Creating value in Swiss-China connectivity
A healthy mix of local knowledge and global know-how is key in delivering portfolio diversification, wealth structuring and succession planning solutions to wealthy Mainland Chinese who have an eye offshore, say Nick Xiao and Philippe Kretz of Swiss China Capital.
Brand certainly still counts for a lot in the eyes of wealthy Mainland Chinese individuals and families. And this isn’t just when they buy luxury items.
In looking to access global investment opportunities and find solutions to issues relating to managing family dynamics, advisers who have credibility plus global expertise and experience have an edge.
This is according to Nick Xiao, managing partner of Swiss China Capital – a multi-family office that, as the name suggests, positions itself as a Swiss wealth management platform for Chinese families.
Yet the value proposition goes well beyond the investment piece. This is key, Xiao says, given that the needs of wealthy Chinese families are increasingly diversified, sophisticated, international and multi-generational.
“What wealthy Chinese families look for is not just investment advisers or product providers, but one institution that can be trusted with their family wealth, safeguard their family interests, and help them achieve family aspirations,” adds Philippe Kretz, founding partner of Swiss China Capital, and the soulmate of Xiao.
And getting this right with a long-term mind-set will open doors to a vast and relatively untapped market in the Mainland.
A USD10 trillion opportunity
Swiss China Capital’s people, processes and philosophy are all rooted in the Swiss private banking heritage, but with the all-important Chinese twist to the culture.
Its CIO department, for example, is led by Julian Laurin, an ex-hedgefunder who is of Swiss-Swedish descent. The relationship managers, meanwhile, are all Swiss-trained bankers hailing from Mainland China, Taiwan and Hong Kong, who have rich experiences handholding clients through market cycles.
Also, the COO department is led by Laurent Kretz, who manages a team of internationally educated legal and compliance, operations, marketing and risk professionals, whose native tongue is Mandarin or Cantonese, but speak perfect English and (occasionally) a little French.
“We are China savvy and can adapt to the fluid Greater China market,” adds Xiao. “But we also have the compliance, self-governance and risk-consciousness of the Swiss.”
Xiao’s own background reflects this ethos. He started his wealth management career in 2005 when he joined Standard Chartered Bank as head of priority banking for China, and later launched the bank's private banking business in Beijing and Shanghai. After this came a four-year stint Credit Suisse as head of china onshore private banking and head of business development for North Asia. He then spent five years in charge of Bank Julius Baer's business development in Greater China.
The reason why this mix is so important for Xiao, is based on the size of the opportunity he foresees in Mainland China.
The equivalent of roughly USD10 trillion of wealth is waiting to be diversified globally. “It is about being able to get access to this money compliantly and then allocates it with clients’ long-term interests in mind,” he explains.
Catering to diverse needs
There are various ways that Swiss China Capital tries to achieve this – all of which aim to fill a gap where Mainland Chinese family wealth tends to get short term-oriented, or under-qualified, advice.
First, the firm conducts client onboarding, investment advisory and risk management for clients' global asset allocation – all in accordance with what it calls stringent Swiss private banking due diligence standards.
“We help generate stable returns and capture growth in clients' asset allocation across geographies and market cycles,” adds Kretz.
Working with 15 custodian banks is key to accessing the most relevant products and expertise to satisfy individual clients at the best terms, Kretz emphasises. Further, when it comes to assessing performance, he says Swiss China Capital looks at the outcomes across the multiple banks.
This is preferable to banking with any specific private bank, believes Kretz, as the client isn’t then limited to an investment strategy that is based on the institution’s own house view and constrained by its specific processes.
Swiss China Capital also guides clients in their family succession needs. It helps them plan and implement family trust and global footprint, leveraging its connectivity among trust companies, lawyers, accountants and tax advisers. It also helps clients select and implement insurance solutions.
Further, it provides a role in tapping into its network to help clients select providers across the world in relation to education, real estate, healthcare, private schools for children and philanthropy.
“We apply our Swiss private banking finesse when shepherding our clients through the procedures of global providers,” adds Xiao.
Driving connectivity the other way is also an important value-add.
As part of its matching service for Sino-Swiss entrepreneurs, for example, in mid-May 2017 the firm brought 15 leading Swiss families – including renowned names in watch-making, technology and banking – on a tour of China. This included arranging meetings with entrepreneurs in Hong Kong, Shenzhen and the South-western hubs of Chengdu and Chongqing.
Also unlike many of the institutions and advisers that Xiao and Kretz say Swiss China Capital finds itself competing with, short-terms financial rewards are not a driver.
In fact, Swiss China Capital is a proponent of an all-in-fee approach as the future business model for the industry. “This is a more rigorous and transparent system than focusing on what a client buys and how frequently,” says Xiao.
It also puts the focus on delivering outcomes in the best interests of the client. “If they are not happy with the advice and performance, they take their assets somewhere else. So it is all about bringing real, high-conviction alpha products and family-based advisory to clients, underpinned by the security and peace of mind afforded by rock-solid custodian platforms,” explains Kretz. “Then it becomes more realistic to discuss how we are fairly compensated by the clients for our dedicated services, over long term.”
The overarching goal, therefore, is to build trust slowly by its actions rather than its words.
This applies to the wealth structuring and succession planning aspects to the offering too. “These services are about strengthening relationships with clients and bonding with the next generation,” says Xiao. “Our goal is to widen the spectrum upon which we can talk with our clients.”
Doing this in a credible way across the full range of services will lead to the types of long-term rewards that he is looking for as part of a sustainable business.
Finding ambitious talent
To be able to deliver on its promises, Swiss China Capital has made fostering and developing talent a priority.
For example, it offers private banking professionals an “RM-centric” support system that is often associated with century-old, family-owned, unlisted private banks in Geneva and Basel. And it has “carefully designed and calibrated its remuneration system to embed a mind-set of a ‘career for life’”.
To grow its RM ranks, Xiao and Kretz say its sweet-spot is a private banker of between 30 and 40 years old who runs a book of between USD150 million and USD300 million – but who will typically be what they call “under-loved, under-supported, and under-rewarded” by previous employers.
This, Xiao believes, breeds ambition. “They can be also more aligned to the second generation once the relationship with the patriarch or matriarch is established.”
Some notable recent hirings show that things are moving in the right direction for the firm, given the firm’s clear priority to expand headcount to create scale, but with the right people to ensure growth is of high quality.
For instance, it added three RMs in May and June 2017 at executive director grade: Nini Wang, previously with Julius Baer and JPMorgan; Ingrid Huang, previously with CTBC Private Banking in Hong Kong; and Ivana Zhang, previously with Ping An Private Banking and UBS AG (HK).
In short, Xiao and Kretz see this as further evidence that private banking talent – in addition to HNW and UHNW clients – are increasingly gravitating towards the multi-family office model.
More from Nick Xiao, CSOP Asset Management