INTERVIEW WITH PHILIPPE SEDNAOUI, CEO of Barclays Wealth in Switzerland
Barclays Wealth, economy, Philippe Sednaoui, CEO, investment report,
Q: What is your background?
I was born in Egypt, raised in Lebanon and educated in French universities. I have worked between Paris, the Middle East, New York, South America and Geneva.
Q: You are the CEO of Barclays Wealth in Switzerland. What exactly does your bank do?
Barclays Wealth in general serves affluent, high net worth and intermediary clients worldwide, providing international and private banking, investment management, fiduciary services and brokerage. Our bank is focused primarily on wealth management here in Switzerland which is our main activity. Our main focus in Switzerland are high net worth individuals and families from all over the world –– Asia, the Middle East, Africa, Latin America and Europe of course.
We also have a dedicated activity helping institutions and intermediaries manage their wealth with specific products and services to that effects
Finally, we have an activity conveyed to a more affluent sector, which is particularly focused on Geneva and Switzerland in general, because of the large number of international organizations and multinational organizations that base many of their executives and employees here. They have certain investment needs and we provide them with the necessary investment solutions.
Barclays has a long history of excellence in the provision of trust, managed companies, foundations, and executorship services. We appreciate that our clients’ life may be complex in that they have homes, and perhaps businesses, in different locations, and children living or working in different countries. With that in mind, we will work to build and execute an individual wealth plan based on clients’ personal, family and business goals.
Q: Is it a complex legal issue?
It does not need to be complex. It just needs some common sense. It becomes complex sometimes because of personal issues. For instance, a European citizen may be married to a non-European citizen who has a different documentation and situation in the country where she/he lives. The kids are, for instance, studying in the United States; there is a house in Norway. And then if somebody were to die ... What law will apply in the event of divorce or in a succession issue?
People therefore need to review their situation in a simple manner and organise accordingly.
Q: In 2007 and 2009, Barclays Wealth was chosen by Global Investor Magazine as the Wealth Manager of the Year. What was your performance in 2008 and how do you see the evolution for 2009?
2008, beyond the world financial crisis, was a very difficult year for all financial institutions and wealth managers who tried to protect their clients’ investments.
There were a lot of seemingly very stable and established companies and values that deteriorated suddenly and sharply. For this reason, it was a very challenging year. For Barclays Wealth globally and in Switzerland particularly, we have, nevertheless, managed to achieve a very solid outcome. We continue to grow. Despite the crisis, our income Barclays Wealth grew by 12% in 2008 to a total profit before taxes of ?345 million.
Income grew principally because of strong growth in the arrival of deposits by new clients. Some of our competitors encountered big difficulties, which stimulated some clients to reorganize their finances. Barclays as a Group, was perceived to be safer. Our deposits went up by 19% last year. We have continued to do business and our lending grew by 31% last year.
Nevertheless, we are facing a very difficult market situation. In this complicated economic environment, we are careful and are controlling our costs. By eliminating superfluous expenditure, we have reduced our costs by 4% last year. While we have not proceeded with any major layoffs, we have sought to work more productively.
We have also made a very important acquisition in the United States by buying the Private Investment Management business within Lehman Brothers which gave us a very strong footprint in the US.
Barclays Wealth now stands at the end of 2008 with assets of clients’ wealth equivalent to ?145 billion, compared with ?132.5 billion the year before.
Elsewhere, a lot of new things have happened in terms of introducing the new investment philosophy. This is fundamental to the way we organize and respect the size of the investment objectives of our clients with profound and in-depth questionnaires and personality evaluation. We try to align the way their portfolios are organized in accordance with their life situations, their tolerance of risk, etc.
2009 has continued to be a challenging year. In the first quarter of the year, business was almost at a standstill, because of client paralysis. This is what our latest study, Barclays Wealth Insight Vol. 9: Breaking the Mould - A Question of personality, seems to make apparent in a vivid manner.
It’s a challenging economic environment and it is still unclear whether globally we have bottomed out in the economic cycle or if the level of economic activity we are witnessing today is sustainable. It is substantially lower than it was in 2007. This affects some regions more than others but certainly influences Europe and the United States. Therefore, we are still being careful.
Q: In a previous interview, you talked about the concept of private investment banking. What exactly is this and for whom is it designed?
In the last fifteen years, we have witnessed major wealth creation in new regions of growth such as Asia, the Middle East, but also in Eastern Europe as a result of the enlargement of Europe as well as in Latin America which became a fairly dynamic place.
Wealth is increasingly the affair of new entrepreneurs. It is no longer the established families that control things, as was the case before. When you talk to an entrepreneur, you can talk to him in two ways. First, you can go and see him as an investment bank. He is the president of his own company that he still controls. He may need investment banking solutions –– whether to sell his company, buy other companies, increase capital or raise debts in international markets. These are a variety of typically investment banking activities.
Second, if you talk to him as a wealth manager, you are addressing the individual to manage his personal wealth. A common feature for these entrepreneurs is that a large proportion of their wealth is still tied up in the company they have founded. So they find themselves having private needs to find investment bank solutions for their companies, especially considering opening up the capital at a certain point, selling it because there may not be a successor in the family, considering on the contrary acquiring other companies, etc.
