Stephen Baird was full of ideas when he became Aberdeen's chief executive in September 2020.
The Scot quickly told staff about his ambitions for the asset manager position, according to two people in a phone call with staff in late 2020, and referred to himself as a “futurist”: someone whose knowledge and research helps them see the future.
Three-and-a-half years on, Baird faces tough questions about its future, as one of the UK's largest remaining pure-play asset managers rushes to cut costs and develop new revenue streams in order to stem the flow of assets to competitors and low-cost passive managers.
Baird's goal was to reduce expenses and increase income by expanding wealth management and selling more investments directly to consumers. The idea was to leave Aberdeen less dependent on its £367bn investment business, which managed money for insurance companies and pension funds, among other clients.
Initially, this plan showed promise: Abrdn acquired Interactive Investor, the UK's second-largest consumer investment site by assets, and consolidated costs, partly by restructuring or closing more than 250 of the firm's investment funds.
Baird also sought to restructure other parts of the underperforming company, selling Aberdeen's private equity arm for £7.5bn and offloading his 50 per cent stake in a joint venture with Virgin Money Bank – although for less. Of half the amount he paid.
Under Baird, the company has cut jobs, costs, the vowels of its name – as part of its much-mocked rebranding – and even the office in the Scottish town named after it.
But analysts say that shift has faltered. Costs remain stubbornly high, the share price has fallen by a third and underperformed the FTSE 350 Asset Managers Index since Baird's appointment, and the group has twice been kicked out of the blue-chip FTSE 100 index.
Ray Miley, an analyst at Panmure Gordon, said: “They have cut some costs, but there is still a lot to be done. It is all well and good to say you are cutting 10 per cent of the workforce, but profit margins are still a million miles away from where they were.” You should be in it.
Others wonder whether Aberdeen's management is the problem itself. “It's quite clear that there needs to be a change in leadership,” says Samuel Gohar, chair of the Buchanan-Harvey Board of Directors Advisory Group. “The only discussion is whether it should start with the president or CEO.”
Some shareholders have already abandoned the group. David Hero, vice president of US investment firm Harris Associates, said the company sold its stake in Aberdeen last year because it “lacked confidence in management's ability to fix the business”.
Aberden told the Financial Times that the management team “has been brought in to deliver a new strategy to create a long-term sustainable business model that can thrive against the backdrop of massive change in the sector.” The company says it has “made significant progress in achieving this. Change was not an option.”
The company's performance in 2023 may have given Bird some leeway, as the pre-tax loss of £6m was less than the £612m it made the previous year, and adjusted operating profits came in above analysts' expectations.
Baird was a Scottish banker whose appointment was overseen by Chairman Sir Douglas Flint, who grew up in Motherwell, a steel town south of Glasgow, and rose to hold the top job in consumer banking at Citigroup. After passing up the CEO role there – to fellow Scot Jane Fraser – Flint suggested to Baird in an Edinburgh pub that he consider running the asset manager.
Baird arrived at what was then Standard Life Aberdeen with a board mandate to expand wealth management and cut costs to transform the business 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 reduce his cost-to-income ratio to 70 percent by the end of 2023 – a goal that was achieved.
The investment portion of the business, which still represents the lion's share of assets under management, impacts expenses with a cost-to-income ratio of 94 percent.
“Our core business is not efficient enough… That's why we're doing a lot of work to modernize it,” Baird told the Financial Times last week, highlighting £102 million in cost cuts in 2023, which Exceeding the target of £75 million, on top of the additional savings of £150 million announced earlier this year.
Baird is said to have proposed to the board at a strategy meeting two years ago a range of potential scenarios that included selling the asset management business – an idea that was rejected.
The idea of selling parts has 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 stepped in to break up the company,” said one executive recruitment expert, who wished to remain anonymous.
“As Jason has made clear on a number of occasions, he supports the format of the group and, along with the rest of the board, is fully committed to the strategy we have set,” Aberden said.
The performance of the group's investment funds deteriorated. The percentage of the company's assets under management that exceeded benchmarks over three years fell from 65 percent in 2022 to 42 percent last year – dragged down by emerging markets.
Meanwhile, dozens of fund managers have left the firm or been fired in the past few years, including a large portion of the firm's multi-asset team. Benefits were also reduced ahead of the layoffs announced in January, which amount to about 500 employees and will focus on support functions including human resources, finance, technology, marketing and communications.
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Baird himself sparked outrage when he told staff earlier this year that bonuses would be paid to “high-performing colleagues”, while his total pay rose to £2.1m from £1.7m the previous year.
“Linking pay to performance is an important part of our approach to compensation across the company,” Aberden said.
Baird inherited a challenging business in 2020, in an industry under pressure from cash outflows and rising costs. But even this futurist may not have anticipated the current pressures he faces. He hopes the latest round of cuts and his big bet on Interactive Investor pays off, otherwise he may envision a future outside the company.
