Every May, Keith Skeoch and four friends he has known since the age of seven meet up in the Lake District. In their twenties, they would spend the trip mountaineering, carousing in the local pubs and sleeping it off in their tents. Now that they’re in their sixties, their wives join them in comfortable rented accommodation and they combine hearty dinners with fell-walking.
Keith has loved the hills all his life. Growing up in Guisborough, Yorkshire, he was able to walk from his front door as a teenager and go rock-climbing in the moors. “It seems unbelievable now that a 13-year-old kid could go off with his mates and do that,” he smiles. “No supervision and no one worrying.”
But while Keith now owns a property in the Lammermuir Hills, south of Edinburgh, physical peaks aren’t the only thing he has climbed over the decades. Although his schoolboy friends and his wife help to keep his feet on the (sometimes undulating) ground, Keith is a member of that elite club of people who have climbed to the top in one of the UK’s best known financial institutions.
A trained economist, he toyed with a career in academia and gave the Civil Service a spin before realising that the intellectual challenge of navigating financial markets, combined with research and building client relationships, was a mix that really excited him. Indeed, it proved such a thrill that he was often reluctant to accept the job offers and promotions that followed, fearful that he was leaving behind the parts of his work he loved most. Furthermore, early in his career at James Capel, whilst building up the company’s overseas investment team, he would likely have mocked the idea that he would ever relocate from London to Edinburgh.
However, having now been Chief Executive Officer of Standard Life Aberdeen for four years, and steering it through its merger with Aberdeen Asset Management, he appears to relish his role more than ever – and sees the extensive travel as a bonus. With appropriately blunt Yorkshire logic, he adds that, if he no longer relished “being around very interesting people”, he would simply stop doing it.
Fraser Allen interviews Keith Skeoch at the Scottish Business Network Masterclass.
This summer, I was lucky enough to be given the opportunity to interview Keith in front of a live audience at a Scottish Business Network event held at the offices of Aberdeen Standard Investments in London. Keith doesn’t do interviews very often, so this was a rare and fascinating opportunity to get inside the mind of a top-tier CEO. And he didn’t disappoint – relaxed, open, insightful about the sector and possessed of an impish sense of humour, we sat back and enjoyed hearing the story of his career to date. What follows is an edited transcript of the interview.
FRASER: You studied economics at university – first at Sussex, then earning an MA at Warwick. What was student life like? And where were you most likely to be found – in the library, in the bar or on the sports field?
KEITH: Yes! All of those! I thought I would study philosophy and psychology and I remember spending one late night in the library and thinking I can’t make head nor tail of this, and it’s not going to leave me much time for rugby or mountaineering, so I switched to basic economics and played a reasonable amount of sport. I was also active, particularly at Sussex, in the student co-op and the bar. In the bar, the rule was that, the night you served, you drunk for free, which I thought was a great idea.
FRASER: Sounds dangerous?
KEITH: I still remember to this day, this would have been in the early 70s, that a pint was 10p. It was interesting though. None of the people running the bar got trolleyed. It was run incredibly well – so as well as learning how to drink, I learnt how to tap and spile (manage barrels of cask ale), in the days when the Campaign for Real Ale was just taking off.
FRASER:After graduating, you considered a career in academia, but ended up joining the Civil Service in 1979, the year that Margaret Thatcher came to power. What prompted that move and what was the experience like?
KEITH: I originally did postgraduate work up at Warwick that was absolutely fascinating and I really did think that I wanted to be an academic.But one of the things I had to do was teach residual maths to economists – students whose maths wasn’t good enough to pass their economics degree. And to cut a long story short, I found I wasn’t very good at the teaching – I lacked the patience! So rather than going on and doing a PhD, I decided to join the real world. I applied to both the Bank of England and to the Government’s economic service and got the job at the Bank of England.
“I received a letter and it said: “Dear Mr. Skeoch, blah, blah, blah, we’re terribly sorry, this has never happened before in the Bank of England, here’s one-and-a-half years’ salary.” So that wasn’t bad!”
However, Mrs Thatcher came in and it was the year in which they abolished exchange controls and decided not to take any graduates on after all, so I was made redundant before I had even joined. But I received a letter and it said: “Dear Mr. Skeoch, blah, blah, blah, we’re terribly sorry, this has never happened before in the Bank of England, here’s one-and-a-half years’ salary.” So that wasn’t bad! Then I picked up the phone to the Government economic service and said: “I’ve been thinking about this job for a while…” Fortunately it was still vacant. I went to work for them but the guy who was mentoring me knew my real interest was in monetary economics and pointed out an interesting job in the private sector.
FRASER: So you switched to James Capel, now HSBC Securities. What did you learn from that period?
KEITH: One of the great things about that time with exchange controls coming off was that nobody had really invested abroad and knew how the international monetary system worked. I had a great advantage in that I not only knew where the Bundesbank was, I actually knew what it did. I spent a long time helping to build up our presence. It started with four of us and, by the time I left, we had around 400 macro guys. It was massively exciting. The intellectual debate was huge, whether you were a monetarist or a Keynesian. The challenge of forecasting stuff was in a different place. I say to young colleagues who are doing economics here, with inflation at about two per cent a year, forecasting is not too difficult – but at that time, it was over two per cent a month. Being at the centre of that and getting out and talking to clients and growing the business into a global one was a fantastic experience.
