Julius Baer puts faith in vitality of youth

For the senior management of Switzerland’s private banks, grey hair – and the matching grey suit - is employed as a sales tool to attract clients looking for safety and conservatism. Boris Collardi, recently appointed CEO of Bank Julius Baer goes against the grain with his youth, vitality and desire to review and restructure; the whiteboard in the 34-year-old private banker’s sun-filled office displays a patchwork quilt of organisational structures.

There is an occasional strategically-placed question mark, with the firm’s chief architect asking: how exactly does this unit fit into the rest of the organisation? Despite his dark hair, and dark suits, Mr Collardi boasts more experience than his detractors at rival Zurich banks would care to admit. While they snipe at him for lack of client-facing experience, his strengths come from an ability to make studied yet quick decisions about optimal structures to boost profitability.

He will now be responsible for private client assets of SFr128bn (€85bn) and SFr31bn of Private Label funds overseen on behalf of third party institutions. Net new money exceeded 2007 figures in both segments last year, but assets fell by 18 per cent due to falling markets. Previously chief operating officer at Baer and then also head of products, Mr Collardi spent 12 years at Credit Suisse in Europe and Asia. He officially joined Baer at the beginning of 2006, following its acquisition of three private banks and GAM. The institution says he played a “decisive role” in their integration. The truth is he was already there in December 2005, attending a strategy offsite break in the Swiss spa resort town of Bad Ragaz, alongside board members Hans de Gier, Alex Widmer – who died recently and was something of a mentor to Mr Collardi when they worked at Credit Suisse - and chairman Raymond Baer.

The stark realities of the Swiss banking world, whose offshore, secrecy-led model was under threat, did not elude this select coterie of financiers as they strolled and breathed in the clean mountain air. Plans during this Alpine retreat relied on moving to an onshore model by diversifying into new markets and recruiting large numbers of private bankers in Latin America, the Middle East, Africa, Eastern Europe, and Asia. This focus on growing economies, channelling of clients into fee-paying investment products, while minimising balance sheet exposure to risky assets, has been at the centre of the profitable “pure play” wealth management strategy delivered by the “new Julius Baer,” so beloved of stockmarket analysts.

Despite the crisis, the bank will continue its cautious expansion process, says Mr Collardi, planning to recruit up to 50 new private bankers during 2009 after hiring 69 last year. Net profitability, down just 10 per cent in 2008, is well above the Swiss average, with the business blueprint buttressed by “very careful execution on the cost side.” Recruitment is a case in point. “We are not in the business of hiring private bankers just to say we are doing it,” states Mr Collardi, well aware this is a key metric for market analysts to arrive at often positive ratings of his bank’s shares. “We want to have the right ones, who can deliver the business case in Switzerland, Asia and Eastern Europe.”

The performance management of customer-facing relationship managers means much higher gross numbers are actually recruited before accounting for dropouts. “Fifteen to 20 bankers quit at the end of last year,” he explains. “These people were not hitting their targets. For a good assessment of a private banker, you need at least a year, not just three months.” Mr Collardi’s review and dismantling of the Investment Products division – created by combining Baer’s old European asset management business with the wealth management solutions unit to sell more in-house strategies to private clients – is cited as one of his key decisions.

Under the old system, there was huge pressure on relationship managers to sell internally manufactured products. Private bankers often resisted this, particularly when their group publicly championed an “open architecture” strategy to attract clients. “We have good products with a good track record, so when it is in the clients’ interest, we are passing them on to our sister companies. But there is no pressure any longer to do so.”Currently, Julius Baer’s private bankers are holding their heads high. Once seen as second-stringers, their image is much more positive than that of blighted colleagues at UBS.

Can Mr Collardi continue the private bank’s upward trajectory? “Boris has given everyone a lift, but his youth is also his handicap, as far as his peer group in the private banking community is concerned,” says a senior source within the bank. “They are waiting for him to slip up. But his strength is that he understands people and he knows his limits, so he will hire good people around him to delegate some of the decision making to.”