Dubai: The private banking industry is facing increased investor scrutiny in terms of performance and risk management practices in the post-financial crisis era and this global trend is applicable to the Middle East region too, said Patrick Odier, Global Senior Partner of Lombard Odier and Chairman of Swiss Banking Association, in an interview with Gulf News.
“Proximity to the clients is becoming very important in the private banking business. People want to see their advisers. I think this was always true in our model of business. It is even more pronounced after the financial crisis. The private banking clients want to hear and feel the strength and depth of the knowledge levels of their advisers,” said Odier.
Lombard Odier, one of the oldest private banks, has had ties to the region since the 1970s and has a representative office in Dubai since 2007. The Swiss bank has a presence in the world’s main financial centres. In the Middle East the bank serves clients ranging from large institutions, sovereign wealth funds, family offices, ultra-high net worth and high net worth individuals.
“We have been serving clients from this region more than 50 years. Keeping with the current global trend in the industry our clients want to see us more often and we too want to gauge their expectations and have a clear idea of what is the demand of tomorrow,” said Odier.
There is a growing trend towards investor demand for higher security and safety which covers capital ratios of banks and the privacy issues. Regionally, the recent geopolitical tensions have made investors more cautious in protecting their wealth.
Odier said, increasingly performance is emerging a key focus area for private banking clients who traditionally were more patient with their wealth managers. The current thinking is that wealth managers have to be more than average.
Despite the rising expectations on performance, Odier said there is still a big chunk of investors who place a premium on risk management over performance.
“Performance orientation is good news to the clients and the banks because it forces banks to deliver. There has been an increased emphasis on both safety and performance aspects. The traditional clients in the Middle East have been much focused on risk management. Wealth preservation is one to the top priorities of the investors from this region,” said Odier.
A growing breed of wealthy entrepreneurial class in the region is seen more demanding in terms of performance. “This class, on their own, are creating good returns on their investments and are tempted to ask for such returns from their bankers,” he said
While Odier feels the demand is justifiable from the point of view of these investors, he said in the wider context of wealth management one has to keep in mind that a private bank like Lombard Odier is not a short term trader.
“We are a long term wealth planner. We can’t afford to create short term performance and subject our clients to bigger losses. So we have to be careful with our investment strategies and ensure these deliver consistent performance,” he said.
Competition
According to Boston Consulting Group’s 2014 Global Wealth Report, private financial wealth in the Middle East region grew by 11.6 per cent to reach $5.2 trillion (Dh19 trillion) in 2013 with GCC countries leading the wealth surge.
High growth in private wealth makes this region very attractive to private banking industry. Most of the leading names in the industry are already here or are attempting to enter the market. In the context of the strong growth in wealth across the region, banks who already have a presence in the region are increasingly committing more resources here.
Responding to the growing wealth management needs of regional clients, a number of regional and local banks have also started offering private banking services to their clients. Lombard Odier does not see the entry of new players impacting their market share.
The bank sees client retention as a function of service culture based on long years of experience rather than pushing newer products. The bank believes product pushing strategy could expose private banking to more regulatory risks.
