Some experts say that Mirabaud private bank does not have critical mass. Despite that the Geneva-based bank is very successful. CEO Antonio Palma reveals in an interview with finews.asia what that has to do with quality of life, Lionel Messi and driving on the left.
Antonio Palma, in contrast to other Swiss private banks you have managed to significantly increase client funds under management. What are you doing different to the competition?
In my opinion, the media are much too fixated on the level of assets under management. This key figure is not the most important measure in a bank. It is purely quantitative, and says little about the quality of the business and profitability.
Is it unimportant how much new money you take in every year?
We are not damned to continuous growth like other banks. We have no wish to manage 300 billion. That would strain our resources past breaking point. We are content with a bit more than 30 billion.
The question is more what one charges to manage assets, and there is a relentless underbidding competition taking place in the Swiss private banking scene. We don’t take on a mandate at any price.
If you don’t win clients on price, what is your argument?
We are focused. For example, we don’t do any passive asset management or Exchange Trade Funds (ETFs). We are also an active asset manager, specialized in Swiss and European shares, namely small and medium caps.
There are many medium-sized firms in Europe that have achieved market leadership. Those are the pearls that we follow intensively with our specialists.
«Clients don’t pay for unprofitable strategies»
For fixed-interest investments we don’t offer any indices, rather high-interest investments or convertible bonds.
We must have strategies that are profitable so that the client is also prepared to pay for them. Risk-related performance counts above costs today.
Are you not in danger of losing your market position, or let’s call it your critical mass?
I’ve been hearing that notion about critical mass my whole life. When I moved to Mirabaud 20 years ago, some colleagues from other banks said that this institution with its handful of billions lacked critical mass.
«Does Lionel Messi lack critical mass?»
And today, when we manage ten times as much, I hear the same thing. I always answer: Lionel Messi was also accused in his youth of not having the critical size …so let’s drop the subject. Again, the formula for success lies in working in a focused and disciplined way.
What role does consolidation play in your strategy?
Consolidation is nothing new. It already existed 25 years ago. Interestingly, very large financial institutions also disappeared over the years. In big storms, big ships go under too.
Crises are part of normal life. Our house has survived at least 50 crises since it was founded in 1819.
«Everything can change over time»
You have stay humble, in the knowledge that everything can change over time – the economy, monetary policy, politics, even the climate and psychology. They are all variables that have an influence on managing assets. They have to be taken into consideration.
Of course, you can achieve a lot today with the help of technology but at the end of the day, the individual’s judgement is what counts and that depends on talent.
In this context, how has the profile of client advisors changed?
A new employee has to suit us and our company culture. Admittedly, that is something all companies say.
We leave it to our job applicants to choose which mangers they want to speak to for their interview, so that they know exactly what to expect. They should also ask us questions so that both sides know if they fit together.
That is unusual.
Yes. We are also not in a great hurry to grow. We have no particular aspiration to reach a given size. Quality of life is important to us, at work too.
We are happy for our employees when they go on vacation. We love our work but it is only part of our daily lives.
We imagine the typical Mirabaud client is over 60. Is that right?
Yes, mostly, especially as people tend to have more money when they are older. It’s like that, apart from some young business people who have made a big fortune. But those are the exception.
Our services are more targeted to a clientele of a certain age. We don’t offer mortgages, for example. The core themes for us are financial planning, pensions, estate planning and inheritances.
Is there not a risk that your clients will die off?
No. In the past it was the father of the family who distributed his assets among his descendants, but today all the children have a say.
Mostly, they have a financial background themselves or have friends in banking. Today the client knows everything, or is at least very quickly informed.
That is why we have to be proactive, offering specialists who are in a position to answer all questions.
«Private bankers don’t work in isolation»
Today client advisors don’t work in the isolated way they did in the past, but in a team. In this way, they can react faster and more competently, which is vital in an era when everyone is constantly online.
Apart from that, the demands of compliance have become huge. But to get back to your question: Our clientele is constantly renewed.
Where will growth be found in the coming years?
For us, in Europe. That is why we’ve opened a bank in Luxembourg. It is the backbone of our activities inside the EU. In addition, we have a subsidiary in Paris; historically our roots are in France.
The founders of the bank were Huguenots who fled to Switzerland. Other target markets for us are the UK, and Spain, where my roots are.
«We might open in Italy, Germany or Belgium»
Recently, we set up a branch in Italy for asset management. Perhaps we will open offices in Italy, Germany or Belgium soon.
We will go where the opportunities are, whether it is teams we want to acquire or clients. Outside Europe, we are present in Dubai and Montreal, active in Central Asia and maybe, one day, in Africa.
Not in Singapore?
Right now, we would be too late to go there, or possibly too early. In any case, we didn’t believe that we could achieve the necessary profitability there.
There was also no partner at the table that would have been prepared to embark on this adventure. That is why we are not in Singapore.
«Having a Singapore office is prestige»
However, we do have a small brokerage business in Hong Kong that delivers valuable services. To be honest, when I listen to what people are saying, there aren’t many Swiss banks making money from private banking in Asia. Having a presence in Singapore has a lot to do with prestige.
We are not prepared to pay potential employees up front. We are business people, we pay well but not up front.
Is digitalization an issue for a classic private bank like Mirabaud?
To be honest, most of our clients are not asking for that. But we want to anticipate any potential demand, which is why we are focusing on it and offering the relevant tools. That is on the client side.
Internally, digitization is already very advanced with us. We were probably the first company to arrange private cloud architecture with Swisscom in our asset management area so that our activities in this cloud can be accessed from anywhere in real time. That would have been unimaginable 10 years ago.
What will change in the coming years?
Two developments will fundamentally change our profession, the first being the automatic exchange of information (AEOI). We don’t know how some countries will interpret the AEOI. Will the exchanged data remain in the hands of the authorities?
It is as if we wanted to introduce driving on the left in our country, but not for all residents at the same time.
We’ll still guarantee confidentiality»
The AEOI will radically change our work because, from our side, will still guarantee confidentiality.
Banking secrecy is not dead with the AEOI, as is being said in some quarters. But it still has to be seen how this confidentiality will be dealt with in future. The experience for this is lacking so far in the banking sector.
And the second development?
The MiFID 2 guidelines for the harmonization of the financial markets in the European internal market. The requirements are so vast, that the costs would be massive. That will unavoidably drive a further industrialization of the banking system and at the same time make it impossible for many smaller clients to receive individual advice – because it will simply be too expensive.
I think it will take at least five years before the sector adapts to these new situations.
Swiss-Spanish dual citizen Antonio Palma has been managing partner and CEO of the Geneva private bank Mirabaud since 2010. He joined the bank back in 1993 and was responsible for various areas over the years. He studied architecture, economic sciences and accounting and completed Swiss degrees in the latter two subjects. Before his time at Mirabaud, Palma was head of logistics for the United Overseas Bank (UOB).
Mirabaud private bank was founded in Geneva in 1819. Today, the group, led by four partners, is active in the three business areas of investment advice, asset management and brokerage. Currently employing 700 people, the group has some 33.1 billion Swiss francs in client funds.