Bank Baron enjoys a life less grand

If it is possible to feel a chill wind when you are the sixth richest man in Britain and 234th richest in the world, measuring your wealth in multi-millions, then Bruno Schroder has just had his collar ruffled.

The family fortune has dropped by about £400 million over the past year as Schroders plc reported its first losses since its stock market listing 42 years ago, generated by the general downturn in financial markets and the struggles of the family business.

At its peak in early 2001, Schroders was worth £3.6 billion, and the 47 per cent family stake £1.7 billion. Shares have almost halved since then.

Even allowing for his share of £1.35 billion from the sale of the firm's merchant banking arm, Baron Schroder - his great-great-grandfather got the title from the King of Prussia - has been bruised.

Schroders reported a plunge to losses of £8 million from £230 million profit the year before. And Baron Schroder's work in the boardroom has attracted fierce criticism. He played a key role in giving a £5 million ex gratia bonus to outgoing chairman Sir Win Bischoff on his retirement last year, triggering a revolt from outside shareholders incensed the payment was not linked to performance.

These blows - parting company with the old bank, the first loss in nearly half a century, and Square Mile disapproval for approving that bonus - might have shaken such a dynastic figure. So how has the baron reacted?

Apart from a momentary shiver, and that special grimace the rich reserve for the public gaze, it is unlikely to have any effect on his lifestyle. The unassuming 6ft 6in aristocrat - listed by Forbes magazine last month as having a personal fortune of about £1.3 billion - will retreat into the privacy only the really wealthy can afford.

Today he is more likely to be found not on the seventh floor of Schroder's Gresham Street HQ, which he now typically visits only twice a week, but on his 16,500-acre estate at Dunlossit on the Scottish island of Islay. Here, his experience and energy is devoted to enterprise schemes to ensure the island community is protected from economic woes that have damaged the Highlands.

Baron Schroder commutes between Islay and a sumptuous house off Ladbroke Grove aboard his only obvious indulgence: a £1.5 million, six seater Pilatus PC-12 turboprop aeroplane he pilots himself. He is immensely proud of his skills as a pilot and navigator.

He is a highly regarded member of the island community, known for his keenness to help fundraising events and preserve local jobs. Islanders say he is keen to blend in with their way of life while indulging his passion for deer stalking and country pursuits.

On Islay, where he spends most of the summer, the baron drove through plans to re-establish a forgotten whisky distillery that had employed 50 locals. One employee said: "He didn't do it because he wanted a stake in the company. We all know how much money he has. He did it because the island was going to be so dreadfully affected."

The baron commissioned the island's ancient woollen mill to produce tweed uniforms for estate workers. He also sponsors the Argyllshire Gathering - the local Highland games - organising traditional dancing afterwards. At the annual Islay airport open day he gives free rides in his aircraft.

On some estates this might be dismissed by locals resentful of the master-servant relationship. But the baron is held in genuine affection. One islander said: "There is a great deal of respect for him. Not because of who he is or how much money he has but because he has so much and still cares.

"He gets involved in the community and is quite approachable. He would always be quick to help even if it was to draw the prize for a raffle."

A colleague said: "He turned up at the staff clay pigeon shoot and you'd have no idea here was the billionaire proprietor. There was no entourage and he was totally unassuming."

Baron Schroder and his sister Charmaine contributed £675,000 to the £1.4 million Islay lifeboat, which they used to watch being launched as children from their castle. At the launch of the new boat he told of how he went out with the lifeboat when he was younger to help rescue a fisherman caught in a storm. To date it has saved five lives.

While on Islay, Baron Schroder is usually accompanied by his partner Baroness Suzanna von Maltzahn, a Dane who obtained her title when she married a German baron.

They share the estate with Baron Schroder's estranged wife Piffa, a devout Roman Catholic who friends say will not divorce him even after years of separation because of her beliefs. The couple married in 1969 and have a daughter, Leonie, a 27-year-old researcher.

Piffa has her own castle rooms and travels there from her Kensington home when Baron Schroder and Baroness von Maltzhahn are in London. A former smallbore champion at Bisley and Irish international shot, at the castle she writes books on shooting - her best-known is Fair Game: A Lady's Guide to Sporting Etiquette - and a monthly column for Shooting Gazette.

