How Switzerland’s oldest private bank is evolving for its growing Middle East client base

Lombard Odier aims to keep up with the times by integrating technology, sustainable investing and Islamic finance

Patrick Odier, senior managing partner of Lombard Odier, says the Middle East is a 'prioritised market' for the bank, with two of its 25 global offices in the UAE. Victor Besa / The National

Lombard Odier, a Swiss private bank with roots dating back to 1776, is undoubtedly old — something it says can be a positive as it has many decades of experience.

"Because we've experienced over 40 crises during the last 224 years, we have gained some experience that can be useful in today's turbulent environment," Patrick Odier, senior managing partner of Lombard Odier, tells The National.

But age comes with challenges as well: the bank, which specialises in asset and wealth management, has to adapt to the changing needs of clients and differentiate itself from new competitors in a rapidly changing world.

Globally, that means keeping up with technological advances and the call for businesses and investments to become more sustainable. In the Middle East, clients not only have a growing appetite for technology and sustainability, they want Islamic finance options and a bespoke touch.

Mr Odier, a descendant of the bank's founders, says the bank is up to the task at hand. While it prides itself on “managing risk with a long view”, Mr Odier says it is important not to “sleep on conservatism when the environment is changing” and be “agile enough to catch the right innovations at the right time”.

With 287 billion Swiss francs (Dh1.09 trillion) of assets under management as of June 2019, 11 per cent higher than six months earlier, Lombard Odier is one of the major players in the Swiss private banking sector.

Swiss banks in general capture most of the world’s offshore money, with more than $1.8tn of the $8.6tn market, according to a 2018 Deloitte report. For Middle East wealth management clients, Jersey, Singapore and Switzerland are expected to be the most favoured offshore jurisdictions over the next five years, a new Intertrust survey of professional wealth advisers in the Gulf found.

While the bank has served clients in the Gulf from its Geneva headquarters for about 50 years, part of Lombard Odier’s strategy is to make the Middle East a “prioritised market”, says Mr Odier. Two of its 25 global offices are now in the UAE: its Dubai office, regulated by the Central Bank of the UAE, opened in 2007, while an Abu Dhabi base opened at Abu Dhabi Global Market in April last year.

With 15 employees in its Abu Dhabi and Dubai offices, Lombard Odier has doubled in the last five years “in terms of people we have and also in terms of assets in the Middle East and UAE”, says Christophe Lalandre, a senior executive officer, who leads the Abu Dhabi office.

Mr Lalandre says the bank is “on track” for the Middle East to account for 10 per cent of its total assets by 2024 from roughly 5 per cent last year.

“It is the fastest rising geographical segment of what we call ‘new market’, which is a third of our total asset base,” says Mr Odier. The other two segments are Swiss residents and European residents, accounting for a third each.

“We consider the UAE presence as a hub for the entire region,” Mr Odier adds. Although the bank has no plans to open offices in other GCC countries, Mr Odier says Saudi Arabia is another “strategic market [with] very important relationships [and] interesting development in terms of investment solution demand — specifically Islamic finance".

Personal wealth growth in the Middle East is rising at a faster rate than globally, according to a July 2019 Global Wealth Report from Boston Consulting Group. Personal financial assets in the region are expected to grow 6.9 per cent annually to $5.2tn in 2023 from $3.7tn in 2019. Globally, personal wealth is projected to grow 5.7 per cent to $272tn over the same time period.

To help capitalise on this opportunity, Lombard Odier is catering to the needs of its Middle East clients by adapting to digital transformation, offering sustainable investing and growing its Islamic finance offerings.

Technology

Half of Middle East clients have switched wealth managers in the last three years, as they increasingly opt for digital options, according to Ernst & Young's recent Global Wealth Management Research 2020 survey. More than half said they choose wealth managers based on digital savviness.

Mr Odier says Lombard Odier has invested heavily in digital transformation, recognising the need regionally and globally. “Technology is at the heart of our strategy,” he says. “Actually a quarter of our total staff is directly linked to technology developments.”

At the same time, he says the bank does not want to lose the “human part” of their business to become a robo-advisory.

“We have been very sensitive to the needs of the clients whether in this or in other regions to have the digitalisation processes as far as possible available while keeping at all times this ‘last mile’, which is the human judgment,” Mr Odier says.

“Sixty per cent of our total asset base is made of either discretionary or advisory mandate, which is quite high of a proportion versus the industry … so we distinguish ourselves there,” he adds.

The bank uses technology to communicate with clients, report issues, ensure operational efficiencies and for risk management.

“For instance, if you were to come to us today and ask what’s the carbon footprint content of your pension fund portfolio, we could give it to you. We could give you water wastage of your portfolio,” Mr Odier says. "These are metrics that are becoming really important.”

Sustainable investing

Globally, clients are increasingly demanding investments that are sustainable, meaning they do not have a negative effect on the planet or even have a positive effect. “Five years ago, probably 5 per cent of our clients generally would ask any question about sustainability. Today it’s probably close to 90 per cent,” says Mr Odier.

Last week BlackRock chief executive Larry Fink said it would exit investments carrying sustainability risks and that the environment will be at the core of all future investments by the world's biggest asset manager.

In the region, too, the demand for sustainable investing is growing. At the Abu Dhabi Sustainability Finance Forum last week, clean energy firm Masdar announced the UAE's first "green" real estate investment trust (Reit) with a value of up to Dh1bn, allowing investors to invest in a portfolio of income-yielding properties with a lower carbon footprint.

Lombard Odier has committed to making sustainability an overall “investment philosophy”, rather than a product strategy. “You will not find … sustainable and non-sustainable distribution channels. We talk, walk and act sustainable,” Mr Odier says.

The bank is the “first and certainly the largest global wealth and asset management firm to become B Corps-certified,” he says. The more than 3,200 “certified B Corporations” worldwide are businesses that meet standards of sustainability and correct behaviour, such as public transparency and legal accountability, to balance profit and purpose.

Islamic finance

In the Middle East, Lombard Odier seeks to combine the sustainability angle with demand for Islamic finance. “We see demand and traction in this respect.” says Mr Odier.

The bank launched sharia-compliant wealth advisory services in Dubai in 2012. Islamic finance accounts for 10 per cent of assets under management globally, which is “a small proportion, but it’s a growing proportion and it’s significant", Mr Odier says.

As Islamic finance excludes certain types of sectors, it can come with risks. The bank seeks to mitigate these risks by complementing portfolios with investments that meet sustainability criteria and can add returns.

“We understand the notion of doing good, which is at the heart of the Islamic philosophy. We understand also the risks of exclusion in certain types of sectors,” Mr Odier says.

Conscious of local competition in the Islamic finance market, Mr Lalandre says, “of course, we are not an Islamic bank. But still clients are coming to us to capitalise on our international expertise".

While it is important for an older institution to keep up with the times, Mr Odier adds, “it is not because we’re old that we think that we’re good”.