Strategy & Operations » Governance » Interview: IG CFO Christopher Hill

Interview: IG CFO Christopher Hill

Christopher Hill, CFO of IG, tells Financial Director why finance sits at the heart of governance at the FTSE 350 CFD company

WHAT SHOULD be a magnificent vista of London from IG’s head office near Cannon Street Station is murky and indistinct on meeting the financial spread-betting, contract for differences (CFD) company.

The whipped up Saharan sands that plagued the capital last month created an old-fashioned smog, but the mistiness ends abruptly at IG’s ultra-modern offices and the sharp-suited attire of CFO Christopher Hill. It, therefore, seems ironic that Hill appreciates the lack of visibility that IG, a 40-year-old brand, has outside of the financial trading space.

“In marketing speak it’s ‘low awareness, low comprehension’,” says Hill.
But there is another branding battle that IG faces, in that the services it provides might have an unsavoury reputation. “People think about CFDs: isn’t that how [the financial world] got into this mess; and spread-betting, isn’t that a bit spivvy?”

While Hill is clear about IG’s strong reputation, it has more to do to become the default choice for the active retail trader. This is a move that effectively looks to widen its market: so that more individual traders go to IG – and from around the globe.

So who are these retail individuals? These are not City traders due to conflict reasons. They can be grouped as 35 to 45 years-old, professionals or owner managers, doctors, dentists – and an increasing number of IT professionals, who “love the technology aspect of the platform”.

“They trade very short term and are at that stage in life where they’ve got a pension and ISAs in place, have set 5% to 10% of their wealth aside to trade in the short term…they’re interested in the markets and want a platform to take positions on the FTSE, DAX, Dow…,” explains Hill.

Platform development

Geographically, IG has moved across Europe since 2007, most recently in Switzerland. It also made the big step to purchase the website a year ago and bring its 14 country sites under a single banner. “IG in Germany is a metalworkers union, so it’s difficult to get IG to rise up the search engine results.”

With an in-house marketing team beavering away, clients are finding their way to IG: with the internet, or online, way of doing things pivotal to its success.

The various online platforms for trading (be it web browser, tablet or even mobile across multiple operating systems), all provide slightly different experiences. But it has got to the point where price feeds to clients are faster than the human eye, and IG is looking to offer direct market access – a more complex and deeper way of trading. For active traders “small prices make significant differences”, says Hill.

So, where Hill sits in all of this becomes clear. Stewardship is paramount (see box three), with the Financial Conduct Authority (FCA) keeping a close eye on its affairs. But then there’s a huge technology investment to make, new markets being entered – all of which require difficult resource allocation decisions – alongside forecasting and modelling.

“You do have to wear a bunch of hats,” says Hill, almost understatedly. Cognisant of statutory and regulatory reporting requirements, risk management and controls, and operate efficiently – all through 70 people across finance and risk – are Hill’s responsibility.

But the measure of finance’s quality is the level of debate it stimulates, he explains. “You need to need to be a catalyst for the business, understand the different streams coming together and join it up with other KPIs – support decision-making and strategy…which way is the business going?”

Intellectual assault course

Finance sits within the governance framework that helps to understand and interpret the implications of the decision made by the business – and these decisions are often around tech investment. Employing a 500-strong IT team, of which 250 are developers, Hill explains that finance must first appreciate that its client base want the same functionality across different platforms, expecting constant upgrading and enhancing.

On some of these IT projects the financial impact can be measured, but on others it’s not apparent until you relate it to its “secondary or tertiary impact”.

“You’re looking at how did client activity change by us doing something, did it impact the P&L, or increase website searches?” Hill says. Finding the metric to help the business understand the impact of investment sees finance and IT analysts working together.

“That’s really key,” says Hill. “One function can’t do it in isolation, so you’ve got to bring the right minds together.”

Finance sat in the corner would be “irrelevant to the business”, and as such the function works hard to make sure it understands how the business works, the opportunities and threats it faces and, most simply, what its key products and services offer the audience.

