Isabelle Jenkins, Banking and Capital Markets Leader, PwC UK: Hello, my name is Isabelle Jenkins. I'm a partner at PwC and the Head of Banking for the UK firm. Welcome to the latest episode in our Business Leaders podcast series. We're exploring how Business Leaders see the future, and how they are driving transformation to achieve that vision.
Isabelle: Today, I'm joined by Liz Nolan, State Street's EMEA CEO. Welcome, Liz, we're delighted that you agreed to talk to us.
Liz Nolan, Liz Nolan, State Street's EMEA CEO: Thank you.
Isabelle: Can you tell us about State Street as a business, and how you serve your clients?
Liz: So, let me start with State Street, the company. So we're the world's largest custodian and fund administrator. We have 33 trillion dollars worth of assets that we administer on behalf of an institution or client base. We're represented in 22 markets across EMEA, and essentially in those markets we provide all of the core security services, asset management, global markets, and global exchange activity, data activity that I'm sure we'll talk about as we go through this.
Isabelle: Great. And how do you think the business is going to change over the next 10 years? Do you think it's going to be fundamentally different?
Liz: So, I think it's already changing and, you know, I think there are all sorts of catalysts to that, even if we were to go back on the most recent 10 years, it changed to some extent post the financial crisis. The impact of regulation on the industry, I would say probably increased the barriers to entry, to some extent, given the focus on regulation, and more recently, technology is really starting to drive more and more change. Not just change from our own perspective, but change to our clients.
And obviously when our clients are faced with change, that so also impacts us because we need to be at the forefront of that change to be able to deliver and continue to help our clients be the best that they can.
So I'd say the other thing is as well our industry has changed and continues to change because clients historically would have looked at us to, what I term as, get the basics right. Ensure that your transaction processing, your asset servicing, the basics of the custodian activity are right.
More and more, clients view us as being more insightful in helping them as to how they grow. So we're moving really as an industry from, I guess we would've been called to some extent historically, the plumbers. The plumbing of the industry, or the infrastructure of the industry.
And I think now that's moving much more into clients looking for us helping them improve performance through insights from data, helping them be more agile in reacting to opportunities or even being at the forefront of opportunities, and also increasing resiliency. And amongst all of those areas is where we believe technology can and is helping.
Isabelle: Right. That's really interesting, and particularly about this point about moving from being the plumbers to then adding insight. Could you tell us a bit more then about data and information and how you've had to change to be able to provide that insight to your clients?
Liz: Yeah, so firstly I'd say that historically our position was to service clients from a back and middle office perspective, right? So, if you like, the middle and tail end of the investment cycle. Now clients are looking for us to be much more towards the front end of the investment cycle as well. Providing data and analytics that are enabling them to be more effective in their investment process, and their decision making.
So one of the things we've done as a way to position ourselves is the recent Charles River acquisition which precisely, in some ways, catapults us into that more front end side of what clients require from us.
And again, if you look back at fund managers when I started out and you look at the data that was available to them 30 plus years ago, they had certain aspects to data whether it was Financial Times or Bloomberg that they would look at on a daily basis.
Compare and contrast that to today. The data that's available to them is just huge by comparison, and that data changes throughout the day.
So trying to collate insights that come from reviewing all of that data is more challenging and that's one of the reasons, for us, behind again the Charles River acquisition because that gives us the ability, capability, to analyze data and provide clients with much more insights that come from that data based on the capabilities that Charles River provides.
Isabelle: And when you did that Charles River acquisition, did you consider, you know, trying to build those capabilities organically? What was kind of the rationale for doing an acquisition?
Liz: Yeah, I mean, I would say there are, the ability to try and build something like that organically, I think firstly the subject matter expertise that you'd need, the timing to do it, it would have made it far more difficult for us to achieve, right? And I would argue for anybody to achieve.
There's a reason why Charles River has been providing those sorts of services for 30, 40 years to clients. There's a huge amount of knowledge and subject matter expertise that's gone into building those capabilities. So for us, the build versus buy was a no brainer, really.
Isabelle: Can we move on to how you use then data and information internally? Are you seeing a corresponding change in the way that information helps you manage your business?
Liz: Yeah. When you hold more than 10% of the world's assets on your books you have a huge amount of data. So I'm old enough to remember, unfortunately, when you would provide them reports, often automated, that clients would upload into their own systems, and that was enough.
Today we're in a very different world and it's more now around the provision of data and insight to clients.
We used to refer to ourselves, and still do of course, as a custodian of assets and we still are. More and more we see ourselves as a custodian of data. We have the ability to provide insights to clients in a different way and that's now becoming more and more who we are.
Isabelle: Right. So a fundamental change in the business model and the services you're using both internally and offering out to clients.
Liz: That's right and more and more through the investment cycle.
Isabelle: You've talked, it's very fascinating, about how your business has changed more, how you use data more, and how you need to use analytics more. As we move forward and maybe artificial intelligence becomes more widespread, what are the implications you see for your business?
Liz: So the implications are many fold. The obvious ones are that it helps us become more efficient in the way that we process and manage activity on behalf of clients.
