Wednesday 18 October 2017

Interview: Susan Dargan's masterplan to put Ireland on global financial services map

Ireland has huge opportunites in the financial services sector post-Brexit, says Susan Dargan of State Street

Susan Dargan by Jon Berkeley
Susan Dargan by Jon Berkeley
Samantha McCaughren

Samantha McCaughren

Susan Dargan first developed an appetite for business at the age of 13, when she began helping out at the family pharmacy in Dublin's north inner city.

Dargan, who now heads up one of the largest international financial services companies in Ireland, State Street, revelled in the everyday commerce at Dargan's Pharmacy, located near the Mater Hospital. "It gave me an ethos of earning money from a young age," she says. "I've been working ever since."

That work ethic is put to good use at State Street, which now employs 2,500 people in Ireland, and needs to fight constantly to retain roles and business in a competitive global sector.

"Every day we are competing internally for activities," she says, speaking from her corner office in the further reaches of the IFSC. "As a consequence of the downturn, State Street wanted to use lower-cost locations like Poland and India. We (the group) now constantly move activities to other locations so we have to ensure the expertise built up at the Irish operations is used for new and more complex activities."

Despite the move to lower cost bases, the company has remained loyal to Ireland. The group's chief executive Joseph Hooley has just been in town to mark State Street's 20-year anniversary here.

Though the EU's ruling on Apple's tax obligations has been dominating discussions on foreign direct investment (FDI), State Street insists Ireland's tax regime isn't the only reason multinationals come to these shores.

"Joe Hooley was here last week and he said that corporation tax is not a decider in State Street being located in Ireland. It's the quality of the people, their ability to adapt quickly and the very innovative workforce," says Dargan.

She admits the rate of 12.5pc is attractive, but points out that many competing locations also have very appealing tax regimes. "Ireland is two decades and more into having a very significant financial services sector. That environment is what attracts people."

With the tax issue brushed aside, Dargan (53), diminutive and dressed in a quirky insect print dress, focuses on what she sees as being the more pressing matters for State Street. Regulation is a personal bugbear of Dargan's. In the wake of the financial crisis, European watchdogs have heaped new rules onto the sector.

"The pace of regulatory change has been unprecedented," she says. "Change was required and we would always say there is a requirement for prudent regulation."

However, Dargan questions the balance between protecting the interests of investors and consumers with the concerns of regulators. "At this stage maybe the pendulum has swung too far," she says.

Dargan believes that Irish regulators who interpret EU regulation for the local market need to be mindful of the impact on the sector.

"It's key when you look at the future of financial services in Ireland that there is a balance between what is right for the end investor versus what I would term 'gold plating the regulation'," she says. In other words, sometimes the Irish take on regulation can be more heavy-handed than necessary.

"I think we need to be more outward-looking in terms of what some of the other jurisdictions are doing in terms of enactment," she says. "We need to make sure we retain Ireland as an attractive location to do business for international financial services."

This is particularly relevant in the light of Brexit, she says, where the regulatory environment will be weighed up by companies seeking a new location in the EU.

Dargan, State Street's head of global services offshore, was in the City of London on the day of the vote and result and saw first hand the shock at the result. "We all had our action plans in place but I don't think anybody in the City thought it would happen," she says.

Having digested the news, most financial organisations now have internal groups focusing on Brexit. "Everybody is looking at the implications. Certainty is key and that may drive people to make changes before the certainty and outcome of the negotiations is known," she says.

Dublin is already competing with locations such as Frankfurt, Paris and Luxembourg for companies on the move from the UK. "Everybody is looking and saying what is the capacity in those locations? Do you really want to be the last person to move? All of that will be taken into account," she says.

Dargan, who chairs representative organisation Financial Services Ireland, believes the initial opportunities for Ireland will come from new investments, rather than a relocation of existing businesses. "In terms of growing their businesses, organisations will make different decisions now on locations than they would have before Brexit."

"Even before Brexit, people were looking at Ireland as a location, as an alternative to London," she says. Some of this was because Ireland is a cheaper location than the City.

Dargan believes that Ireland has huge opportunities in the area of financial services. "As long as we have the right overall environment," she cautions.

Tax for potential employees is one issue on her agenda. "If you want to attract people with expertise, you need to make it more attractive for senior experienced people to come into Ireland," she says.

"When you compare the marginal tax rate here to the UK there is a significant differential there," she says. "I'm not talking about the super high earners, I'm talking about the middle management earning €50,000 to €70,000."

Wage inflation is on the radar and may become an issue if more companies locate here. "It's something that we monitor on an ongoing basis - we need to be careful that wage inflation is very measured. If it grows too quickly it will impact on the attractiveness of Ireland for FDI."