This is where we increasingly foster encounters. This is not a day-to-day activity, but for the wealth management of certain clients we attempt to provide them with solutions which are in the nature of the investment banker. How do we do it? First we get a better understanding of what his/her real agenda is, and where he/she wants to go as a private person, not as the president of a company. We then involve our investment bank, Barclays Capital. Is it a question of providing more liquidity or helping them to organize the next steps in owning the company in different manners, before they put it out in international markets? Then, we bring in the investment banking part so that it works well on the business side of the company and on the private banking side in the most efficient manner. In fact, Barclays Wealth accompanies them on both sides.
Q: In the latest Barclays Wealth Insights, you talk about what has happened after last year’s financial crisis. What would you say is the most striking trend?
The most striking trend is the co-existence of clear opportunities in the market to invest ones assets with a great measure of prudence by investors following the market instability over the last 2 years. There are clearly some quality assets or financial assets in different regions, whether on the equity side, on the bond side or the commodity side. This is very different from the previous 5 years when a lot of money was chasing few good investments. Prices were high and it were expensive.
There has been quite a big correction in asset prices over the last two years and, if past reflexes of the investor base had continued, the corrections would have been more limited because the philosophy was “buy on Dips”.
Today the ability or the desire of investors to go in is more limited than it used to be. What the study has tried to focus on is why this is so. The conclusion is really a very simple one: Across geographies, investors fail to act fully on the investment opportunities that are out there. There is an element of prudence resulting from the market losses suffered by most people, irrespective of the size of their wealth, over the last two years this creates a paralysis and refusal to take risk at a time when there is no clear consensus as to whether the crisis is really over.
Clearly, the apparent conclusion of our study is that, while the opportunities are there and recognised by investors, they see no reason to rush and prefer to play safe. This is, in simple terms, the message of our study.
Q: As a banker, do you see any changes or do you think this attitude will end soon?
I think it will change. We should not underestimate or downplay the enormity of what has happened: in terms of economic activity, in terms of the way we do business, in the new level of intervention that governments had to take throughout the crisis. This will probably mean in time higher taxation and more regulations. The wide-ranging government deficits are worrisome and these are not things that will go away quickly. Therefore people across the board, realize that there has been a game change and we have not yet understood fully the consequences. This calls for caution –– a natural attitude for anyone what lies over the horizon is not clear.
On the other hand, I still think that we are too close to 2008. People have looked at the performance of their financial portfolio –– their savings, their retirement plan, their pension plan –– during 2008. Very few are those who can say that “we made money in 2008”.
I do not think that the present crisis will go away quickly but in terms of investment in financial market, human memory can sometimes be shorter than we expect. As the conclusion of the report states –– it is a year of caution.
Q: Is your bank reserved for extremely wealthy persons, or is it possible for more “ordinary” people to benefit from your expertise?
In Switzerland we focus on Wealth management. We manage wealth, but wealth does not need to be extremely high for us to do business. The way we organize ourselves is that we have dedicated teams who will manage different segments of clients with their respective requirements.
At Barclays Bank (Suisse) SA we have a dedicated team, led by Mr Matthias Erismann, who focuses on Switzerland with clients who are not among the absolutely wealthy, but rather “comfortable”. They have good careers –– people from international organizations and multinationals.
Q: What might you offer the international community in particular?
We provide a full investment offer and can help people to find flexible solutions to organize their wealth both legally and financially and there are some fairly simple answers as the majority of international people need the same kind of service and can participate as successfully as large clients through mutual funds, through special investment programmes that the financial markets.
Q: What can people do in order to benefit from your services?
Matthias Erismann is the best person to contact; he has a whole team of dedicated people. If clients are geographically close, we can quickly organize a meeting, explain the situation and show them what we can do for them. We are extremely flexible about meeting them. At the outset, if a relationship is started, clients will receive a dedicated relationship manager with whom they will be able to conduct their day-to-day communication, conduct business and hold meetings. These relationship managers will then call upon different specialists who may be needed to advise on different products and specialty areas.
Q: What Barclays Wealth offers in Switzerland?
We have our headquarters here in Geneva, and Geneva has a very special role as an international city for multinationals and international organizations.
We pay particular attention to the people who have their business life and their careers in these organizations. They are an important and a local element that forms opinions in the Geneva market. Their position and their international culture helps us very much in adapting to the evolving needs of that international segment.
This provides us with some very interesting aspects that are reflected in investments. You will find people from distant regions who are better informed and understand certain risks that are not necessarily obvious for a Western European. Somebody coming from Asia may understand better a particular Asian telecommunication company, etc. That is what Geneva is about as a banking centre. It is quite unique in comparison to New York, London and Hong Kong, which are huge financial centres but each with their own culture. New York is an American financial centre; London is primarily a UK or European financial centre, Hong Kong is Asian. Switzerland in that sense is a truly international financial centre. We do not have any bias on currency, so when we hold a position for a client we are in a neutral position –– we will go for what makes most sense. The same is also true about the investments that we look at. We look at the whole world as a place to invest.
Q: If people leave Geneva, can this relationship continue and could I benefit from the same services if I were based, for instance, in New York?
Yes, absolutely. One would first look at the tax situation depending on the new place of residence. We can certainly advise people before they make a move whether it is better for them to transfer their assets to our New York office to be managed there or to be neutral –– to keep them here. Our aim is definitely to continue to serve our clients wherever they are on the globe.