FRASER: So you’d found your ‘thing’ and in 1999 you were asked to join Standard Life Investments. How did that come about?
KEITH: I loved research and became one of three people running research worldwide – economic quantitative methods and investment strategy. At the tail end of my time, I was persuaded to step down from the research and run international equities, which meant running sales, training, research, pretty much everything. But, because of the Big Bang, international stockbroking, where you give advice to clients, had turned into what we now call investment banking, and I’m afraid I didn’t like it. I was 41 or 42 and thought I was making a big step up. I was on the board of James Capel/HSBC Securities, but the one thing I had retained was relationship management because I was one of the few people there who was in touch with all the clients – and one of those clients was Standard Life.
One of the things we used to do with clients – I don’t suppose this happens any more – is that we used to have a very long traditional Christmas lunch. You’d go on a Friday, and it would last all afternoon. We had a competition at this particular lunch of ‘guess the best stock, guess the best market’ and it was really very jolly apart from the guy who was sitting next to me. He kept going on and on about how Standard Life Investments didn’t have a Chief Investment Officer. So I just kept saying “very good, wish you well etc”.
I got back to London after Christmas and, being a bit thick, I told a friend of mine what had a happened and he said “you idiot, they want to know if you’re interested”. So I thought, bugger, this is a problem because they’re a major client and, if I didn’t want the job, they might be offended. So, to cut a long story short, I went up for an interview with Sandy Crombie. I was expecting that it wouldn’t be exciting – who would want to go and work for a boring Scottish life company? But he was very intriguing and persuasive and, after about six weeks, they offered me the job. I was going to stay for two years to get experience of another industry and, 20 years later, I’m still here.
FRASER: You obviously enjoyed the way the job started – what were those first couple of years like?
KEITH: They were fascinating because the task was to take the investment side of a life assurance business and create an asset manager and I still remember the way that Sandy described it. He said, we have £67bn of assets, but only run £5bn of that for the outside world – so we’ve got critical mass with a blank sheet of paper. What he wanted me to do was build an investment process that would deliver performance, and turn a UK company into a global company. At that stage, I didn’t even think of Standard Life as a UK company but an Edinburgh company – although I didn’t like to mention that!
“We have £67bn of assets, but only run £5bn of that for the outside world.”
Sandy also said he wanted me to attract talent. So, for the first couple of years, we really acted as a start-up, getting the word out, looking to do something different, convincing the client and customer base and the investment banks that we were attractive so we could get momentum and pull talent into Edinburgh. Apologies to the Edinburgh headhunting community but I didn’t want Edinburgh-based head-hunters that talked to the Edinburgh diaspora. I said, let’s go back to the head-hunters who said they wouldn’t do it because it was too difficult and I’ll explain to them why this is a wonderful challenge to move talent from London. The rest is history. It was very successful. And things really kicked off after Standard Life went through its near-death experience, which was quite a thought-provoking time.
FRASER: For those that are not aware, what was that near-death experience?
KEITH: In 2003, Standard Life was still a mutual and the regulator changed the rules to solvency capital and we nearly went bust. So we had to go through a demutualisation process and float on the Stock Exchange, as well as create a strategy and a business plan that allowed us to raise the money. That was quite a formative experience because Standard Life had been a mutual since 1925, founded in 1825. So its behaviours and its mindsets were ingrained and taking people into a different kind of environment was absolutely fascinating.
FRASER: You were then asked to become Chief Executive of Standard Life Investments, transforming the business over the next nine years. Talk us through that.
KEITH: When Standard Life went through demutualisation, Sandy Crombie came to me. He had been promoted to CEO and he said, “I want you to step up and be the chief executive officer of Standard Life Investments.” And I said: “Well, I’m sorry Sandy, I’m having so much fun, I’m doing what I love, markets, people and investing, so I don’t want to do it.” So, he said: “Well that’s disappointing. I’ll tell you what, why don’t you help me recruit the right person because you’re going to be quite important in all this.” So over the next three months, we interviewed people and I came out each time and said “I don’t think so, or not on your nelly”. And then it dawned on me that, actually, I was rather passionate about the job and the sensible thing to do was to step up and take it. Sandy Crombie is very clever.
FRASER: In 2015, you became Chief Executive of Standard Life and, shortly afterwards, navigated the merger with Aberdeen Asset Management. What’s your perspective on that now?
KEITH: We had always said that our strategy post-IPO, post-demutualisation, was about building a capital-light business because there was no benefit in trying to deploy our balance sheet to create a guarantee that people weren’t prepared to pay for. So we wanted to get ourselves out of the insurance regime. The other reason for that was that insurance books are long-lived but eventually they leave the business and then they pay out. And there is a point at which these books start to run down and you can’t decommission the infrastructure as fast as the book runs off. So it just becomes a unit cost problem, and it’s pretty horrible if you’re in that space. So we knew we were facing up to the fact that we needed to get value to help shape the business. And given all the change that was happening in the world, we felt we needed scale.
