Asiamoney.com: Julius Baer CEO interview

Asiamoney.com, February 2011

Of all the private banking recruitment drives in Asia in recent years, few banks have increased their scale as rapidly as Julius Baer. Five years ago, it was nowhere – literally, nobody on the ground. “We are a traditional Swiss-based private banking organisation,” says Boris Collardi, global CEO. “We have been around for 120 years, of which 115 were spent concentrating on Europe and Switzerland.” Having finally decided to turn into a diversified global private banking group, it wasn’t about to waste another century: it already has more than 400 people in Asia, the vast majority of them in Singapore.

These days, Julius Baer’s results announcements talking about Asia as “our second home market”. “When it comes to its strategic importance to the group, it’s very simple: it’s a fast growing region in terms of wealth and in terms of us being able to gain market share.” 10% of the global headcount are now in Asia and half of all new growth, in terms of net new money, is sourced from the region. That’s not to say, though, that it’s a source of profits yet. “Hopefully in future profitability will follow,” Collardi says. “Today we are breakeven, but we expect in the next five years the profit contribution from Asia will improve dramatically.”

Today, Collardi believes the footprint is in place, with major operations in Singapore and Hong Kong, a more minor office in Jakarta, and another expected this year in Shanghai. “We’ve filed for that and are waiting for approval from the local regulator.” With that established, Collardi is focused on attracting new bankers and bringing new clients in, as well as “getting the Julius Baer name more well-known among the upper segment of clientele.”

Upper segment meaning ultra high net worth? “I think it’s a very big opportunity. A lot of wealth is being generated through IPOs of companies, and these are ultra high net worths we can capture through Hong Kong and Singapore.” Julius Baer is hardly alone in wanting to capture this market, but is finding various new ways to target it; the bank brought out more than 100 Chinese entrepreneurs to Switzerland recently and put them on a course, particularly to try to imprint the idea of succession planning in a market where most of the wealth is first generation rather than the fourth or fifth that is commonplace in Europe. “It’s fascinating for many of them, as their kids are coming out of university and they need to put them into the business. And for China in particular it’s a pressing topic because Chinese families have traditionally only had one kid.” Collardi showed them a photograph of Julius Baer, the banker who founded the group in 1890, then another of the family members descended from him – 120 of them. “I said to the entrepreneurs, how will your family tree look in 120 years? You need to put a structure in place for the next generation.”

There is already a sophisticated homegrown industry well versed in these ideas in Asia, as well as an equally sophisticated multinational one, but Collardi is not a wide-eyed ingénue in Asia: he spent five years in Singapore with Credit Suisse, an institution he worked with for 13 years before shifting to Julius Baer as COO in 2006 and reaching the top job in 2009.

Julius Baer sits at an interesting point on the spectrum of private banking models in Asia – a spectrum with a far-flung range of responses to the financial crisis. On one end are the local houses like DBS which thrived in the crisis because of the local perception that they could trust the name and knew it wouldn’t fold; on the other are the global full-service heavyweights like Citi and UBS which did suffer dreadfully during the crisis, partly because of stresses in other areas of the bank. Pure-play Swiss groups like Julius Baer, Pictet and Clariden Leu sit in the middle, but here again Julius Baer is somewhat differentiated because unlike many other Swiss private banks, it is listed.

Unsurprisingly Collardi argues the pure-play model was galvanised in the crisis, partly for the sense of focus on clients and the lack of capital-damaging distractions like sub-prime (Collardi proudly notes that for one year it, not UBS or Credit Suisse, was the most profitable bank in Switzerland). “If you don’t have a conflict of interest with investment banking, the client perceives you as bring there for them rather than just in the good times,” he says. But this wasn’t always a boast Julius Baer could make: it was only in 2009 that it demerged from Global Asset Management, which it had bought in 2005 from UBS, and so became truly independent (and even now, the two institutions are consolidated within Julius Bär Gruppe, listed in Switzerland). “We’ve taken the model to the extreme by spinning off our asset management business,” Collardi says. “We said, if one of the learnings of the crisis is to be a true advisor to the client, we shouldn’t have our own products which could implicitly create a conflict of interest.”

And the listing? “For me it is like going to the gym every morning,” he says. “It is a lot of effort and work, but it’s a discipline that you have in your life, that every decision you make no ultimately is transparent to the market and will be reflected in one of your KPIs. Your mental discipline is much higher, and you cannot hide good or bad news. It’s out there.”

In its newfound pure advisory role, the bank has rallied around a number of long term investment themes: growth, planet and people. Growth is in essence the shift from traditional to emerging (“which, I think by now, have emerged”) markets, with improving transparency, diminishing corruption, and opportunities on the back of commodities and domestic demand. Planet is the scarcity theme, around areas such as energy consumption, water and natural resources. And people looks at fundamental changes in the way we behave, from communication to health and functional foods (the theory that one should eat different diets at different points in one’s life – fellow Swiss multinational Nestle is a leader in the field).

Again, none of these themes are particularly new, but the bank’s marketing of them is quite charismatic, particularly on the planet theme, with handbooks and guides somewhat reminiscent of CLSA. Emboldened by its new independence, the bank is punchy in pointing out that a lot of existing green investments are conflicted. “We’re trying to do this in an unbiased way, not trying to sell products behind it – ‘you have to do green investments and by the way, we have 15 products to sell on it’,” he says. “Not all green investments are as green as they seem to be. Some are not very useful; and some companies use it as a marketing tool rather than any real conviction in the company. We’ve tried to give people a warning about what is real and what is not real.”

Generally, Collardi is optimistic, and thinks clients and markets just want some good news. “I see the fundamentals everywhere stabilised,” he says. “Everyone wants to go back to an optimistic mood. People in general want good news now. And the way out of this crisis will be optimism.”