Clariden Leu outlines Asia strategy

Swiss private bank Clariden Leu yesterday announced a new Asia strategy to be lead by Jimmy Lee, who joined earlier this month after being poached from Deutsche Bank in March.

Underlining the weight that the firm puts on the new strategy -- and the region -- Erich Pfister, head of the Middle East and Asia division, flew out from Zurich to announce the plans at a media briefing in Singapore. Pfister touched on the history of Clariden Leu, which was created in 2007 through the merger of five separate banks owned by Credit Suisse, and the combined 500 years of private banking experience that the new entity offers its clients through the private banks which came together to form it.

"More than half of the international staff of Clariden Leu is based in Asia, which is a good indication of where we want to be and where we expect our growth to come from," said Pfister. Clariden Leu has 1,530 employees of which 200 are employed outside Switzerland. Of these 200, 100 are based in Singapore and another 23 in Hong Kong. "There is still a strong Swiss-ness among the directors with only Swiss people -- or Swiss men to be more exact -- currently comprising our board but we expect this will change over time too," he added in a lighter vein.

At a time when private banking products have become commoditised, Clariden Leu prides itself on establishing an understanding of the needs and requirements of its individual clients and holding those as paramount. The firm does selectively manage some products, however. Pfister highlighted the area of insurance-linked securities (ILS) within which catastrophe bonds (cat bonds) are a flagship product for the Swiss private bank and one where it claims to be a market leader.

"We are financially very strong," stressed Pfister. "Our cost-to-income ratio was 56% for 2008 and we avoid being burdened with very large costs."

Pfister highlighted that a strong banking platform is fast becoming an imperative in Asia as "increasingly the trend is money generated in Asia stays in Asia". Clariden Leu has had a local presence in Singapore since 1985 and an offshore Singapore banking license since 2005. It has been present in Hong Kong since 1991.

"Clients in Asia want to be close to their relationship managers and investment specialists," observed Pfister. "This is our belief and shapes our strategy."

In March this year, FinanceAsia reported that Clariden Leu had hired Jimmy Lee from Deutsche Bank, where he was head of private wealth management for Southeast Asia and South Asia, as its new Singapore-based Asia head. Lee started at Clariden Leu on June 10. He took over from Stefan Hausherr, who is head of operations for Asia and branch manager for Singapore, and who had been doubling up as Asia head on an interim basis since November 2008. Hausherr goes back to his earlier role, also reporting to Pfister.

"The team we have assembled has all the ingredients for us to outperform the market and our competitors," said Pfister, before inviting Lee to say a few words.

"Singapore is promoting wealth management services as an alternative banking location to Europe and is now a well-established private banking hub," said Lee of Clariden Leu's decision to more clearly develop a strategy specific to the region.

Lee said one difference between Asian wealth and wealth elsewhere is that Asian wealth is still mixed between personal and corporate wealth. "In Europe, wealth has already been transferred across generations so clients are willing to delegate more," said Lee. In contrast, Asian clients are more engaged in discussions about their portfolio.

"I expect the industry to consolidate in the future as some small players may not be able to make the investments necessary to compete and some conglomerate firms may decide to dispose of their private banking businesses to enhance focus on other areas," said Pfister in response to a question. He clarified that Clariden Leu's growth strategy in the region is organic but said the firm may opportunistically look at options as they arise and it has the balance sheet strength to do this.

Both Pfister and Lee also alluded to the loss of trust that the wealth management industry witnessed in the aftermath of the 2008 financial crisis.

"The industry had become very creative in terms of products and not only the clients but even the private bankers did not understand how some of the structured products would perform," commented Pfister. But he acknowledged that structured products have neither dwindled nor died, rather there is more caution and a back-to-basics approach to structuring.

"The landscape had changed to an extent where people were no longer proud to say they worked for a private bank," said Lee. "All customers were affected by asset devaluation and they understand this, but a small portion were hurt beyond the point of no return."

The Zurich-headquartered private bank, which has SFr94 billion ($88.3 billion) of assets under management globally, does not break out AUM regionally or share a target AUM or client number for Asia.

"There are two concepts we have always believed in but which have had a revival [post the crisis]," explained Pfister in closing. "Diversification is back. Earlier, soaring markets drove people to invest too heavily in certain assets such as equities, hedge funds and structured products but now that has changed. Another concept that is back is suitability -- the importance of understanding clients' needs to ensure the products they invest in are suitable for their requirements."