“We look to identify the Eagles, not the Ostriches”
Frédéric Rochat

in the news

“We look to identify the Eagles, not the Ostriches”

Interview published in NZZ on 12 September 2019


Mr. Rochat, who are Lombard Odier's typical clients?

There is no such thing as a typical client. Each client is unique and has different needs. It is up to us to provide each of them with a tailored solution. But some things are constant. We are often approached by entrepreneurs or business owners who’ve achieved success and become wealthy in Switzerland, Europe or in emerging countries – they come from traditional industries as well as new sectors.   


What do these clients value most?

These clients care about the preservation of their wealth and the performance of their investments. But they are increasingly concerned about how to pass on their assets to the next generation. They expect their bank to assist them and their children with this step. It is a major sign of success when the client relationship continues on with the next generation. There is no better proof of trust.


But other banks do this too. What do you do better?  

We always try to stand out from other providers by focusing on three distinguishing features: values, technology and expertise.

We always try to stand out from other providers by focusing on three distinguishing features: values, technology and expertise.

Speaking of values: is it true that clients not only look at performance, but also expect the bank to share their values?

That's absolutely true. The new generation of clients are avid technology users. They have strong values and gear their personal and professional lives accordingly. They also want their assets to be invested in line with these values.

Lombard Odier was founded in 1796. The fact that we are still here today shows we embody longevity and sustainability. These values are part of our business model. We’ve recently been recognised as a B Corporation. This is an important milestone for us as it acknowledges our sustainability efforts. Our future head office in Bellevue, Geneva, which we’re scheduled to move into in 2021, is being built in accordance with the strictest sustainability criteria.


Why has the term "sustainability" become so widespread?   

A Sustainability Revolution is currently underway. Many companies recognise that sustainability is a major challenge for our planet and are adapting their business models – but not all. One of our responsibilities is to identify companies committed to sustainability in each sector and to include them in our investment universe. We look for far-sighted businesses that focus on the future. Let me draw an analogy with the animal kingdom: we want Eagles, not Ostriches.

One of our responsibilities is to identify companies committed to sustainability in each sector and to include them in our investment universe

How do you find Eagles? 

We don't just rely on income statements and balance sheets. We have expanded our business analyst teams to include specialists who offer a view of a specific industry and experts who assess companies based on sustainability criteria. Traditional analysis has been supplemented with sustainability aspects. That's how we find Eagles.

We look for far-sighted businesses that focus on the future. We want Eagles, not Ostriches.

What about technology, the other differentiating factor you mentioned?  

Technology is crucial to success. We do not see any conflict between technology and advisory services. Younger clients, in particular, expect to access e-banking services just as easily and conveniently as buying a book from Amazon. This trend will change asset management in the same way that technological revolutions have transformed air travel and the watch industry – with the emergence of low-cost airlines and the launch of plastic watches by Swatch. I am confident that asset management will have its own EasyJet moment.

What will this look like? 

Asset management will experience polarisation. At one end of the spectrum, there will be players who rely on a very simple, intuitive, standardised and passively managed offering. The only differentiating factor will be price. This is the low-cost model. At the other end of the spectrum, there will be premium providers who want to generate added value and offer quality. One model is no better than the other; only the positioning is different. As a provider of high-quality services and personalised investment strategies, we see ourselves as artisanal bankers, as skilled craftworkers in private banking.

As a provider of high-quality services and personalised investment strategies, we see ourselves as artisanal bankers, as skilled craftworkers in private banking.

Why is the technological revolution in private banking only happening now? Why does this core business lag other industries in the areas of automation and digitalisation?

One reason is regulation, which slows down innovation, especially in large banks. As a medium-sized institution, we aim to be more agile and more active in responding to change. Another reason is the longstanding lack of transparency.  Today, clients are able to thoroughly compare offers thanks to technology. For me, the key question is: which business model will clients choose in a transparent world? A low-cost, simple, standardised model – or a personalised model aimed at added value and quality? Banks positioned between these two poles will possibly struggle the most.


Would it be safe to assume that more banks will disappear from the market?

Banks that opt for the simple, standardised model will have to invest in technology. On the other hand, providers who focus on added value and quality will have to invest in expert, high-quality services. In both models, size and profitability will play an important role when it comes to financing investments. As a bank, you have to position yourself clearly – the status quo has no future.


Investing in technology is tricky. How do you ensure that it will actually have a positive impact on profitability?   

Technology plays a key role in banking, so players have no choice but to invest and try to keep up. First and foremost, new technologies benefit clients – they make it possible to provide a better service in conjunction with flesh-and-blood advisors. Thanks to technology, we can have an even closer relationship with our clients. For example, we can offer more transparency regarding portfolios, performance and costs. Greater transparency means more dynamic discussions with clients and a more precise understanding of their needs. Furthermore, technology helps banks keep costs under control and comply with complex regulatory requirements – without technology, clients would be overwhelmed by mountains of paperwork.


And what about the third differentiating feature, expertise?

The Bank accompanies its clients throughout their lives, and from generation to generation. Our expertise underpins the high calibre of our teams, who develop tailor-made solutions and investments for our clients. In Switzerland, for example, our teams can advise on succession planning and inheritance in over a dozen jurisdictions. We see ourselves not only as asset managers, but also as active investors who find opportunities for their clients, even in a difficult market environment. For example, investments in real assets such as private equity, real estate and infrastructure.


Other banks make the same claim. UBS and Credit Suisse are even able to offer investment banking services to wealthy clients. Do you feel pressure from the competition?

We are building on an important unique selling point: we are independent private bankers, and we devote all our time to advising clients. We are a bank of entrepreneurs for entrepreneurs. We are large enough to be able to invest in technology and investment expertise, but still small enough to know each of our corporate clients personally. There will always be competition, but there are many clients who appreciate our proximity and knowledge.

We see ourselves not only as asset managers, but also as active investors who find opportunities for their clients, even in a difficult market environment

Will Lombard Odier always be a niche player that focuses on doing a few things better than everyone else?

Yes. Although we want to grow, we also want to stay of a size that enables us to know our clients personally. We, the Partners, spend most of our time in dialogue with their clients – throughout the entire duration of the business relationship. For us, growth is not a goal in itself, but the result of our actions. Growth is important provided that it is a sign of quality. It shows us that we are able to attract new clients and convince them of our offer.


What will Lombard Odier look like in 20 years? Will values such as technology and expertise still be crucial?

Nobody in the firm believes that 223 years of history is enough to guarantee success in the next 20 years – that is an illusion. As Partners, we are not actually the owners of the bank, but rather its trustees. Our main goal is to hand the firm over to the next generation of Partners in an even better, more stable condition than before. But we can only do that by constantly calling ourselves into question, and by remaining agile and innovative. Our goal is to still be there for our clients in 20 years time. Despite all these technological advances, the world will not become simpler.


What exactly do you mean by “the world will not become simpler”?

It's worthwhile remembering that asset management is an export industry. It relies on access to other markets. If Switzerland's relationship with Europe deteriorated significantly, creating uncertainty around the bilateral path, our export-oriented industry would be severely impacted. The financial centre would likely shed jobs and the state would lose tax revenues. 

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