citigroup, rising to senior roles in Asia and head of its global consumer banking unit. 

The 53-year-old made another career switch last year when he became chief executive of Standard Life Aberdeen and immediately began reorganising the underperforming £456bn Edinburgh-based asset manager.

“Few companies survive into their third century,” he says of SLA, which traces its roots back to 1825. “But my ambition is to ensure that Standard Life Aberdeen is a competitor fit for the 21st century.”

During a video call from company headquarters, he is not shy about discussing his achievements, pointing out during his Citigroup years he “built the biggest wealth asset management business in Asia”.

A recent SLA alumni, who notes Bird was in the mix as a possible chief executive for HSBC, described him as “very driven”.

Bird’s plan is to strengthen SLA’s institutional investment and adviser platforms, expand wealth management and the fledgling direct-to-consumer business and deepen relationships with strategic partners such as Phoenix Insurance.

“We have to set our sights higher. We have to focus, do fewer things more effectively, and create a performance culture in order to grow this business.”

Such improvements are badly needed. SLA’s market value has shrunk by almost half from a peak of £13.3bn in October 2017 to £6.8bn following the combination of Standard Life with Aberdeen Asset Management. The deal devised by Keith Skeoch and Martin Gilbert, former SLA co-chiefs, was supposed to create a world class investment company but massive investor withdrawals and a drop of more than 40 per cent in pre-tax profits have resulted.

Stemming investor outflows is a top priority. Bank of America forecasts net outflows of £10bn for 2020, which would lift withdrawals over the past four years to close to £100bn.

Bird has pushed through a series of changes in his first six months as chief executive which has unsettled some staff.

“Everybody is on guard. He is shaking things up quite substantially, including the organisational structure and operating tempo. It all feels very different but in quite a new and exciting way,” said an employee who declined to be named.

But Bird insists that staff were frustrated by the lack of progress under the previous regime and improvements in morale will follow.

“We now have the right people, the right technology and, most importantly, a lock on clients’ needs and ambitions,” says Bird.

SLA’s shares currently yield about 6.9 per cent, one of the highest payout ratios among FTSE 100 peers. A thorny question confronting the board is whether to cut the dividend, which is uncovered by earnings. SLA’s robust balance sheet means it could match the 21.6p full-year dividend paid in 2019 but longer term support could be problematic.

Some analysts think it would be timely to reduce the dividend by half given the cuts in payouts forced on numerous other companies by the coronavirus pandemic. Bird would not be drawn on this sensitive topic ahead of SLA’s full-year results in March.

Since his arrival, the £6.5bn Parmenion advisory business, which was bought for £50m in 2016, has been put up for sale; the Nordic direct real estate business was sold last year; and SLA is quitting Indonesia, a fast growing market where it hoped to become a top 10 player but failed to penetrate.

Tighter focus should deliver cost savings. SLA’s cost to income ratio stands at 85 per cent, exceeded only by Credit Suisse AM and GAM in a group of 34 rival European asset management businesses, according to analysts.

Under Bird, a single asset management platform to oversee all of SLA’s institutional investment business will be completed this year. New fund development will be centralised instead of being carried out in multiple locations.

Bird hints a new distribution partnership with a global wealth platform will be unveiled in the coming weeks. He declines to answer whether the partner is Citigroup but also struggles to suppress a smile.

Speculation is also rife about mergers and acquisitions across the investment industry. SLA holds £1.8bn of surplus capital on its balance sheet which it could use to finance deals. But Bird is cautious. “We are going to be very careful if and when we acquire anything.”

Cold water is poured over press reports over the scale of his ambitions to compete against the giant ETF businesses established by BlackRock and Vanguard.

“We have to participate in ETFs when they are the most efficient delivery mechanism. We have more new ETFs in the pipeline but we are not going to become a 5 basis points index fund provider,” he says.

Bird also aims to create a single integrated wealth management platform that will combine SLA’s financial advice and planning service which is branded as 1825, a discretionary fund management unit with £8bn in assets and SLA Choices, a fledgling consumer savings unit. 

“Asset management and wealth management are converging across the world. Intermediaries are being squeezed out and everyone is going direct. I am open to acquiring in this space [wealth management],” he says.

Asia is also a target for expansion, not only because of Bird’s experience in the region.

Heng An Standard Life, a joint venture between SLA and Tianjin TEDA International, was granted approval last month to launch pension investment products in China, the first foreign venture to receive this permission.

“Asia is in my blood. I never thought I would work anywhere else. China and India will be at the heart of future wealth accumulation. Asia will be a very big part of our story,” he says.

He plays acoustic guitar for relaxation and watches developments in hi-fi music technology, an interest that developed during his training as a mechanical engineer.

“Engineering teaches you the importance of precision,” he says.

SLA’s investors and policyholders will be watching to see whether Bird’s precision plans yield results.