- 2 weeks ago
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00:00I think our job in wealth management is to remind our clients that they should focus on the longer term
00:07and try to weather the storm and look ahead.
00:11We are managing retirement savings. We're investors. We're not traders.
00:17And investing is about time and the value of compounding returns. It's not about timing.
00:24So a big part of our job is to try to comfort our clients about the longer term outlook for
00:30markets, reminding them of what their investment objectives are rather than try to react to either peer pressure or to
00:39the news flow.
00:41I think if you try to trade on the news flow, you're bound to lose money.
00:46OK, but there has been this rather awkward question of whether European wealth centers are going to get a boost
00:53from the unrest in the Middle East.
00:55I mean, already here in the UK, we've seen some politicians talk up the benefits of being in Britain rather
01:01than maybe in one of the Gulf states.
01:03Do you think that that will happen or is happening now?
01:06I think it is happening. I think there are three three dimensions to look at.
01:10The first one is obviously diversifying your your investment.
01:15And this is what clients have done, you know, and we've advised clients to do for for for many, many
01:19years.
01:20There are two new things that are that have been happening.
01:23The first one is that people have started to realize that that wealth, especially the the high net worth wealth
01:29segment is very mobile.
01:31And therefore, we've seen people moving away from certain regions into others.
01:35And obviously, the UAE has been a primary beneficiary of of that wealth migration.
01:41And that, given the uncertainty of the geopolitical situation in the region, might, you know, might come back into question.
01:49And we might see some reversal of some of those those movements.
01:53The third one is as much as you diversify your investments, high net worth clients now want to diversify their
01:59booking centers as well.
02:00They want to diversify where they custody their assets.
02:03And therefore, our job is to be able to provide optionality to clients so that they don't put their eggs
02:08in the same basket for both investing and for safeguarding their assets.
02:13And in that respect, yes, we might see some some flows coming back to to Europe and obviously to to
02:22Switzerland.
02:23It wouldn't surprise you for me to.
02:26Yeah, I was going to ask, is it going to be Switzerland?
02:28Is it Milan?
02:28Is it Frankfurt?
02:29Is it London?
02:30Yeah, I think I think I think, you know, it depends what you what you what you're looking for.
02:39The business of wealth management is about establishing trust with your clients and trust is a function of a few
02:45things.
02:45It's a function of of the expertise you have.
02:48It's a function of the understanding you have of your client needs.
02:53And in Switzerland, we've you know, we have been doing wealth management for for decades.
02:58We know about family governance.
03:00We know about succession.
03:01We know about international investing.
03:03We have a pool of talents which is set up to be able to give that advice and deploy the
03:08investments internationally.
03:10And it's about reliability.
03:12So you need a host country where you have a stable government, a strong currency, a strong regulatory framework.
03:21And and, you know, Switzerland offers that.
03:25It's not the only place that offers that.
03:26But for sure, for sure, it has it has its cards to play.
03:29But is the stronger franc going to be an issue for Switzerland's industry in this case?
03:36Listen, the the Swiss franc has been in general has been appreciating, you know, every year for many, many years.
03:44And Switzerland continues to, you know, to grow employments.
03:50We continue to have full employments.
03:52We continue to export because we focus on high value added industries and services.
03:59And when you're if you're talking about the financial industry from a client perspective, you know, it doesn't matter because
04:06if you think in euro, you'll be based in euro.
04:08If you think in dollar, you'll be you'll be investing in dollar.
04:11OK, so that's maybe a little bit of a sales pitch for Switzerland.
04:15The advantages of being based there.
04:17Want to talk about other things that the markets are concerned about.
04:21Private credit, retail investors pulling out billions.
04:23There are individual stories that have raised their global concern.
04:29How worried are you about private markets?
04:32I think the danger in private markets is to try to picture liquidity when there is no liquidity.
04:44Private markets are illiquid markets.
04:47So any wrappers that try to provide the liquidity that doesn't inherently exist is is dangerous.
04:54And when we talk about democratizing private assets for retail investors, which is what you were you were touching upon.
05:01If democratization is about providing access, we're fine with it.
05:06If democratization is about trying to provide the illusion of liquidity, this is when it becomes dangerous.
05:12Because if you need that liquidity for your own personal reasons, you might get it.
05:16But if there is a crisis and everybody's rushing out of the door, you're not going to get it.
05:21Private assets.
05:22Is that what you feel is?
05:23I'm sorry.
05:23Is that what you feel is happening?
05:24Do you think this is a crisis with the volumes of investors that are pulling out of what they're pulling
05:29out of these funds?
05:29I think that if clients are investing anything else than their reserve assets, the assets that they don't need into
05:37private assets, you're bound to have a problem at some point in time.
05:43So, you know, I think you need to be you need to be very aware of of where you're investing.
05:48And from an asset management perspective, you need to be extremely transparent about the terms of the wrappers that you
05:56are that you're offering.
05:57OK, I think that's quite interesting on on private markets then also focus on industry consolidation in the industry.
06:08The sale of Schroder's, for example, I mean, there's lots happening insurance talking about today, but that's just today.
06:13Thinking about your industry in particular, do you think that there will be more consolidation?
