Sound Off: with Dan Kragt
If there’s anyone who understands the unique history and challenges of the trust industry, it’s Dan Kragt. After selling his business to TMF Group in 1999, Kragt stayed with the firm and has been instrumental in its global expansion over the last 20 years. He served as the Chief Operating Officer (COO) of TMF Group from 2015 to 2018, as well as serving as a member of the company’s Board. Kragt now focuses on supporting fast-growing FinTech initiatives. He recently joined the advisory board of Finos.
Finos: Name the biggest challenge that comes to mind that the industry faced in the past, and how they overcame it.
Dan: A few industry events creating challenges that I have witnessed include the Sarbanes Oxley Act, following the Enron/Andersen collapse with the Big4 having to choose between auditing, consulting or advice and compliance (incl. BPO), many corporate administrative service providers seized the opportunity to become either global players and/or to capture larger corporate clients, until that happened the market had been “cornered” by the Big4.
9/11, resulted in an abrupt and increased focus on KYC and AML. The need to then build procedures and capabilities took lots of time and many resources in order to face these requirements, which were unlikely to go away, but instead were expected to multiply. The sector dedicated substantial resources to assure it could preserve the sector’s reputation and avoid being associated with illicit activities and funds. Over time, this burden has become substantial and driven costs up, and thus, also fees while leaving smaller providers struggling to comply. The result has been a certain sector concentration.
BEPS, changing the frontiers and requirements for tax-planning opportunities. The use of tax efficient structures, especially, for internationally-oriented companies has become more complicated if one wants to be truly efficient and compliant. This is creating a total shift in the trust industry. There is a limited number of third-party directorships, adequate office (and human resources) infrastructure and actual decision-making and daily management to take place in-country. All of this is forcing the trust sector to adapt its offering. Many tend to shift towards servicing financial vehicles rather than corporate holdings, as most of these fall outside the BEPS scope for now. The level of expertise and resources required assure margins and protection against outside players.
Panama Papers have caused further focus on KYC and increased sensitivity for PEP clients.
Finos: How did you see technology use change within the industry during your career?
Dan: Communication has changed dramatically. There is less face-to-face, less travel, less paper, more informal (WhatsApp, Slack, etc.), phone or voice are used as backup and video conferencing has become very accessible. Reaction times, ease of exchanging information and documents have all benefitted the sector given its global nature. Technology focussed on KYC is playing a major role, helping to meet the ever-increasing demands in the need to verify identities, corporate and personal info, fund flows and transactions, all while trying to contain costs. I’ve seen lots of sensitivity around privacy and security as technology takes a central place in the client-service provider relationship.
Finos: In an industry where trust is key, and personal service is the name of the game, how can a trust company grow and keep the personal touch in service delivery (i.e. not lose the client’s trust).
Dan: Improved communications and better file/client knowledge is key and this is greatly helped by technology. Also, many administrative or routine tasks that used to absorb resources and energy are now being automated, which should allow the freeing up of resources for more and better interaction with clients.
Finos: What advice would you have for the next generation of industry leaders?
Dan: The industry has suffered from many stakeholders interested in defending “status quo”. Pressure from players outside the sector, the increased need for technologically-based solutions, the technical (r)evolution itself, clients’ expectations –- these things all now require the sector leaders to anticipate the upcoming needs and challenges if they want to continue to lead the industry. Looking ahead, being at least early adapters (if not pioneers) of new solutions and adapting service offerings early on – not waiting until regulators “impose” changes – are the key to future success.
Finos: In your view, what responsibility does the industry have in leading the charge in developing new services for clients?
Dan: It’s mostly a matter of survival, as the current offering will no longer either meet regulatory requirements or clients’ demands. The sector needs to actively incorporate not only new offerings that respond to different needs, which means also from different and new kinds of clients, but also needs to assure current and future clients that the sector is up to the challenge. This will keep clients from searching for other solutions or outside players that could invade the sector with superior technology or client-service experience. Working on client intimacy to retain trust, as well as to keep up with an increasingly fast-changing environment, will be required for the sector to proof their clients and continue to rely on them.
Finos: If you would start a new trust company from scratch today, what are the top things you would focus on to differentiate yourself from the crowd?
Dan: I would focus on customer experience throughout the customer journey, leveraging technology to improve communications with clients and colleagues to drive proximity and intimacy, but also efficiency and quality. Additionally, a well-chosen stack of solutions assuring good front-to-back office operations and communications internally, as well as with clients and other external parties regulators/authorities, banking, other professional services providers, etc. is key to success. This doesn’t require large investments anymore (SaaS!) and it will soon no longer be only the larger players with the deep pockets that will have access to these solutions.
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