One of the little tricks that “a bunch of my guys have run with” is introducing a finance graduate scheme, which usually sees some 300 grads apply for just two posts. These applicants go through an intellectual assault course of tests, including maths, and a telephone interview – followed by a day face-to-face grilling. The successful applicants then spend six months at a time in various roles across finance and risk.

A couple of these scheme members themselves introduced an away-day for the whole of finance, with the team completing challenges based on IG’s various platforms. “So they could understand why we have different IT development teams and ‘dev queues’,” says Hill.

Trading, not gambling

With techies working on a myriad of ways to deliver the same group of products and services, and the propensity for people to make mobile transactions, the question must be: how big is IG’s potential market?

There is a trend towards self-directed investment, explains Hill, with between 25,000 and 35,000 clients trading on a monthly basis through its platforms, which compares with an estimated 750,000 online equity traders. “Going from that, there is scope for expansion of client numbers.”

Hill cringes when Financial Director suggests that this might follow the huge increase in growth in online sports gambling, and we might see share trading as commonly accepted practice.

“There are ‘gamey’ players in the market, but we want to appeal to active traders…it’s trading, not gambling…a very professional offering…an investment activity. I flinch when I read about us as a ‘spread better’, or about people ‘taking a punt’.”

IG was set up in 1974 by Stuart Wheeler to create a platform to trade gold more easily. So while the delivery method and range of services and investment choices may have changed dramatically, IG is, as far as Hill is concerned, still doing what it has always done.

But with many clients taking leveraged positions, things have changed, including IG’s regulator, which is now the FCA. “They were in yesterday”, Hill points out, “we have a very good relationship with them”.

A key area of focus for the two parties is to ensure that clients don’t overstretch themselves. While individuals can puts ‘stops’ into place – to halt their losses at a certain level – IG will also close out client positions if they feel it has got “unmanageable”.

“That’s something the regulator’s really keen on,” he adds. Of course, it’s not interested in taking on tens of millions of pounds of debtors just to be written off later, either.

A watchful gaze upon IG’s finance and governance extends beyond regulators. Hill sits on a board alongside audit committee chairman Martin Jackson, an experienced FD in life assurance, while both chief executive Tim Howkins and Jonathan Davie are chartered accountants.

The relationship between CFO and the audit committee chair has revolved over time, Hill points out, with more onus on the committee to provide robust oversight. But, for Hill anyway, the audit committee chair is someone the CFO should be able to talk to and use as a sounding board – alongside the ‘challenge’ aspect.

This stress-testing is not confined to board governance. For a fast-growing company you might expect it to be arrogant or complacent, but “it’s absolutely not”.

“It has a culture of consistently challenging and asking ‘how can we do things better’?”

For the finance function, this translates to “nailing down” stewardship, “without which you have no credibility”, then becoming more strategic and a catalyst for decision-making and action.

“You have to let the business see itself in different ways,” he explains. “When we help people see the landscape and that prompts them to say: ‘well we need to do this, or that’. If you demonstrate a desire to learn about the business, people warm to you and you can get more done.”

Continued on page 2

Christopher Hill CV
2011 – present CFO, IG Group
2008- 2011 CFO, Travelex
2007 – 2008 Group financial controller, Travelex
2005 – 2006 FD, UK & Ireland, VWR International
2000 – 2005 Various, GE Capital
1993 – 2000 Manager, Arthur Andersen

BOX: IG and the numbers game
IG was set up in 1974 by Stuart Wheeler, a man who has made the headlines for a variety of reasons: donating millions of pounds to the Conservative Party then becoming current treasurer of UKIP; and supposedly being one of the last people to see Lord Lucan alive at a game of Bridge.

Despite the colourful nature of his character, the basics he created at IG haven’t actually changed that much – from creating a gold trading platform it now offers more opportunities to spread-bet, enter a contract for difference (CFD), or take other trading positions. However, its scale is now great.

The FTSE 250 business currently has a market cap of nearly £2.4bn. Its half-year figures showed improved performance following a “subdued” prior year. Net trading revenue was £183m for the six months to 30 November 2013, compared to £169m a year earlier. Profit before tax was £95m, from £81m for same period a year earlier.