06:18This is a key question for Europe.
06:22I think there will be more consolidation.
06:26But I have to admit that in in our industry, in the wealth management and the asset management industry, I'm
06:33very doubtful that consolidation brings value to clients.
06:38Sometimes, sometimes, sometimes it brings value to shareholders, but rarely, rarely to clients.
06:45What we have seen invariably when there are big mergers is that the management is is taking their eyes off
06:55the ball.
06:55And in that case, the ball has to be clients because they're too busy integrating operational platforms, tech platforms, establishing
07:03retention plans or redundancy packages.
07:05And performance erodes.
07:08The quality of the service goes down.
07:11Talent leaves because they don't know whether they're going to have a job tomorrow or not.
07:15And clients as well as well leave.
07:17So as far as we're concerned, we don't view that as a necessity in our industry.
07:25And as far as we're concerned, we never engage in M&A.
07:28It hasn't stopped us from growing faster than the industry.
07:33You can acquire talents.
07:34You don't need to acquire the legacy that comes with the whole operational platform when you acquire a firm.
07:44One of the big themes, of course, that has been on markets over the past, I mean, several years now
07:49at this stage has been the speed at which AI is being adopted.
07:52Of course, that's been driving a lot of the share price of some of these big companies as well.
07:56But on a practical point of view, I'm wondering how much are you using AI in PICTA and how much
08:01are you using it personally?
08:05Yeah, we will use and we are using AI wherever we see the potential to provide an even finest service
08:14to our clients.
08:15So we were one of the first Swiss bank to roll out an internal chatbot a couple of years ago.
08:23We have now given access to our people to perplexity, to code codes, to co-pilots.
08:30We have 80% of our staff which are daily users of one of these tools.
08:37And at the same time, not only do we provide the tools, but we also provide training, teaching them how
08:42to use the tools.
08:43So we are rolling out now, as we speak, a master class on AI for us, the seven managing partners,
08:49for the equity partners, for the top management of the firm.
08:51And that will trickle down throughout the organization to make sure that everybody can embrace it and be augmented.
09:00And I think there are different areas where we see its value.
09:04Obviously, in some area, if we can increase productivity and free up time for bankers, relationship managers, portfolio managers to
09:13focus on higher value-added tasks than repetitive processes, it's a benefit.
09:19We are using it to automate some tasks, and I'll give you concrete examples, or also to try to improve
09:27the way we deliver service to our clients or we make investment decisions.
09:31In the area of compliance, knowing your customer processes, contract management, cross-border rules, reporting, responding to requests for proposals.
09:48I mean, there are plenty of use cases where AI makes you simply much more efficient.
09:54What about the risks, though?
09:56We have been looking at the meetings taking place in the U.S. over the anthropic model mythos and the
10:01cybersecurity risks that poses.
10:03U.S. regulators calling in the banks to find out how prepared they are.
10:08How concerned are you about the cybersecurity or other risks from this technology?
10:12Of course.
10:13I think, you know, the biggest assets we have as a financial institution is our reputation, and the biggest risk
10:18for our reputation is to be attacked.
10:23And denial of service is an absolute, you know, it's an absolute killer.
10:29It's what keeps us awake at night.
10:31And therefore, we spend a lot of our investments on making sure that our cyber security is up to standards
10:42and constantly investing to make sure that we, you know, we can cope with any attacks that we would have.
10:49And so far, so far, so good.
10:52But it's definitely, you know, as much as you invest in AI, you need to invest in cyber.
10:57Right, cyber security.
10:58Yeah, okay.
11:01We're kind of coming to the end of our thoughts.
11:04We talked to a very high level about the industry and how you see it, which I think is really
11:07fascinating.
11:09Do you think that the war in Iran, me, is a support for active management versus passive management?
11:17What do you think it means for the industry?
11:20I think the war in Iran is going to trigger two things.
11:25First, I think, yes, I think whenever there is a heightened period of volatility, this is when active management can
11:31actually play its cards.
11:34And therefore, yes, I think active management, you know, can deliver value.
11:39I think the other thing that may happen following the war in Iran, despite what is happening on the other
11:45side of the Atlantic,
11:46is that we might be on the cusp of a renewed interest and investment wave in clean energy transition.
11:53I think, and not on the back of climate change, on the back of building strategic autonomy, energy has been
11:59weaponized.
12:00And therefore, the ability of government to achieve energy independence is managing a geopolitical risk.
12:10And that, I think, is a very, very exciting opportunity.
12:14Is the goal then to be energy independent?
12:16Because Europe is an energy importer and that is seen as a massive Achilles heel.
12:21Is there really a push to become energy independent?
12:23Of course, of course, but they have they have up that game since the Russian invasion of Ukraine today.
12:28If you look at Europe, if you look at solar and wind, it produces more energy than fossil fuel.
12:33If you add hydro, it's above 50 percent of the energy mix.
12:36So they are making progress.
12:37If you look at what's happening in China, they're definitely on a path to become energy independent.
12:41So I think that if there's one lesson to take from from the current crisis is that you cannot just
12:47rely on all being important from from abroad,
12:50because it, you know, it puts you it puts you at risk.
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