In this episode, host Brandon Ashplant speaks with Dave Sauvarin, Chief Executive of Northern Trust’s business operations in the Channel Islands. The pair discuss the advantages of Guernsey’s banking services, including the role of private wealth banking, and banking services for funds and the insurance sector. They explore the impact of the digital transformation - and the opportunities it presents.
Full transcript below:
Brandon 0:00
Hello and welcome to the Guernsey Finance podcast, where we bring you interviews with leaders from the global finance industry, as well as news and developments from Guernsey's financial services sector. My name is Brandon Ashplant, and I'm Technical Manager, Funds and Private Wealth here at Guernsey Finance. For those of you who aren't familiar with Guernsey, the island is a leading global finance centre. The success of the industry here is underpinned by economic substance, political stability and asset security, and we are committed to the cause of sustainable finance. To find out more about Guernsey's success in sustainable finance, tune into our sister podcast, the Sustainable Finance Guernsey podcast. Today I'm delighted to be joined by Dave Sauvarin, Chief Executive of Northern Trust's business operations here in the Channel Islands. In this episode, we will discuss the advantage of Guernsey's banking services, including the role of private wealth banking and banking services for funds and the insurance sector. We will also explore some of the key trends emerging, including the digital transformation and its effects. We will also touch on the role that Northern Trust has played and continues to play in the island's financial services ecosystem. So without further ado, welcome Dave.
Dave 1:16
Thank you. Brandon, delighted to be here.
Brandon 1:18
Thanks for joining us. So firstly, just for those listeners who perhaps don't know you, tell us about you and your career to date.
Dave 1:27
So proud Guernsey resident, first thing I would say, married father of two. December will mark the 30th anniversary of my time in industry. So three decades, it's been very varied. Worked a lot across a number of organisations, from British, European and, more recently US custodian bank. And in that time, it's been really varied as well. So I think I started out my life in internal control and system support, writing specifications for banking systems, so relevant for today's topic. Around about that time, we saw the emergence of Basel II and requirements for risk management. So I got involved in operational risk and trading risk, and made it to the lofty heights of Chief Risk Officer. So clearly, a background in risk management. Also spent some time in funds, 2006 moved into looking after real asset funds, real estate, working with listed funds as well. So familiar with the UK, I've led a business in another location before returning to Guernsey in 2013/2014, and I've had some senior roles in the location since then. So as I sit here today, I'm Chairman of our bank, Chairman of our fiduciary business, and I'm the Country Exec for Northern Trust operations in Guernsey as well.
Brandon 2:52
Excellent. So let's dive in. So Northern Trust has had a presence here in Guernsey, you know, for more than 50 years, having established a presence on the island all the way back in September of 1972. How have, you know, the business's operations evolved and changed over the years since then, since then?
Dave 3:12
Clearly, I can't talk about the first 20 years. My thoughts on the last 30, I think the first thing I would say is pace. When I joined, everything was analogue, and I know we'll come on to talk about digital. I remember some of my early duties involving taking reams of paper produced as part of an overnight run that were distributed to teams that needed to be re-keyed into systems. It wasn't the people weren't active, but the turnaround times in some of your tasks was a lot longer. No better example than dealing with correspondence, we would have clients deal with us by way of post. A letter would come in. It would need to be read and understood. You go and sit with a manager who would dictate a response that would go to a typing pool, we used to call it, and somebody would type up the response to be reviewed and signed off before it's put in the post and sent back to the client. So you could have a week turnaround in a task, in a request, in an action. Today, it's instant communication, is instant access to data. So the first thing I'd say was, is pace. I think as operating models have matured, we saw the emergence of outsourcing, which I think is really good for the island, we are all able to access broader teams of expertise globally or within the community as well. So something that wasn't around necessarily in the early 90s, that we see a little bit more now, is the emergence of outsourcing as a concept, which leads on, I guess, to centres of excellence. Again, a term probably I didn't hear in the 90s, that I hear now you can really specialise and bring the weight of scale. To things in a way that perhaps we didn't do 30 years ago. And I think it's going full circle as well. We'll probably come on to talk about data. But I do see an opportunity for Guernsey to start to bring some of this stuff centrally within the island and data is probably a good example of that. So, probably the shift of analogue to digital would be how I characterise, sort of my experience over the last 30 years.
