Vincent Duhamel
It is a truism that high net worth individuals in the West, where wealth has been around longer, are generally focused on preserving their fortunes, while those in the East are still mainly in wealth creation mode.
So what could a 200 year-old Geneva-based private bank offer to Asia’s yield-hungry entrepreneurs?
According to Vincent Duhamel, head of the Asia-Pacific and Japan division of Swiss bank Lombard Odier, a generational change in attitude towards wealth preservation amongst the region’s wealthiest families, is creating a unique opportunity for the bank.
“Pure wealth management is a niche that is less well-known in Asia. Because the wealth tends to be younger, here the model has traditionally been transactional and brokerage-oriented. But pure play wealth management is a niche that we strongly believe in, that is where we are at our best,” said Duhamel.
As Lombard Odier celebrates a quarter century in Asia this year, the emphasis is shifting from the primary to the second and third generations in the region. This is where there is a greater need for the bank’s services, said Duhamel.
“As an entrepreneur you are still a risk-taker. You want financing from your bank, they give you credit cards, lend you money, provide investment banking services for when you want to IPO. Many of them have invested heavily in their own companies, generating 35 per cent CAGR for the last 30 years. We don’t pretend to be able to compete with those type of returns.”
“But when it comes to the second and third generations, they tend to be more risk averse, more prudent and better suited to wealth preservation. Asia is becoming much more open to this approach,” he added.
A turnaround
Duhamel has been in his role for nearly a year now, after joining from Swiss family office SAIL advisors. During the last year net new money in the private banking division has increased by over $1 billion to over $8 billion. “Things have gone faster than I expected,” he said. “We think we have a competitive advantage on discretionary asset management and a good opportunity right now. We are specialised and so don't try to be competitive on lending, IPOs, structured products. So for us it was to better wait until the right time to define what we had to offer,” he added.
When the bank appointed Duhamel in 2011, he was given three mandates in Asia.
First, was to develop the commercial side of institutional business. “Before last March this segment was very limited,” said Duhamel. “But we have since put in place a lot of commercial opportunities, for example we have won large mandates from Chinese and Japanese institutions, and it is now humming along nicely.”
Secondly, Duhamel was tasked with growing its third party distribution platform, including tying up with other private banks to sell its funds. It has launched around six of these partnerships in Japan and in March announced a ground-breaking partnership with 200 year-old Australian private bank, JB Were.
This tie-up was on the cards since last summer, said Duhamel. “Australia has a large amount of wealth and is a very sophisticated, competitive and domestically oriented market. It did not necessarily make sense to go into Australia and put our name on the door,” he said.
Rather than compete with a 170-year old firm like JBWere, Lombard Odier realised that the aligned culture and mindset would better create a mutually beneficial partnership. Lombard and JBWere private bankers are financially incentivised to work together and share clients.
War for talent
The third mandate, and possibly the most challenging in Asia, is to grow its private wealth management business. This part has not grown as quickly as the two others, partly on account of the battle for talent raging in Asia. Compensation for talented private bankers has rocketed and the last year bank opted to wait on the side lines until the dust settles.
Consequently, hires have been mainly on the institutional side. Duhamel has been steadily building his ranks of lieutenants in this business.
Sheau-Yien Wang, previously with State Street Global Advisors in Singapore, joined as head of key institutional client relationships in South East Asia. Joanna Wong now heads up Lombard Odier’s third party distribution in Asia, previously at AllianceBernstein. Former Goldman Sachs Asset Management executive Hyoung Nam Kim joined as director of business development for Korea.
One addition to the private bank was Simon Tan from UBS last December, as senior relationship manager. Pranay Gupta, a former client of Duhamel’s, joined from ING in January as the bank’s first Asia chief investment officer. “In Asia, we want to develop the CIO function within the institutional frame,” said Duhamel, although Gupta officially sits within the private banking arm.
“We stayed careful in the first year,” said Duhamel. “We hired a few private bankers but we didn’t want to get into the war of talent that existed, especially last year. It is not the number of people but the quality, and who fits with the culture of the organisation. So now we started to get a few interesting people coming on board, with others coming through now.”
Duhamel believes that talented bankers are now approaching Lombard because of its longer standpoint. “We are attractive to them as we don’t have the Monday morning meeting to sell this product this week. We take a much longer view, how we should be managing money, how we should avoid certain risks and what is the best way for them to prosper long term. This is best for mature private bankers who have enough scars on their back to realise that this is better suited to their clients,” he said.
Future growth
So what is the focus for the next 12 months, during Lombard’s 25th year in Asia? Hiring for the investment and private banking teams will take priority, in a bid to meet Duhamel’s aim to double assets under management to $15 billion in Asia in five years, he said. To put this into perspective, the Geneva-based bank, which traces its roots to 1796, manages more than $160 billion in assets for institutional and high net-worth clients.
The bank currently has 80 people divided between Tokyo, Singapore and Hong Kong, divided equally between the front office and back office. Duhamel aims to grow this to 130 within the next five years.
An ongoing hurdle is going to be building the brand of Lombard Odier outside of its homeland. “Branding is a challenge, as we are a Swiss bank that is not so well known here. We don’t want to cheapen the brand and our main attraction is our capital safety and stability.” The bank is doing more advertising and sponsorship in the UHNW space, playing to its 'safe and steady' reputation. Duhamel said Lombard is very conservative, even for a Swiss bank; its partners own a share of the firm and so have a vested interest in its long term performance.
“In 200 years, 45 financial crises, we have never been bailed out," said Duhamel. "We may not be the right bank for everyone but, increasingly in Asia, people are seeing the value in our approach.”