Holding court in his office in Rue du Rhône, Geneva’s main shopping street, Guy de Picciotto recalls the words of Edgar, his late father, who founded Union Bancaire Privée in 1969.
“He felt that no one took him seriously compared with Lombard Odier and Pictet [his bank’s rivals], which have been around for 200 years,” says Mr de Picciotto. “He was always complaining about this but it is not a problem for me.”
The younger Mr de Picciotto took the helm of the bank in 1998. He is proud of the relationship with the “next generation” of clients, who are taking over family assets and responsibilities in the same way he has.
“We argued, especially in the beginning,” he remembers, smiling. He says the new generation still values personal advice but also demands regular, digital access to portfolios. “This is proving a challenge,” admits the banker who looks after SFr125bn of assets ($125bn), overseen by nearly 1,700 staff.
Digital transformation is not the only challenge facing Mr de Picciotto. Brexit is ruffling feathers in Switzerland and forcing plans to be ripped up or redrawn. “Without Brexit, we would definitely make London our European base but this plan needs to be postponed,” he says.
Instead, more resources will be focused on Luxembourg and building up operations in Italy, Spain and France. “For all of us, market access is key. Unfortunately, Switzerland does not have access to the EU [banking sector].”
London clients requiring services, especially in locating properties and other investments, will not be abandoned.
“If there is potential to increase the asset base through acquisitions, we will certainly look at it”
he says. “If not in Switzerland, then definitely in Asia, and we need to strengthen our London bank, whatever the outcome of Brexit.”
Of all Geneva’s bankers, Mr de Picciotto, who made his mark with a string of acquisitions, is the most likely to do deals.
These included the Swiss arm of ABN Amro in 2011, the international private banking business of the UK’s Lloyds Banking Group in 2013 and the most prestigious of all, the acquisition of Coutts’ international wealth management franchise from Royal Bank of Scotland in 2016.
The jewel in Coutts’ crown was that the bank, often associated with the British royal family, also provided a gateway to Asia, where it has 250 staff in Hong Kong and Singapore. It initially added SFr14bn in assets across private banking and asset management.
“There is a rotation in Asia, with big banks exiting,” Mr de Picciotto says, referring to the withdrawal of Société Générale and ING, before RBS.
“Clients who entered a bank did not always find what they expected, so we decided to offer them an alternative model of a family-owned, relatively young bank. This attracts a few new people to our platform.”
UBP’s purchases have to be viewed in context. The bank had to reinvent itself after its foray into managing hedge funds was scuppered. As the global financial crisis began in 2008, UBP clients lost $700m across discretionary portfolios and funds of hedge funds exposed to strategies peddled by fraudster Bernard Madoff.
“We had a love affair with hedge funds, not because they were sexy but because they were delivering a level of performance at a volatility which clients expected.
Institutions were also attracted to these investments. Yes, we saw the warning signs but are always much wiser after the event.
His belief is that a “few scandals” after 2008 scuppered a top-performing asset class.
UBP can also claim to have stood by its clients, offering to compensate them for half of any investments made with Madoff and agreeing to pay the trustee for Madoff victims $500m in 2010.
Investors voted with their feet when UBP’s hedge funds under management tumbled from $60bn in 2007, when the bank was the largest global-fund-of-hedge-funds player, to $25bn in 2010, with profits falling likewise.
The bank’s total managed assets also fell from $121bn in 2007 to $69bn in 2010 but recovered as it refocused on traditional investments.
“The main change after the hedge fund bubble burst is that we started a new institutional business, with long-only products,” says Mr de Picciotto. He sees a brighter future in distributing fund products to insurance companies and rival banks, rather than direct to private clients. “This was quite small when we had hedge funds but is now closer to $40bn.
”Rising volatility also means maligned structured products are returning to favour.
“This is an easy way to capture an investment idea and present it to our clients,” he says. “In a time of very low interest rates, it helps us manufacture returns.”
Madoff was not the only spoke in UBP’s wheel. Swiss banks had a torrid time at the hands of the US authorities after the financial crisis, as Washington searched for scapegoats to blame for helping US citizens avoid tax.
UBP settled for $188m with the US Department of Justice’s Swiss bank programme. A non-prosecution agreement was signed in 2016.
“All the big banks were having problems with Madoff and the financial crisis. It was a decade of big changes and turmoil, which included the US attacks on American clients in Switzerland,” recalls Mr de Picciotto.
He lists the factors that used to give him sleepless nights. “These all kept me awake but there was never a moment where I wanted to give up,” he says. In fact the critics of the Swiss system spurred him on.
“During the last decade, did I ever think ‘the game is over?’ Never
— and very early on I saw there would be opportunities for us and I would be able to substitute the disappearance of our hedge-fund assets, but at a cheaper price.
“I can’t think of any other industry that faced so many challenges and changes and was able not only to survive but to expand.”
Source: Interview by Yuri Bender, 2018, Financial Times, 21 May, "Yes, I worried but I never wanted to give up". Used under licence from the financial Times. All Rights Reserved.