Brandon 3:58
And before we sort of focus on the sort of
Dave 4:10
Yeah,
Brandon 4:11
Guernsey's jurisdictional strengths and the island more broadly, could you just talk a bit about, you know, how does Northern Trust Guernsey fit into the sort of wider global strategy of Northern Trust as a global brand and a larger organisation?
Dave 5:07
Yeah, I think, quite neatly we have. So the way that we think about our business in Northern Trust is through lines of business, and we're pretty well represented in the location, with all the products and services that you would see globally within Northern Trust. So if I think about our business locally, we've got a funds business, which we call Global Fund Services. We'll come on to talk about wealth, no doubt. We've got a family office business, a business that focuses on asset owners rather than asset managers. Our credit organisation is based in Guernsey, so the expertise around Europe is centred out of this location, custody, banking, everything that you can do within the group, we can largely service out of this location. So we're pretty well aligned from that standpoint. The other thing I would say is maybe it is a trend over the years, clients are becoming increasingly more global, and we would service the same clients out of multiple locations. So to the extent that I share clients with Lux, Ireland, UK, US, further afield, it's good that we're here so they can have the same experience under one brand.
Brandon 5:21
And sort of more broadly, from a macro perspective, there is clearly currently a huge, you know, there is huge change in global markets. One only need look so far as the sort of dual surge in stocks and commodities, notably gold, this duet being in, you know, an anomaly in itself, in many respects. What reasons would you attribute to, you know, to this broader change we're seeing, and what are some of the sort of key trends you're seeing in fun, in the financial services ecosystem, both locally, but, you know, globally as well.
Dave 7:31
Yeah, that's so that's a big topic, and I wish I had our Chief Economist with us to help answer that. So surge in commodity prices and gold, for me, historically, that's always been around uncertainty and concern. If I think about gold, that's always been that sort of Safe Harbour asset in times of uncertainty. And you only need to read the papers to see that there, whether it's politically, geopolitics, there is a lot of uncertainty in the world. I think there were observations around whether there's a bit of heat in the stock market as well, and we're starting to shift, see a shift into other assets. So it's interesting time trends, what are we seeing? Everything is becoming more complex. So I think in the constant search for yield and return clients that we deal with are becoming increasingly sophisticated in how they're managing their own money, but also how they're structuring product to attract capital. So if there's one trend is that things are not getting any easier, but actually, think that's where Guernsey is brilliant. Guernsey is geared up really well to deal with complexity, just the relationships that we maintain our ability to be nimble, I think we can, we can solve for those sorts of challenges kind of a little bit quicker and more smoothly compared with other locations.
Brandon 8:56
And on that. Let's talk about Guernsey and Guernsey's advantage, the island offers a market-leading banking proposition, combining sort of political independence, regulatory excellence and that sort of wider economic stability. We have 21 licensed banks holding £37.6 billion in deposits, £19.6 billion in lending and managing assets to the tune of £20.9 billion. The island provides sophisticated banking solutions for the private wealth sector, you know, funds and insurance, as you've talked about within Northern Trust already, and touched on there. What makes Guernsey such a strategic location for banking services?
Dave 9:37
Yeah, I think, I think you probably answered it in the question. I think you touched on political stability, regulation, deep service, expertise. Taking a step back, I think geography, just where we are in the world, I think is really quite helpful. We bridge international centres by being Greenwich Mean Time with an internationally recognised language as well. So I think the geography is, is very important. I think the fact that we're outside the EU within Europe is, is an asset as well. There are things that a bank can do in Guernsey that you may not be able to do within Europe as a function of regulation. So I think that's interesting. And the fact that we're geographically close is good. I think you touched on the regulator. We do have a progressive regulator. I think we've seen entry into the market of a new banking provider in the last six months, which I think is brilliant for Guernsey. Pretty stable political system. Our laws are understood, and we've got decades and decades of experience in the location, so why wouldn't you? I think will be my response.
Brandon 10:47
And Northern Trust's banking services form a key part of its Guernsey operation. As you touched on earlier in the conversation, can you explain the sort of types of banking services offered here in Guernsey and how they sort of support, you know, both the institutional and also those private clients as well.