Much of the growth came, according to chief executive Tim Howkins, from its strategy of broadening its offer and product range to attract and retain active traders (as opposed to traders using its products infrequently), with these traders receiving a more targeted and personal service.
IG’s geographic expansion was also important. Its European offering, excluding the UK, saw 25% growth over the period, contributing £40m in revenues.

BOX: Hill, traversed
The lure of the financial markets was always there for Christopher Hill, even during his days completing a masters degree in modern history at Oxford University. But he realised he’d need a further qualification to help him break in to the City.

With Arthur Andersen at the time running a strong financial services practice, he chose to study there as a chartered accountant. While running a controls review at a commodities broker, Hill noticed the fascinating range of companies it dealt with on the cocoa desk, including the likes of Cadbury’s and Nestlé.

Hill then saw a link between understanding the markets and learning about corporates.

Back at Andersen he was put in touch with a former Roll Royce treasurer who’d just joined, Judith Harris-Jones, and had set up a treasury practice at the firm. “I waded in and asked: can I be involved? I was a teaboy and spreadsheet jockey for a couple of years,” says Hill.

Eventually he became the “guy on the ground” for a treasury implantation at a Swiss engineering company. Six months on, and “nothing was the same after that”.

He then spent valuable time at what is considered one of the best-run and forward-thinking corporates on the planet, GE, in its capital and finance divisions. His time there was brain-expanding, including ta period at its own university pitching ‘theoretical’ deals to then GE chief risk officer Jim Colica – who would explain what actually happened to those deals in real life.

He helped set up GE Capital’s European treasury function, but to rise up the pyramid he would need to work abroad. And with a young family, he decided against that option.

So he moved to laboratory supplier business VWR as FD for UK & Ireland. The setting of Poole, Dorset, would seem idyllic, and even Hill admits that the office was “plush”. But the business needed turning around. So operating margins, incorporating cost reduction, working capital and cashflow, need to be dealt with: “uprooting it from Poole to a tin shed on the M1 where the distribution centre was”.

Understandably, the finance team didn’t want to move, so Hill had to rebuild the function – alongside managing an SAP implementation that “hadn’t gone particularly well”.

Hill’s treasury and finance function responsibilities were, by then, well-rounded. But he still hadn’t managed the operations of a group function as a controller. If he was going to push on as a group FD, then statutory reporting, consolidation, tax and investor reporting were missing from his CV.

A discussion with then Travelex CFO John Martin about a divisional FD role saw Martin come back and propose a controller position.

“I asked him ‘what does that mean?’. And he said ‘what do you want it to mean?’. After outlining what he wanted, Hill got the job. Hill was able to develop, which gave Martin freedom to work more closely with CEO Ian Meakins.

Martin then moved onto PE firm Alchemy Partners, with Hill stepping up as acting CFO just before Lehmans “went pop”. Suddenly Travelex was a payments and forex business with £900m of debt and the global economy folding around it, seeing passenger numbers collapsing. “There were all sorts of challenges, managing the debt, planning scenarios, cashflow… at the time you had to just get on and deal with it, it was really tough.”

Meakins then departed and Travelex was without a CEO for some 12 months.

This saw him step up again, although more in terms of responsibilities rather than a change in job title. Helping the business find ways to invest, it posted a “fantastic set of numbers” and sold its cards and payments business to Mastercard and Western Union, paying off its debt.

With more change planned for its next stage, Hill sat down with its new CEO and said “I think it’s the right time to move on”.

And then Hill joined IG, in 2011. A strong brand with fast growth globally expanding, “and the technology piece”, he points out.

BOX: Spread-betting and CFDs – what’s the difference?
At first it seems easier to run through the similarities: You can bet on a position, and that bet can be leveraged – in other words, you can win or lose, a lot more than the initial outlay.

But differences exist. Spread bets can apply to any type of market, and the timescale that the bet applies to is often open as well. CFD trading, unlike spread-betting, tends to apply to ‘real’ assets such as shares and currencies – with a timeframe often set within the contract. CFDs also come under the CGT regime, unlike spread-betting.

The spread-better’s charges are often included within the spread price, whereas a CFD is associated with a commission.

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