I often quote to our teams that historically, we had people who, and we still do have, performing processing of activity. We want to use artificial intelligence to perform the processing and the people manage the exceptions.
So, in addition to creating efficiencies, performing client behavioral analysis and product personalisation. So that will enable us to apply learned patterns to new data which enables better decision making on our part and also provides clients with the data to make better decision making on their part. So that's another part of where we believe that AI can have a significant impact on our business.
And I would just also add we view AI as one component, obviously, in a broader technology evolution. Right? So, AI coupled with distributed ledger, cloud infrastructure, etc, are all components of enabling us to be more efficient and more effective in how we process on behalf of clients.
Isabelle: Right, great.
Isabelle: Do you make any current business use of AI or are you, you know, looking at just some proof of concepts? Where are you in the journey?
Liz: We have both. We work a lot with clients certainly on proof of concepts, but we do have, in particular, machine learning AI in some of our, processing centers. So I'd say we're at the start of it. We're also utilising far more cloud technology. We are now looking much more at blockchain technology and how that can support the investment process. So all activities together, are a big part of our strategy over the next couple of years.
Isabelle: That's really interesting to hear about where you are with AI and also with blockchain machine learning and other technologies. What does that mean then for the skills that you'll need going forward in your workforce? Will that change the types of skills you're looking for?
Liz: Yeah. I think the skills evolve.
So certainly, you know, I would say historically technology has played a role where it has supported or enabled the business, and therefore we've needed people with technology skills that can, if you like, sit alongside or work with the business or provide solutions to the business. Now, I think we need people with a skill set that understand this to be part of the development of the strategy of the business.
So I would almost say historically, technology supported the business strategy, whereas now, the use of technology, AI, and all that we've talked about, is actually part of the definition of the strategy and part of the decisions from a business standpoint of where we play, how we play, how we'll win where we play, and so the skills that we need for the individuals that are part of that are somewhat different than what we've needed historically.
Isabelle: So as skills change, what hiring challenges are you seeing?
Liz: So first and foremost let me just say, the scope of technology is critical and always has been critical when we've thought about how we're developing our talent pool.
Talent and people though, to me, remain at the heart and soul of a company. So, therefore, looking at how we attract talent in the first place, how we grow and develop that talent, remains as important as it ever was.
Historically technology was seen as external to business skills. So you'd hire a business person, you'd hire technology people, whereas now they're a lot more integrated.
I'm not sure yet that we're necessarily seeing people coming out of university with those combined skill sets. I still feel that there is a technology route and a business route. And so therefore, when people are joining us, it's up to us to link those two and how we take people with technology knowledge, technology skills and make them business people and vice versa.
Isabelle: It's really lovely to be talking to a female CEO. Diversity and inclusion tends to be a challenge across the FS sector. It'd be great to hear what State Street is doing to try and overcome some of those challenges.
Liz: So it's incredibly important to State Street, and I know all companies say that. I joined State Street at the outset, three years ago, and one of the things that struck me through the whole interview process that was pretty extensive including with the CEO of the company at the time, Jay Hooley, was that it seemed to be lived and breathed by the company.
It seemed to be embedded. And I'm one where I have this ultimate vision, I'm not sure it'll be in my working life but hopefully my kids', where we get to a point where it's so embedded it's no longer talked about because it's automatic and it's so obvious. I think State Street is well on that journey.
We see it very much at the heart of who we are. We do set targets and have set targets that we have, I'm pleased to say, over the last three years reached. We've now upped those targets and we're pushing further.
I think targets are good in that they give you a barometer, but I do think it's got to be in the heart of the culture of an organisation that lives and breathes this stuff, as opposed to there's a target there and we've got to meet the target.
Isabelle: That's all great to hear and it's great to hear that when you were joining State Street, it's one of the things that was attractive to you.
Isabelle: If we could turn to talking about future growth and the growth of the organisation, what do you see as the main challenges that you're facing at the moment?
Liz: So challenges exist in different ways.
We feel those, I certainly feel those, everyday here at the moment in EMEA, on the political front. When you look at some of the political and economic factors that are impacting our business, not least driven by things such as Brexit. You know, also we have areas such as the Italian budget fallout, we have trade tariffs on the agenda.
So we're definitely seeing it's a period where investors have paused and, therefore, we're not seeing the same sort of growth as we have seen over many recent years.
Arguably, our clients need us even more in more challenging times than they do in times of uplift, if you like. So, therefore, all the more need for data and insights that help them and inform them about the right investment decisions.
Additionally, there are the challenges of the impact of all of those things and more on our clients that create challenges to us. So I think the biggest one, when you put all that together, is how do we and what do we prioritise over the coming years as what's important to us when we look at supporting clients and our growth agenda? Making sure we decide what not to do, becomes just as important as deciding what to do.
Isabelle: Great. Liz, I want to thank you. This has been an absolutely fascinating interview and I've really enjoyed it and I know our listeners will. So thank you so much.
Liz: My pleasure. Thank you.