Dave 11:03
Yeah, so we're seeing the needs of those distinct groups almost merge, as so we have a family office business, and our experience over the last few years is that they're becoming far more sophisticated and would have the characteristics that we would see in fund management clients. And so their needs are broadly similar. It's going to sound daft. The first thing I think about is sometimes people just need a bank account, and that's a really odd thing to say, but sometimes the need is that simple. I have a transaction that needs to complete, and to complete that transaction, I need a bank account so it can be as simple as that. As we see businesses mature, then I think the needs of that client also mature, and we can extend into cash and treasury management. So these businesses have their own balance sheets that need to be optimised and if they don't have that capability in-house, is that a capability that we can support? So that's another service that we offer. Portfolios of assets, some of them need custody, so we can act as that custodian, that depository. And then you get into other elements of banking, credit, cash management, multi-currency, foreign exchange. So things that you would know and expect a bank to do, we do. It's amazing that it always starts with that simple need of a bank account, sometimes.
Brandon 12:35
Certainly, and what's the value to Northern Trust in providing that sort of all under one umbrella, in a sense, to put it bluntly speaking.
Dave 12:44
Yeah, think it can make the life and the relationship more straightforward, but it's more efficient. It's more simple. If you think the more service providers you bring to a relationship, the more relationships. You therefore have to oversee and to communicate with. So the extent to which you can bring that on all under one brand should simplify your processes. So I have an open dialog with the team that run the wealth business, as I do with the with the fund business, so that I think is helpful at a more broad sense, if I think about this from a Guernsey standpoint, dealing with a single jurisdiction, a single set of laws, a single set of regulations is clearly going to be a more efficient way to run your business.
Brandon 13:33
And private wealth banking is an area where sort of client needs are often highly bespoke. How does Guernsey tailor its private wealth banking services to meet the sort of those complex needs already touched on there. You know, when it comes to sort of high-net-worth individuals in there and their families as well.
Dave 13:49
Yeah, so I'll give you a couple of examples, and I think it's where Guernsey really excels, is that we've got a really deep, mature fiduciary sector, but we've also got a really deep and mature fund sector. So just in the last week, we've been speaking with a prospect client who is really interested in the PIF, the Private Investment Fund regime. For those that aren't familiar with the location really, it lends itself well to a small group of investors that are close to one another. And you think, well, kind of that's a fund strategy, but in the context of the family office, where they have the next generation of wealth coming through that want to have a little bit more involvement in how they manage, manage that. That wealth, this structure, represents a really good kind of opportunity for them. So, I think it plays to Guernsey strength in a number of ways. We certainly can be nimble in changing our regulations to support that sort of regulated product. Come back to the point around expertise as these wealth businesses become a little bit more sophisticated and look and feel like a fund management opportunity. Then we've got that heritage in our funds industry. To be able to support that and work alongside I also think the islands quite discrete. I think it's some of the clients that we do deal with discretion is really, really important. And I think where we are again, geography, sweet spot in terms of scale as well. We can offer that service, in a way that maybe other locations can't.
Brandon 15:25
And on the PIF point, or the Private Investment Fund point, for those who, aren't so familiar with it, I mean, clearly that talks exactly to the point you made at the start there about regulation, because obviously the regulator on Island changed the PIF regime to sort of open it out, more broadly speaking, for those high net worth families, to enable their fiduciary provider to actually obtain the ROI license, to give them the sort of product at face value. So clearly, you know, the jurisdiction is flexible, and that's an example of that as yet.
Dave 15:55
Yeah, you're no longer in one pillar. I think the products and services are, you know, that they're adaptable between, between them now.
Brandon 16:03
Yes. Now the island offers a full suite of services, including cash management, Treasury, FX services, lending, custody, asset management and multi-currency accounts. What are the benefits of having all these deep local expertise under one roof, jurisdictionally speaking, because obviously touched on the Northern Trust, but from a jurisdictional perspective?