"He and his wife lead separate lives and they have done for some time," said a friend. "It is quite well known he does his thing and she gets on with hers. They always come over at different times. He comes for shooting parties and to get involved with the community but she comes for privacy." Piffa remains a director of one of the family trusts.

Born in 1933, Bruno Lionel Schroder was educated at Eton, Oxford, and Harvard Business School. He served in the Life Guards before joining the family firm in 1960. His father Baron Helmut had a heart attack and Bruno, then 27 and doing his MBA at Harvard, was urgently summoned to the firm.

He joined the bread-and-butter banking division, but later moved to the more glamorous corporate finance side, advising big companies on takeovers and acquisitions. By 1963 he was elevated to the board.

But he has never played much more than a part-time, ambassadorial role. At company headquarters he was scarcely visible. In the bank's semi-official history, "Schroders, Merchants and Bankers" by Professor Richard Roberts of Sussex University, he merits just one paragraph.

The baron's main achievement, says Professor Roberts, was to organise family interests to ensure the continued independence of the firm. A complex two-tier share structure gave the family a disproportionate amount of voting shares and therefore boardroom control. "He was very aware of his birthright," said another colleague. In an interview he once said he thought only of protecting his fortune so he could pass it on to the children.

As if to prove his fiscal prudence, when the magazine Bizarre sent a list of millionaires cheques for 97p, he was one of the few to cash them.

At Schroders he has been content to watch the profits roll in, generally overshadowed by his brother-in-law, Charmaine's husband Sir George Mallinckrodt, known as Gowi ( pronounced Go-Vee). Sir George, himself heir to a separate industrial fortune, married Charmaine in 1958 and rapidly rose through the ranks of the bank, becoming chairman in its golden period from 1984 to 1995.

One former colleague said: "Bruno was the gladhander-in-chief, someone to be wheeled out to meet the clients. Bruno had pretty good contacts, but Gowi had them in spades."

By 1999 Schroders was making profits of more than £300 million a year and had been catapulted into the FTSE 100 index of Britain's biggest listed companies. The share price was riding high as US and Continental banks eyed up the few remaining independent houses in the City.

Eventually, in early 2000 came the decision to break up the firm and sell the corporate finance side to Salomon Smith Barney, part of US banking giant Citigroup. It was a hard decision for the baron, said one colleague: "I think he went through agony. He is a nice person who wants to do the right thing."

With hindsight the decision, characteristically, was probably right. Schroders banked £1.35 billion from the sale of the merchant banking arm at what turned out to be the very top of the market.

But parting company with the old bank's core was a humiliation. It traces its roots to Baron Schroder's great-great-grandfather Johann Heinrich Schroder, a Hamburg Lutheran who set up J Henry Schroder & Co in the City of London in 1818, financing trade. Johann was rewarded with his Prussian barony and his son John Henry was knighted by Queen Victoria.

During the First World War when Baron Schroder's grandfather, who shared his name, faced having the bank seized as enemy property, George V intervened, the baron was naturalised, and he retired to the country until hostilities ceased.

The recent problems at Schroders stem from the downturn in share markets, which reduces the fees received from pension funds it manages on behalf of millions of employees. It has also been hit by a number of client defections as pension fund trustees take their business to better-performing rivals.

An embarrassing accounting error led to the firm inadvertently overstating profits by £11 million last year. It was the kind of mistake Schroders would not tolerate in the firms it itself invests in, say critics.

Friends say there is steel in Baron Schroder, and a stubborn streak that stops him bowing to City pressure when it threatens the interests of family or friends.

The company's recent troubles focused attention on its unorthodox boardroom practices. Its patrician response to criticism - the baron's seat on the remuneration committee, a breach of best practice because he is not independent, "is considered by the board to be appropriate" - also raised hackles among modernisers.

The baron's approval of a pay scheme to guarantee new chief executive Michael Dobson £2 million a year regardless of performance has also raised eyebrows among some outside shareholders.

Though it would, of course, be considered small change in the Schroder family vault.