Stephen Bird was brimming with ideas when he became Abrdn chief executive in September 2020.
The Scotsman soon told employees about his ambitions for the asset manager, according to two people on a late 2020 staff call, and referred to himself as a “futurist”: someone whose knowledge and research helps them to see the future.
Three-and-a-half years later, Bird is facing difficult questions about his own future, as one of the UK’s largest remaining pure-play asset managers races to cut costs and develop new revenue streams in order to stem the flow of assets to rivals and to low-cost passive managers.
Bird’s aim was to cut expenses and boost income by expanding wealth management and selling more investments directly to consumers. The idea was to leave Abrdn less reliant on its £367bn investment business, which managed money for insurers and pension funds, among other clients.
At first, this plan showed promise: Abrdn acquired Interactive Investor, the UK’s second-largest consumer investment site by assets, and took the knife to group costs, in part by restructuring or closing more than 250 of the company’s investment funds.
Bird also sought to restructure other underperforming parts of the business, selling off Abrdn’s £7.5bn private equity arm and offloading its 50 per cent stake in a joint venture with the bank Virgin Money — although for less than half the amount it paid.
Under Bird’s tenure, the firm has cut jobs, costs, vowels from its name — as part of a much-ridiculed rebranding — and even the office in the Scottish city after which it is named.
But analysts argue the turnaround has floundered. Costs remain stubbornly high, the share price has fallen by a third and underperformed the FTSE 350 asset managers’ benchmark since Bird’s appointment, and the group has twice been ejected from the blue-chip FTSE 100 index.
Rae Maile, an analyst at Panmure Gordon, said: “They’ve taken some costs out but there is still much which needs to be done. It’s all well and good saying you’ll take out 10 per cent of the workforce but profit margins are still a million miles away from where they need to be.”
Others question whether it is Abrdn’s management that is itself the problem. “It is abundantly clear that a change of leadership is required,” says Samuel Johar, chair of board advisory group Buchanan Harvey. “The only discussion is whether it should begin with the chair or the CEO.”
Some shareholders have already given up on the group. David Herro, deputy chair of US investment firm Harris Associates, said the firm sold its stake in Abrdn last year because it “lacked confidence that management could repair the business.”
Abrdn told the Financial Times that the management team was “brought in to deliver a new strategy of creating a long-term, sustainable business model that could thrive against a backdrop of huge change in the sector”. The company says it has “made substantial progress in delivering that. No change was not an option.”
The company’s performance in 2023 may have given Bird some headroom, as the £6mn pre-tax loss reported was lower than the £612mn suffered a year before, and adjusted operating profits came in above analysts’ forecasts.
A Scottish banker whose appointment was overseen by chair Sir Douglas Flint, Bird was raised in Motherwell, a steel town south of Glasgow, and rose to hold the top consumer banking role at Citigroup. It was after he missed out on the chief executive position there — to fellow Scot, Jane Fraser — that Flint suggested to Bird in an Edinburgh pub that he consider running the asset manager.
Bird arrived at what was then Standard Life Aberdeen with a mandate from the board to expand wealth management and slash costs to turn the business around within five years, according to a person familiar with the process.
He sought to do the job sooner. He said in the company’s annual report in early 2021 that he would cut the cost-income ratio to 70 per cent by the end of 2023 — a target that has been missed.
The investments part of the business, which still accounts for the lion’s share of assets under management, is weighing on expenses with a cost-income ratio of 94 per cent.
“Our core business is just not efficient enough . . . that is why we have done so much work to modernise it,” Bird told the FT last week, highlighting the £102mn in cost-cutting in 2023, above the £75mn target, as well as the further £150mn in savings announced earlier this year.
Bird reportedly suggested to the board in a strategy meeting two years ago a range of possible scenarios that included selling off the asset management business — an idea that has been dismissed.
The idea of a sale of parts resurfaced following the appointment of former banker and Aviva executive Jason Windsor as Abrdn’s chief financial officer. “Jason Windsor is a former M&A banker — he could have gone in to break the business up,” said an executive recruitment expert, who wished to remain unnamed.
Abrdn said: “As Jason has made clear on a number of occasions, he is supportive of the shape of the group and, along with the rest of the board, is fully committed to the strategy that we have set out.”
The performance of the group’s investment funds has worsened. The percentage of the firm’s assets under management beating benchmarks over a three-year period dropped from 65 per cent in 2022 to 42 per cent last year — dragged down by emerging markets.
Meanwhile, scores of fund managers have left the firm or been axed in the past few years, including a large part of the company’s multi-asset team. Benefits were also slashed ahead of the redundancies announced in January, which hit around 500 employees and will focus on support functions including HR, finance, tech, and marketing and communications.
Bird himself has drawn ire for telling staff earlier this year that bonuses would be paid for “performing colleagues”, while his total pay increased to £2.1mn from £1.7mn the previous year.
Abrdn said: “Linking pay to performance is an important part of our approach to compensation across the company.”
Bird inherited a challenged business in 2020, in an industry squeezed by fund outflows and high costs. But even this futurist might not have forecast the current pressure he faces. He will be hoping his latest round of cuts and his big bet on Interactive Investor pay off, or else he might be picturing a future outside of the company.
