With 50 years of experience in global private banking to support his case, EFG International founder and chairman Jean-Pierre Cuoni is adamant that putting experienced relationship managers fully in charge of their own clients is the best way to succeed in today’s market.
Date: Nov 2010
Tags: Strategy, Differentiation, Value proposition, Hiring, Business model, Sales
With 50 years of experience in global private banking to support his case, EFG International founder and chairman Jean-Pierre Cuoni is adamant that putting experienced relationship managers fully in charge of their own clients is the best way to succeed in today’s market.
After only 15 years since the firm began in Switzerland in 1995, the group’s near-US$100 billion in client assets, managed by roughly 650 client relationship officers (CROs) worldwide, is testament to Cuoni’s claim.
“Our business model, which is also our competitive advantage, is to give our CROs responsibility for their businesses, meaning their clients are their own,” said Cuoni. “We are the only private bank which doesn’t have clients; instead we hire CROs with the intention that they bring in their own clients and then look after them.”
And he expects that the attraction to relationship managers of the relatively high level of freedom in how they manage their clients’ assets to play an ever-more vital role in luring good people, and in turn growing EFG’s overall share of client wallet going forward.
Against the backdrop of a highly-competitive global market environment where net new assets are a key measure of success, Cuoni is therefore optimistic about his bank’s future – especially in Asia.
Making the model count in Asia
Sitting doing this interview in the Shangri-La Hotel in Singapore, surrounded by his competitors all vying for a larger slice of Asia’s wealth management market, Zurich-based Cuoni said he is pleased with the firm’s progress in the region after exactly 10 years on the ground.
“After we started the bank in Switzerland in 1995, it was clear that sooner or later we would need to be in Asia,” he explained. “So we decided to go to Asia as soon as we could afford it.”
In 2000, after EFG Bank booked roughly a CHF5 million net profit, the time was right.
From just one man hired in Hong Kong with a “sky’s the limit” mandate to create a private banking business, Bob Chiu and his chief executive officer Albert Chiu now oversees around 450 staff, including 150 CROs, focused all across Asia.
According to Cuoni, about 15% of EFG’s total global business now comes from Asia.
“Private banking develops better in growing rather than declining economies, so this is where we see the biggest growth potential, aside from Latin America,” said Cuoni. “We therefore believe we would rather concentrate more of our efforts out here.”
With exception of 20 staff in the region, all are of Asian cultural background. “We are a local organisation catering to local clients with local products and on-the-ground execution,” he added.
Yet the real differentiator is again EFG’s entrepreneurial culture.
“The freedom we give to our CROs means we impose no sales targets,” explained Cuoni. “We don’t ask people to sell certain things to clients. Rather we tell our CROs to take care of clients in whatever they consider to be in the clients’ best interests.”
This has the desired effect of attracting experienced, competent bankers. “Relationship managers hate being told what to do, what to sell and how to sell it,” he said. “We take this away from them. That is why we are successful in hiring some of the best people.”
As a result, Cuoni said this means the bank is more likely to succeed in its quest for net new client assets.
Control without excessive restrictions
At first glance, EFG’s model of giving relationship managers first a platform and then the autonomy to manage their own clients appears to create potential pitfalls. Especially at a time when regulators are scrutinising the activities of all financial institutions.
Yet there are various internal rules and controls to support the private bankers and ensure consistency in the quality and standards of their service.
Some examples of this include centralised managerial support to identify business opportunities and recruit the right people to provide the marketing activities. There is also centralised support to identify, screen and select the right products and solutions from the marketplace for clients. At the same time, a centralised compliance function ensures all activities are regulatory compliant. Credit support is centralised, too, to make sure the bank is well-protected while it extends credit to clients. In addition, operations are centralised to ensure all transactions are handled and settled professionally and efficiently.
Key within this infrastructure is the fact that the CROs are experienced professionals who know the relevant rules and regulations, said Cuoni. “Otherwise our model wouldn’t work.”
During the hiring process, therefore, every CRO is carefully scrutinised. In particular, they have got to be known within EFG. “Effectively, every CRO needs a sponsor inside the bank,” explained Cuoni.
The track record and credibility of every banker is also an essential component in giving management the confidence to grant CROs the authority and flexibility to be decision-makers when it comes to client accounts.
“A private client doesn’t want to talk to a person in a private bank who doesn’t have the authority to make decisions,” said Cuoni. “At many firms, the bankers need to get authorisations, second signatures and other approvals, even for simple transactions such as changing addresses. This is not what clients want from their bankers.”
The proof of the EFG model, he said, is that in 15 years of business, the bank hasn’t had any significant incidents relating to lack of proper controls.
Making good advice profitable
The luxury of experienced professionals who can offer clients good advice is a key success factor in today’s environment.
“We will continue to make good money in this business,” said Cuoni, “because clients who are well-advised are willing to pay for that advice.”
He added: “Clients recognise this is a service and they recognise the differences in quality, which they can see over time through the performance they get.”
So at a time when the industry globally is grappling with shrinking margins, Cuoni said he doesn’t believe this will affect the higher end of the market.
