Charting a sustainable course through the US$100 billion barrier
A smooth integration is Michel Longhini's priority for a successful acquisition by Union Bancaire Privee (UBP) of the international business of Coutts. That requires clear messaging, to reassure clients and staff alike about the new value proposition.
With UBP’s Coutts deal, the latest example in a wave of global consolidation and re-segmentation in international private banking, Michel Longhini is a busy man. But he is quietly confident at the same time.
After all, he is overseeing his fourth acquisition in four years – a flurry of activity that has moved what was a CHF 65 billion (US$69 billion) private banking division in terms of AUM at the end of 2010, towards an expected CHF 130 billion-plus business after the completion of Coutts.
Longhini, who joined UBP as chief executive officer of private banking just under five years ago, has spearheaded a culture of smooth integrations that breed successful outcomes – for clients as well as internal stakeholders.
That includes maintaining a lean structure, with an overall cost-income ratio for UBP of 67% as a tangible example.
“What has been key to all our acquisitions is bringing in additional knowledge,” says Longhini. “In buying the assets and teams of Coutts, it will bring us an expertise in specific areas, especially Asian private banking.”
Yet he is also realistic and grounded enough to know that getting to this point isn’t plain sailing. So, just a few weeks into the latest leg of UBP’s journey – buying over CHF 30 billion in AUM from all of Coutts operations outside the UK – it isn’t a surprise that his feet have barely touched the ground.
He recognises the importance of the person running the show to eye-ball existing and future colleagues alike, and as quickly as possible. And he has made it his priority to jet around the world in order to do so.
“Any changes for RMs and clients need to be as minimal as possible,” he says.
When Hubbis sat down with him in Singapore in mid-April, to take stock of a whirlwind three weeks since the public announcement of the Coutts deal, he had already met with over 90% of Coutts relationship managers (RMs) worldwide, all senior management and the key individuals in products and services. Plus he had held townhall meetings with all the other staff.
But it isn’t just internal stakeholders to which Longhini has been focused on articulating UBP’s vision and value proposition. Coutts clients were first on his list. He knows this is the only way to make such strides in asset and business growth sustainable.
Reaching out to reassure
Perhaps most notable – and instrumental – in UBP creating its track record has been the consistent way it has approached each integration.
First and foremost, confirms Longhini, is giving comfort and reassurance to clients by ensuring a smooth transfer in terms of their relationships and accounts.
“This is a pre-condition of any acquisition and enables to minimize attrition,” he states. “The clients look for a stability in the relationship,” says Longhini, “as well as additional capacity in terms of products and services and access to markets.”
It is therefore important to clearly communicate the value proposition of the new owner. ”For UBP, this means explaining that we are committed to remaining a pure player in private banking, and having our clients benefit from our Swiss heritage of excellence in the field”, explains Longhini.
Being family-owned is also a key differentiator as it enables the bank to adopt a long-term vision.
“Another important element in UBP’s value proposition,” adds Longhini, “is the close interaction between the different business lines – and notably between private banking and long-only and alternative investments”.
Further, he explains that the bank is well known for its lean organisational structure and operational efficiency, which has enabled it to develop a tailor-made approach to private banking services, as well as products.
It is, however, important not to try to fit a square peg in a round hole with these types of deals. “With the in-depth reviews I have been doing, the aim is to understand within Coutts key elements of the existing structure such as what is important to clients and staff, what is working well, and how teams are managed,” explains Longhini. “It is important that we do not make excessive changes.”
That means needing to be flexible enough with the new structure to guarantee to existing staff and clients that the reason why they bank with or work for Coutts will not change.
From a more practical, operational perspective, the functionality around how RMs communicate with clients also needs to remain consistent. These steps are vital in the Coutts integration, and both UBP and Coutts International Management made sure that all Coutts clients were informed the day the deal was signed.
When it comes to staff, quick and clear communication is equally critical to ensure a smooth transition.
Longhini has learned from UBP’s growth strategy in recent years that the RMs, as the individuals in charge of client relationships, should be informed immediately of all plans, and motivated to transfer their clients accordingly.
From Geneva and Zurich initially, to Monaco, Dubai, Singapore and Hong Kong, all Coutts employees were informed within five days of the announcement at the end of March.
The next step was to have more detailed discussions with the most senior people in the firm. “It is very important to make sure people understand the UBP structure, the process of the integration, the timing and deadlines,” he explains. “It is important to be quick and responsive to all questions in addressing any concerns at the team level.”
Waking the talk
Ultimately, the measure of success will be whether Longhini can make size matter – and last.
That means achieving the scalability to fulfill the vision, while also retaining a certain adaptability to bring all sides into alignment – a key ingredient in his other integrations.
