Private ethos tempts westam player to defect

German private bank Sal. Oppenheim is stealthily climbing through the league tables. Its recent acquisition from ING of BHF Bank, another institution offering private and investment banking and mutual funds, has not been a high profile one, but it has added nearly ?12bn in critical assets and additional strengths. Oppenheim Asset Management now runs ?75bn, making it the seventh largest funds house in Germany. BHF has handed over mutual fund assets to Oppenheim, but will continue to operate as a seperate unit, handling its own private banking and real estate assets.

“There is some overlap, but overall, it is a good fit,” says Rupert Hengster, who has been in place as CEO of Oppenheim for just over a year, after moving from WestAM to accept the private banking challenge.

While Mr Hengster plays down any regional carve-up of Germany’s private client business, Oppenheim is stronger in Northern Germany and BHF in the South.

The tie-up adds an extra 1700 employees to Oppenheim’s existing 1470 payroll. “After this merger, Bank Sal. Oppenheim is now the largest private bank in Europe. We are larger than Julius Baer or Vontobel in terms of assets and people,” smiles Mr Hengster, with the inference that his move has already been worthwhile.

Of the assets which Oppenheim brings to the party, ?30bn are from the group’s private banking arm, ?15bn from external institutions and ?10bn in retail funds, which have been managed for three years through a joint venture with Prudential of the US. The partnership, which employs 50 people in Cologne and offers 150 mutual funds, started with ?6bn. Net retail inflows of E685m in 2004 put Oppenheim fourth behind Indexchange, Allianz Dresdner and Union. Crucially they were ahead of big-name competitors such as Deka and DWS.

Serious players

Investment banking activity, including the issuance of capital market-style certificates, so beloved of the German retail investor, is handled out of Frankfurt.

In Germany, believes Mr Hengster, it is vital for any serious player to be able to issue options or certificates in addition to manufacturing mutual funds. “People in Germany like very flexible structured products, so that they can invest in all sorts of strategies very quickly, often within a week. A fund, on the other hand, takes between three and six months to launch.”

In addition to this investment banking expertise, Oppenheim’s marketing presentations stress its private banking heritage, contrasted with being part of a global firm. The institution is owned by five partners. The Oppenheim families typically co-invest in any new products, particularly hedge funds. “The quality has to be good for their own money to be invested,” says Mr Hengster.

The confidential nature of private banking is also brought to the fore. “Even within the bank’s management committee, there are certain clients who are never talked about,” claims Mr Hengster. “They invest their money and tell the adviser that the detail should stay with just two or three people, and it always does,” he adds. “This is not guaranteed with any other institution, once you are ‘in the system’.”

The private banking ethos also engenders regular contact and dialogue between adviser and client. “It is not enough to meet a client several times a year to push him into certain products,” says Mr Hengster. “You must always learn what is on his table and to create a solution for the current need.”

The other quality assurance badge used to attract German financial institutions as customers is the tightly regulated, specialised KAG structure for fund managers, set up under Germany’s often complex investment laws. “Some institutions use the KAG structure as a liquidity check,” suggests Mr Hengster. “There is also a need to be close to clients to prove this is really a German strategy. Can you run a successful German business out of London with just three people in Germany?” asks Mr Hengster in a gentle dig at some of his Anglo-Saxon competitors.

“There is a 90 per cent chance that this will not be successful. Swiss banks are also in and out of this market. Clients will stay with those managers who are always there. Asset management is like the Tour de France, it is not just a short sprint. It needs constant preparation over the years before you are awarded with the medal.”

But German private banks and distributors can also be alienated by a hard-sell approach, believes Mr Hengster. “You can’t be too pushy. International houses have quarterly and monthly targets, so they are under greater pressure. I don’t care whether my money has come in the fourth quarter of 2004 or at the end of 2005, as long as we win it.”

Insurance companies provide strong competition, but Mr Hengster believes the banks are winning the battle. “German insurance companies tend to do a lot in-house. They created their own KAGs so as to manage assets for other insurance companies and third parties,” he says. “But this wasn’t really working. Other parties were saying: ‘As an insurance company, I don’t want my money invested in another insurance company’s KAG’. It could be costly.”

Fewer is better

Much of his sales spiel centres on the requirement for smaller, expert houses rather than the big supertankers. “Are there too many managers in Germany? Yes, of course, particularly in the public sector. Including Deka, there are seven or eight. This could go down to three, each concentrating on a special topic, with a more powerful approach. The best way to survive is not by being the biggest, but understanding how clients behave.”

Mr Hengster is still getting accustomed to the culture at his new workplace. “At Oppenheim, you have an idea, you propose it to the partners, and it can be made to happen really quickly. In a big bank, there is always an excuse if something’s not working, as it’s a team decision. But at Oppenheim, it’s entrepreneurial. There is nowhere to hide, as it is quickly apparent whose fault it is if something is not successful.”

Hengster: ‘asset management is like the Tour de France: it is not just a short sprint’