Dave 16:24
Well, I think the answer is the same, but just probably from a location standpoint rather than a business standpoint. So what do I feel everyday access to relationships that I have in common with a prospect or a client. So whether it's audit, advisory, legal, regulator, we talk about it often, but it is true, we can get together very quickly in a room, same day, in a way that you can't elsewhere as easily. And I think the closeness of those relationships that we've all built over many years, I think has value at a senior end. I can pick up the phone to many people in industry and either understand or unpick a challenge that we've got to work through. And I think that has real value. We spoke about keeping things simple. So a prospect coming to the location that knows that all of their service providers can be here, I think, is really quite elegant. If I'm dealing with one rule of law and I'm dealing with one regulator that is just less complex, and therefore it has to be more efficient and better value for the prospect and client. It's probably those two things.
Brandon 17:47
In addition to private wealth banking and fund services banking, which we've touched on, the island also enables the infrastructure industry through sort of specialised banking solutions. Can you talk through those multinational operations, you know, the letter of credit and the sort of dedicated expertise and captive insurance that all together, sort of enable the wider sort of banks to support complex transactions and the sort of complex offering that you talked to earlier?
Dave 18:17
Yeah, so I think I mentioned a little bit earlier, I think that's where Guernsey truly excels, is with complex we certainly see inflows of work to us, because it can't be easily catered for elsewhere. So that ability to be kind of nimble, to be flexible in your operating model to an extent. We're not a cookie-cutter as a location. And I think if we were, then we wouldn't be able to respond to some of these challenges. Increasingly important, as we see the pace of change just only accelerate, is our ability to adapt. And we've had historically, a really good track record in that thinking about multinationals and some of the specific. If I think about credit, our credit guys based in Guernsey, they'll interact with clients globally, across the full spectrum of credit. We're probably, as we sit here today, not as heavily represented in the insurance sector as we would like, but clearly see that credit opportunity in that market, and that's something that we're certainly going to explore over the coming years. But I keep coming back to the same cliches. It's that we have a heritage of expertise with a track record of being adaptable and being able to respond to things that are complex in a timeframe that works for the client.
Brandon 19:42
And can you talk to the nature of Northern Trust's local fund administration arm, and how, I guess this sort of complements the wider banking offering?
Dave 19:54
Yeah. So it's which comes first, the chicken or the egg? And I'm never quite sure when I answer this question. So, I think about how our bank operates, it does principally support two clients, and those clients are our fund business and our wealth business. And I think as an ecosystem, it's really quite powerful when it works. If I think about the top to bottom of how a fund operates, fundamentally, at some point, you're going to need to move some money to do something. So whether it's subscriptions and redemptions of investors or calls and distributions, whether you're investing or divesting, buying or selling, selling an asset or something as simple as paying expenses, money has to move at some point. So having the bank and being able to interface that with the fund admin platform creates scale, creates efficiency, helps with accuracy. It's just, it's a good, logical relationship, but it's deeper than that. We have seen, certainly in a lower interest rate environment, a higher demand for credit coming from our clients, as we've seen, the return of interest rates then perhaps the offering that we have around deposits starts to resonate a little bit more strongly with those clients, and being able to do that quickly under one brand, carry out their due diligence once, and then it's just a product offering, I think is, I think is really quite, quite powerful when it works and certainly like to see more of that in Guernsey.
Brandon 21:23
And let's talk about the digital transformation,
Dave 21:27
yeah,
Brandon 21:27
because this is an area where Northern Trust has had a real sort of first move advantage. Can you talk about the recent changes you've seen and how Guernsey, you know as a jurisdiction, is in a position to sort of play a key role in this?
Dave 21:42
Sure. So we're not going to get through this talk without talking about AI. So we should probably use this question as the marker to talk about AI. I see things slightly different to others. I see these changes not as seismic and as evolutionary, I see them as more gradual. Okay, if I think back to early 90s, when I started work, we were just rolling out PCs. And I remember at the time, if you were seduced by kind of the rhetoric in the market is that your job, you'll be able to do your job in two hours, and how you're going to fill your time, and jobs will be at risk and we're hearing the same rhetoric today with the emergence of AI, as it's your roles will be displaced, the work will be done within two hours, and how you're going to fill your time, I think a little bit of that will happen. But I also think the demands on individuals will increase. So I was talking about pace before, I can see there being an opportunity for volumes to increase, our ability to produce more with the same will go up, we will become more productive. I think accuracy will increase, I think risk will decrease, and I think we'll see the emergence of technologies and industries that don't exist today as a consequence. So for me, it's my experience has been, it's always been a little bit more gradual, and I'm cautious about being seduced by this. You know, there's this seismic shift that everybody's talking about when it comes when it comes to AI, data and cyber, I think are interesting topics for the island as well. So continuing on that, on the AI theme, there are tasks that will be replaced by AI assistants, large language models. And you can see that there is the potential for maybe more of the critical mass of a business to return to and be housed in Guernsey, which I think would be beneficial for the island. What that opens up, of course, is how we secure that data, both as a business and as a location. Come back to geography, I think there's a real opportunity for Guernsey to just be a place where you can secure your data, even globally. If I think about our digital links with other countries, this could be a real safe harbour for data. Going forward, there's loads around the edges of digital transformation. It's not going to stop. But I think the measurement is gradual than anything seismic.