UBP’s series of selective acquisitions have been a deliberate part of a growth strategy to rebuild the business in the wake of the 2008 financial crisis. In total, the activity to date has led to UBP dotting the world map, with the group’s various businesses now in some 25 locations.
“The ABN AMRO acquisition brought size in Europe and Latin America; the Lloyds deal also made sense from a geographic perspective, in the Middle East and parts of Europe; and Santander created scale in Southern Europe,” says Longhini.
And Coutts looks like being UBP’s biggest challenge so far. It will require a transfer of about 1,000 staff, mostly RMs and product and services teams, half in Europe and the Middle East and half in Asia. This will almost double the workforce from its current level of 1,300, and increase assets for the overall group to CHF 130 billion.
It is also important that acquisitions reinforce a company’s strategic development. “For example, with the ABN AMRO and Lloyds acquisitions, UBP significantly strengthened its wealth planning teams and breadth of expertise in the field. This included product tax engineering – a field in which we were lacking strong expertise. With the current evolutions, this was a must.”
Longhini explains further that the bank also brought new talent and expertise to its existing capabilities. For instance, it launched, along with two senior wealth planners who came from ABN AMRO, a web platform dedicated to helping UHNW individuals find the best-suited family office based on a series of criteria and in-person meetings (FOSS, Family Office Services Switzerland).
“Coutts International is well known for its advisory services, and we are looking forward to adding strength to our own existing capabilities”, he adds.
Raising the stakes
There is certainly a clear objective for the Coutts deal, in terms of the vision for what a much-enlarged UBP will look and feel like post-acquisition.
In short, it represents a major step forward in UBP’s growth strategy, enabling it to both broaden its wealth management activities and to further its global reach.
“We can now really play in the top league of pure play private banks, as a top five global firm,” says Longhini. “Our appetite is to create a worldwide presence with the scale to service the international private wealth needs of wealthy families, who are tax compliant.”
He is adamant that size is a critical success factor in today’s market – as long as what gets added is complementary to the existing business. “The deal doesn’t change our strategy globally, but adds fundamental components in terms of market coverage, product knowledge and wealth structuring.”
Of particular significance following the Coutts deal is the impact it will have for UBP’s relatively young Asia business. For instance, it brings to it long-standing relationships with HNW clients in Hong Kong and Singapore.
Onboarding the bank’s more Asia-focused product offering is another clear attraction for UBP, including a more structured advisory and portfolio management ethos and know-how to complement the Swiss firm’s heritage in investment management.
Further, says Longhini, there is added value in the Asian-focused wealth structuring experience of Coutts, to add to what UBP has in Switzerland.
With around 40% of assets being for clients in Asia, it effectively puts rocket fuel into an ambition the Swiss firm has made no secret about previously. After starting from scratch in Singapore three years ago, UBP made a big step forward for its private banking business in mid-2013 by securing a licence to become a merchant bank. That has enabled it, in Singapore, to take assets on deposit and offer a wider range of wealth management services from its local booking centre.
At that point, it had about 20 employees in Singapore, servicing around 200 active clients in Asia, managing roughly US$1 billion of assets in the region.
More recently, in January 2015, UBP began a joint venture with a leading asset management team in China to create a new company in Shanghai. The aim is to give domestic and international investors best-in-class Chinese equity and fixed income solutions.
Now, the firm has propelled its Asian private banking business to a new level, both in terms of scale as well as breadth of products and services on the ground. And for the group as a whole, Asia – including Japan – now accounts for over 20% of total assets.
“Asia will be a major part of UBP’s future, and everyone in the firm is clear that this is one of the most important and positive implications of the Coutts acquisition,” says Longhini.
Yet it isn’t all about Asia. After running BNP Paribas Wealth Management’s Asia Pacific business for five years from 2003 out of Singapore, Longhini isn’t blinkered in his perspective of the potential the region. “I’m not sure we would have considered Coutts if it were an Asia-only business,” he adds. “It is more about Asia as part of a global organisation.”
For example, he sees other strategic steps forward with the geographic foothold that the Coutts deal brings. UBP will now strengthen its presence in Switzerland and Monaco, and boost its presence in growth markets such as Central and Eastern Europe, and the Middle East and Asia.
In those parts of Europe where there is more of an overlap with UBP’s existing business, the focus now is how to create the most effective synergies and improve productivity.
Keeping the dream alive
In sharing his plans, Longhini is intent on implementing the entrepreneurial vision, innovation and independence which drove Edgar de Picciotto in the first place to create what is now UBP.
“I am here to manage the private banking business for the family and to try to make it a success,” he says, “but it is vital as a starting point to have a family with ambition and vision.”
For Longhini, not only is it a personal challenge which he says he enjoys, but it is also part of a bigger team effort to achieve this growth.
That is based, he explains, on a certain philosophy which is all about respecting the organisations and individuals it has integrated with.
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