ALAN Harden, who took over as chief executive of the Dundee-based Alliance Trusts in January, believes Scotland is wrong to promote itself as a financial centre on the basis of quality of life.
This is not because the 46-year-old American is disillusioned with the lifestyle in his new home town of Aberdeen or his workplace in Dundee since moving from Tokyo — where he was managing director for the Asia-Pacific region of Citigroup Asset Management — last October.
In fact it’s because Harden, born to an US father and an English mother on the US Air Force base at Burtonwood in Cheshire in January 1958, believes that it is short-sighted to promote a “lifestyle” to woo talented individuals to come and work here.
He says: “You don’t want people to come here to ‘retire’. Professional people will only come to Scotland because they want a career challenge.
“Scotland would be better advised to promote itself on the strength of thought leadership, something that I’ve found in abundance here. We should be capitalising on that, not lifestyle, which should never be anything more than an added bonus.”
Having taken over the reins at the Alliance Trusts (which have £2 billion under management and employ 150 people) from Gavin Suggett, Alan Harden is fully aware of the challenges he faces in his new job.
“The history of Alliance Trusts has been superb — but we can’t allow the history to be a tombstone around our necks. The thing that will drive our decisions is to have a view to the past, but not to be held prisoner by it.”
Both Alliance trusts, the Alliance Trust and the smaller Second Alliance Trust, have their origins in the 1870s, when a group of wealthy Dundee jute merchants and other businessmen invested in farmland and ranches in the US through these vehicles. Today, they are a pooled vehicle for the personal savings of around 27,000 people.
Alan Harden believes that aspects of the Alliance Trusts‘ unusual and slightly quirky formula — they are self-managed, conservatively accounted and don’t pay commission to independent financial advisers — stand them in good stead for the future. He believes these characteristics ensure that the interests of customers, shareholders and staff are aligned. One gets the impression he is not going to rock the boat too much — at least not yet.
“The fact it is self-managed was a big attraction for me. It means one group is not prejudiced in favour of another and everyone’s attention is on creating long-term value for shareholders.
“Alliance Trusts has always taken the view that it is an owner of companies and not a trader of paper. And I want to enhance that further. Which means not even looking at investments as long-term holdings, but an allocation of corporate capital. That may sound like cute words but it’s a mindset.
Another joy, as I was looking at the firm, were the statements of transparency and integrity. And another thing that they’ve got absolutely right is they have no desire to put in a [menu-driven] telephone system.
“Here you’ll get a human being right away…. The likelihood is you’ll get to know them and that’s so rare. I don’t see us changing that.”
Harden also highlights that the trust’s “wrapper” service, Alliance Trust Savings, founded in 1988, is the cheapest in the market and charges flat transfer fees of just £1 when a customer wants to juggle their portfolio.
Alan Harden says: “Our expenses are closely managed. We don’t want to diminish people’s wealth by being a high-cost supplier. A total expense ratio of 2% is not unusual for an Oeic [open-ended investment company]. That is a lot of money over 20 years. But our total expense ratio is 0.35%. I don’t want to be puritanical about it, but I am very cost conscious.”
Nor does Alan Harden harbour desires to vacate either the former Lamb’s Temperance Hotel in Reform Street where Alliance is based — or the City of Discovery itself.
“The building may be a little bit quirky but it certainly does not inhibit us from making decisions or being progressive and innovative.
“It’s a charming place to work in and have people come and visit and it would be hard to replicate. And being in Dundee has worked really successfully for the last 120 years.”
What Alan Harden thinks needs to be changed
Even so, Harden is open about other aspects of the trusts that may need attention: their relatively low media and marketing profile; their failure to pay either bonuses or incentive payments to fund managers; and their lack of in-house expertise in the fixed-interest and property arenas.
Alan Harden, whose predecessor Gavin Suggett earned £190,000 in his last year with Alliance Trusts, mentions executive pay as one area that will have to be reviewed. “It’s important that we pay good people appropriately for the job that they are going to do. We are in a competitive industry.”
He wants to introduce incentive payments based on total shareholder return against a peer group of investment trusts. “That’s the purest way to look at it. We don’t have any incentive programme at the moment and that is not totally helpful.”
But he scotches rumours that he intends to convert Alliance Trusts into a third party manager with a view to “poaching other management mandates.” These claims appeared in The Herald last October at the time of his appointment. Harden says: “I’ve no idea where they got that from, because it wasn’t what I said nor mentioned nor have any desire to do.”
Alan Harden heard about the job at Alliance through headhunters Whitehead Mann and had meetings with the nominations committee and executive directors before finally committing himself to taking up the chief executive role in September 2003.
Harden says: “With every layer I went through, I was uncovering more and more fascinating bits of both the history and the opportunities that the company has today thanks to its integrity and the things for which it is well-known.”
Asked what he did on his arrival at Meadow House on Reform Street, Alan Harden says: “I was full of questions. What should we do? What can we do? Where should we be going? How do we keep the promise we have made to our shareholders — that we should be their core investment.
“That’s what we’ve been working out so we’ll end up with a list of things that we have got to do that will allow us to meet that objective by the summer.”
Alan Harden believes that, in its own way, Alliance Trusts have a big role in helping resolve the impending pensions time bomb, not least in not scaring potential investors with impenetrable jargon.
“We are heading towards a perfect storm in that area. You’ve got an ageing population. We have a very low birth rate. Unless this generation of baby boomers have sufficient wealth to provide their own pension for themselves we will either have to tax the young to the extent there is no incentive left or the elderly will have to live on so little that it becomes unattractive as well.”
This article was published in the Sunday Herald on 23 May 2004