Brandon 24:36
Just touching on the first point you make about the sort of specific, I guess, the sort of the human impact, how is sort of digital change affecting the skill sets and roles you're seeing because, you know, are you seeing a shift in the types of expertise required, and if so, how are you adapting to that change in the sort of professional environment as an organisation?
Dave 25:02
So definitely, we are accessing the skills of people that have this mindset internally already, whether they're enthusiastic amateurs within the business, or people that are hired specifically because they have that skill. We are accessing their capability more than we ever did, and whether that's research, analytics, reporting, automation of tasks, there is absolutely more of that happening on the hiring side, I would say it is gradual. It will accelerate a little bit, but at the moment, it's gradual. If I think about candidates hiring, the shift that I would see is for the past 20 years. If you've read a CV, probably at the end, it would say something along the lines of, I am proficient in the full Microsoft Office Suite. I think what we'll see over the next 10 years is candidates talking about, okay, I'm proficient with Gen AI. I understand large language models. I use Power Apps on a daily basis. So I can write an AI assistant, and I have used those, and I think that language will start to change. And as future generations come through, I think that will just become the default, in the same way that today we will look at somebody understanding the full MS suite as a default, how it then accelerates beyond then? Don't know. So I think it's a bit of a mixed response. Definitely accessing that expertise internally more than ever before, and that's right, starting to see that come through with candidates, but it's probably on a role-by-role basis that we're seeing.
Brandon 26:52
Interesting. So just to end, Dave, can you talk about some of the sort of key pillars of your leadership style? I mean, clearly, you know, a long career at Northern Trust, and sort of spent time off island and returned back to Guernsey, and you're now sort of at the helm and leading the organisation locally. You know, considering all this, what key piece of advice would you offer, sort of, the next generation of leaders coming to the fore?
Dave 27:17
Crikey, don't do what I did. That's really, I mean, it's such a personal thing for everybody. What I would say is, what's worked for me trying to show up and be a consistent person every day, whoever that may be. If I think about the leaders that I have respected and worked well with in the past, they've always been consistent. I'm seeing the same person every day I come into the office. So that I think is first for me. I think having a sense of humour. I think there are moments in the day that can be stressful; there are light moments, but I think having a sense of humour for me personally, helped a few situations and build relationships, and I've relied on that and got away with it for 30 years. So why? So why change? And I think being positive as well. I think there's always different perspectives that you can bring to things, and how you see any situation. And I think trying to see whatever you're faced with in as positive a way as you can it's a challenge, it's not a problem, it's an opportunity, it's not an obstacle. I think, I think that mindset is really quite, quite important. Advice I would give to everybody is just be yourself, take risks, embrace change.
Brandon 28:28
Brilliant. Well, thanks for joining us, Dave.
Dave 28:30
Thank you for having me. It's been a pleasure.
Brandon 28:33
Excellent. Well, that's all we have time for. Thanks to Dave for joining us on the podcast to discuss the role of Northern Trust here in Guernsey, explore some of the key trends emerging in the wider financial services ecosystem, including the increased digital transformation and the role of banking services more broadly here in Guernsey. Thanks also to you for listening. If you enjoyed this discussion, we have an extensive back catalogue of interviews on the Guernsey Finance podcast channel. You can check them out by searching Guernsey Finance on your preferred podcast platform. We also have links to Dave and Northern Trust in our show notes. To find out more about Guernsey and its specialist financial services sector, head over to our website, guernseyfinance.com. We look forward to welcoming you back to the podcast soon, but until then, it's goodbye from Guernsey.