“Mergers are tough and difficult and there’s a lot of short-term pain associated with it but it was the right thing to do.”
Martin Gilbert (CEO of Aberdeen Asset Management) felt that Aberdeen needed scale too. Actually, mergers in asset management, which are really people businesses, are incredibly difficult to do. You’ve got to find something that is complementary. However, Standard Life Investments is largely multi-assets and developed markets; while Aberdeen is largely emerging markets. And, out of the top 100 clients, we only had four that were in common. So there was a good chance to make the merger work. And getting scale in the asset management business allowed us to sell some of the insurance books to build the kind of company we have today. Getting through it is a transformative process though. Mergers are tough and difficult and there’s a lot of short-term pain associated with it but it was the right thing to do.
FRASER: Following the merger, you became co-CEO with Martin Gilbert – an unusual arrangement. The media speculated about shareholder suggestions that this might be not be the best structure and, a couple of years later, you became the sole CEO again. How did being a co-CEO work for you?
KEITH: It was great! I don’t think the shareholders had an issue with it. The people that seemed to have an issue with it were the ladies and gentlemen of the press, who created a lot of noise. Martin and I get on like a house on fire, and we didn’t have any major decision that we disagreed about. We knew what we were both good at and, as I said to somebody at the time, Martin is 63 and I’m 62 – we’re hardly a couple of pups desperate to compete with each other. All that was important was that we made a success of it and delivered the vision, so we got on with it.
FRASER: Why did Martin move up to a chairmanship role then?
KEITH: One of the issues of operating in a modern regulatory entity is that it is quite constraining in terms of what you have to do and where you need to be. For instance, there was an evening where we were signing off the deal to sell Standard Life Assurance Limited to Phoenix and Martin was down in Bali at the IMF conference seeing clients. And the final signing was late – it was so late, it was something like 4am for him. But because he was a co-CEO, he had to do the signing. But actually, we needed Martin bouncing about with the clients. So, there was a point at which, with a lot of the heavy lifting done, we thought we should generate a different arrangement, and cut out the external noise. We now have a single CEO with Martin acting as Vice Chairman of Standard Life Aberdeen plc and Chairman of Aberdeen Standard Investments.
FRASER: What do you see as the main challenges and opportunities for the overall industry now and, specifically, for Standard Life Aberdeen?
KEITH: As an industry, we’ve got two big challenges. We’re living in a world where there is a lot of economic and political destruction. We’re probably seeing the steady erosion over time of large-scale institutional investors and time benefits schemes. And, as regulation makes it more difficult to have large collective investment vehicles on insurance balance sheets, where you are using your capital to provide a guarantee, you end up with a process that I rather pompously call the ‘democratisation of financial risk’. In other words, people are having to take more and more responsibility for their own financial future. So, in my industry, we need to come to terms with serving small balance sheets as opposed to very large balance sheets. The return environment is going to be very different over the next 10 years relative to the last 20 or 30 years and the way in which we manufacture the investment return will be very different. We need to think about broader base solutions that we take to individuals rather than creating products that we can go and sell.
“People are having to take more and more responsibility for their own financial future. So, in my industry, we need to come to terms with serving small balance sheets as opposed to very large balance sheets.”
There’s also a huge issue of rebuilding trust. Trust in financial services is very low, trust in experts is very low and, actually, trust in the corporate sector is pretty low too – which I think is odd given that most people in the private sector work for some kind of corporate entity. We need to show up and we need to operate through a social licence. We’re expanding our retail business, expanding our advice business. We are thinking about how we manufacture broad-based solutions that we can take to clients and customers rather than just selling and pushing a load of products.
We’re also firm about our very strong long-term heritage in environmental, social and corporate governance and stewardship. As our Chief Investment Officer Rod Paris was saying recently: “We’re in a rather unusual situation, we need to start preaching what we practice, not the other way around.” There is a narrative that that needs to be rolled out in society and, as the UK’s largest independent fund manager, we need to play our role in forming that narrative.
FRASER: You’ve come a long way since that economics degree. Do you still view your CEO role through the prism of an economist?
KEITH: I’d like to say no but it’s probably a bit like being a recovering alcoholic – I can only ever be a recovering economist. So it does shape the way I view things. It’s a discipline. I can’t help it but I think it’s served me well and I also think it’s a lot more practical than the old joke about the scientist and the economist who are stranded on a desert island with a stack of tinned food but no tools. The scientist devises an ingenious mechanism for getting the tins open; the economist merely says: “assume we have a can opener”. I don’t think I’m that kind of economist – I hope not!
FRASER: You’ve steered the business through extraordinary times of change. How do you relax and how much longer do you want to go on doing this?
KEITH: I’ve always had the view that you should do what you enjoy and, if you don’t enjoy it, stop doing it. One of the things that I am blessed with in asset management is being around very interesting people. I am also very fortunate to have a wife who keeps me grounded. How long will I go on? Well, that’s probably for the Chairman to decide. I think it’s safe to say that, as I’m 63 in November, I’m probably closer to the end of my career than I’ve ever been!