Another issue is the supply of commercial property," she says, pointing to the office blocks being developed near State Street's headquarters. Equally important is the development of residential property to house new workers in the city. She says a rethink of planning regulations is merited.

"I would say they need to build higher even if it's in certain pockets of the city. That can be a combination of what they have done quite successfully down here (in the IFSC), which is high-end housing, with the social housing alongside it. That's a pretty good model."

State Street has operations in Naas, Kilkenny and Drogheda that Dargan says have provided diversity for the company. It also means the pressures of hiring in Dublin are not felt so acutely.

Dargan herself was brought up in the well-to-do South Dublin suburb of Rathgar. One of seven sisters, she studied Commerce in UCD but soon tired of the student life and was itching to get working in banking. She decided to drop out of her degree course and move to London. Dargan secured a job working in treasury, although at that stage had no idea what area of banking particularly appealed to her.

She began working on Northern Trust, which had just started to trade futures (a type of financial contract) on the London stock market. "I worked with a trader from Chicago. I was his position keeper, so he taught me everything about futures."

A few years later Bank of Ireland was looking for someone who knew about the relatively new area of futures and Dargan, who was keen to get back to her home city, jumped at the chance.

"I have been very lucky in my career that I have worked in areas which have been new and have grown over time," she says.

In 1996, at a time when the IFSC was just getting off the ground, State Street formed a joint venture with Bank of Ireland, which is how Dargan came to work for the financial services giant.

It's a huge player in the sector, although, as Dargan admits, not a household name in financial services. However, the group services 11pc of the world's assets. "We help people to invest and to save for the longer terms whether it's in pensions or funds," she explains.

The group employs 30,000 people internationally and has grown in Ireland organically and through a series of acquisitions. Ireland is now its single largest location outside of the US.

In 2003,it bought Deutsche Banks's global custody business, which employed almost 500 people. State Street then unwound the joint venture with Bank of Ireland, merging that business with its Deutsche operations. Other smaller acquisitions followed.

In 2010, State Street bought Bank of Ireland asset management. It was the group's first acquisition of an asset management business.

"It's been very successful and as a result, earlier this year we acquired the GE asset management business globally."

"We've been very successful in bringing all of those together, which is no easy feat I can tell you, because you're bringing groups of people and systems together as well." Her management team comprises of executives from all the companies it has acquired along the way.

Dargan is always focused on new areas of growth in the sector. "We're constantly looking at where we're going next which has allowed us to retain the numbers we have and grow the numbers we have here as well."

The Irish operation secured State Street's derivatives centre of excellence for Europe and has also built up expertise in the growing loan funds space. Much of the administration preparation traditionally done in Ireland is now done in Poland. Ireland now plays an oversight role.

Data is a growing area. "More and more we're working with clients to manage their data for them," she says.

While regulation can make business more challenging for State Street, it has also presented opportunities.

"For asset managers it's difficult to keep pace with the level of change so they look to service providers like ourselves to provide solutions for them.

"We're constantly innovating and that's why we're the leading custodial administrator with 28pc market share," she says.

Dargan sits on the IFS 2020 body advising on the Government's action plan for the sector. She is encouraged to see the strategy in place, although is clear that more support would be welcomed.

"Do we think we could do with more funding in order to get the message out about the attractiveness of Ireland as an international financial services centre? Absolutely we do," she says.

"I'm responsible for business in Ireland and Luxembourg. I can give feedback about what I'm seeing across locations but for me it doesn't make a difference on my performance as to whether the business goes to Luxembourg or Ireland."

"But I have a view as to how we (Ireland) can be seen as the premier location for international financial services.

"Within the area we play we are never going to be a global location like London or New York. But we have a great environment in which we play and it's making sure we are seen as the premier location for the outward-looking financial services which we've been really successful on to date".

She adds that Dublin is an easy commute from London:"But if the overall environment isn't optimal we will lose out to other locations."

'As my life got busier, I started running'

In my time off...

"My partner Don and his 17-year-old daughter Kasia keep me busy. We ski in the winter and I like to run. As my life got busier I started running, and I just kept on doing it. You can just get out the door and run, so whether I'm travelling or whatever, I just head out the hotel door and run."

My music tastes…

"We have very different music tastes in my household. First Aid Kit (a Swedish folk duo) are pretty good. If I had gone down to Electric Picnic I don't think I would have got down to Chemical Brothers, I would have been down at Lana Del Rey."

The last book I read…

"I was on holidays a couple of weeks ago and I read The Mitford Girls by Mary S Lovell. It's very good - talk about a family which ended up with completely different views between fascists and communists."

The best career advice I ever received…

"Women tend to do their job and expect to be recognised whereas men tend to promote themselves more. I benefited from sponsorship where a senior person promotes you in your organisation and beyond and I think that's really helpful. We have a senior women's group in State Street. We do it in a formalised way - but it can be done informally."

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