By Tim Clark, Wall Street & Technology
On the second leg of the Scottish Financial Services tour, I had the opportunity to speak to different financial services firms and institutions located in Edinburgh, a city that is just as proud of its gothic heritage and architecture as it is of its financial services savvy.The rolling green hills and mountains that lie on the outskirts of Edinburgh, where ancient castles and looming churches reside, provides a very stark contrast to the bustling, modern heartbeat of the downtown area where Standard Life Investments, Citigroup Scotland and The Royal Bank of Scotland retain significant operations and are enjoying healthy growth.
"This is a small city that packs a punch," says Andrew Milligan, head of global strategy for Standard Life Investments, headquartered in Edinburgh. Milligan says the multitude of art galleries, restaurants and other activities that have cropped up in Edinburgh over the last 10 to 15 years help attract and retain talent for Standard Life, the thirteenth-largest private equity firm, which employs 700 worldwide.
The company currently retains around $50 billion in assets under management, and Milligan says future growth for the firm means continuing to build wealth for clients while avoiding acquisitions, as they distract from the company's core competencies of banking, healthcare and investments. "Customer attention equals customer retention," says Milligan. While Standard Life wouldn't entirely dismiss the buyout of another financial services firm if it made sense, Milligan believes the end cost and technological complexities involved don't justify the means. An interesting strategy that flies in the face of what Resolution Asset Management (see part one of this report) is championing out of its Glasgow headquarters.
Standard Life might not look too closely at mergers and acquisitions but the firm did partner with Citigroup, handing over their middle- and back-office procedures under a new area of business at Citigroup dubbed Funds Administration. "Funds Administration is highly specialized and technical, which is why we need good people here," says Colin Stewart, managing director, global transaction services, Citigroup. "We're confident that the local infrastructure [in Edinburgh] can accommodate us."
Citigroup's Funds Administration operation takes a specific business function of another firm and places it onto a Citigroup platform, which Citigroup manages and operates. This method of migration is much easier than farming out IT personnel to custom-tailor specific applications for different clients. While Stewart wouldn't elaborate on the specifics of how Funds Administration operates, he did say that Citigroup has "invested quite heavily in the tech platform," a proprietary system that powers Funds Administration. "Our CEO is following progress here very closely," says Stewart. On a side note, Citigroup also supported Resolution Asset Management with a portion of its mergers and acquisitions activity.
In closing, Scotland's declining population tops out at roughly 5 million and since one in 10 jobs are in the financial services sector, luring top talent to the country is a multitiered initiative that the University of Edinburgh, Scottish Financial Enterprise and Tom McCabe, Scottish Executive Finance Minister, take very seriously. These constituents are involved in Fresh Talent, a program that allows students without visas to stay in Scotland to study. But as this BBC News item points out, Fresh Talent has opened up a fresh can of worms as other U.K. universities now want the program extended beyond Scotland's borders.
A bit of controversial press isn't such a bad thing, especially if it presents Scotland as an innovator, a thought not lost on Amanda Harvie, chief executive at Scottish Financial Enterprise, an organization that raises awareness for financial services in Scotland and also lobbies for improvements by influencing policymakers.
"We regard ourselves not as a satellite to London but a singular financial services hub in its own right," says Harvie. "We're always looking to raise the bar." Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio