Revamped Indosuez Wealth Management puts faith in strength of a worldwide brand

When Paul de Leusse became CEO of Indosuez Wealth Management in September, the bank had emerged from a four-year-long strategic transformation, culminating in its relaunch in January 2016 as the new global wealth management brand of Crédit Agricole Group.

Today Indosuez WM, whose story dates back to 1875, has €109bn ($116bn) in assets under management, and offices in 14 countries across Europe, the Middle East, Asia-Pacific and the Americas.

The aim of the reorganisation was to strengthen the wealth management offering to families and entrepreneurs, while aligning the many autonomous private banks across the globe in their cross-border service.

In France, the discreet, low-profile private bank had been known as Banque de Gestion Privée Indosuez since 2012, but outside the country the bank’s subsidiaries had used a variety of company names and acronyms, with a strong brand dilution.

“The rebranding, under the unique worldwide brand, marks a proper cultural shift,” says Mr de Leusse. It underlines a clear move away from private banking - where the client’s sole point of contact is the private banker and the financial expertise is dictated by the client’s place of residence and adviser’s skills - to wealth management, where relationship managers become “entry points to the expertise and capabilities of the bank”.

The move involved “a lot of training” and the introduction of new performance measures, says Mr de Leusse.

An international wealth structuring offer was introduced, integrating corporate services. In order to ensure proximity to clients, regional hubs - Switzerland, France and Monaco for Europe, Miami for Latin American and Singapore for Asia - were staffed with experts for key product lines and services.

“We can meet client needs in each geography, much quicker than any global organisation with a centralised approach,” states Mr de Leusse.

The mid-sized bank can compete with large, international players, in terms of geographical span, depth of research, product and service offering, while enjoying the nimbleness of smaller institutions, he claims.

But looking ahead to 2020 – even if global wealth is expected to grow by 6 per cent - Mr de Leusse is acutely aware that institutions need to adapt and implement strategic decisions very quickly, if they are to have any chance to survive in the post-secrecy, rapidly evolving world of private banking.

Regulatory changes, digital revolution and change of client behaviour are all issues private banks must address in the next three to five years, he believes, having significantly lagged behind other areas of the banking industry.

The shift is particularly crucial in order to be able cater to the younger generation, who demand a considerably higher number of interactions with private bankers and experts than their parents, and have a strong preference for socially responsible investments.

“It is about better understanding the needs of the clients and creating much stronger intimacy with them,” he says. “Banks failing to do that will grow older and older, along with their client base, and ultimately disappear.”

Consolidation wave

The growing wave of consolidation, primarily in Europe, is a clear sign of private banks’ attempt to keep pace with times. In 2015, there were more than 120 private banking transactions globally, up from 40 per year during the period between 2008 and 2012, according to consultant Scorpio Partnership.

Indosuez itself carried out a deep refocusing work, beginning in 2010 by exiting tax havens, and then two years later withdrawing from the creation, management and administration of legal entities’ activity. Three years ago, it launched a tax certification process, by which EU clients were requested to give the bank written proof of their tax compliance, a process which reduced Indosuez’s AuM by €5bn.

In 2016, it started 'exiting' all clients living in countries that have not signed, or are not committed to sign, the automatic exchange of information, while extending the tax certification process to non-European residents. This procedure is expected to cut a further €10bn in AuM.

“Reducing our AuM by 15 per cent in total was a tough decision to take,” admits Mr de Leusse, “but allows us to focus on fundamental priorities now.”

One of the firm’s key pillars is to accelerate growth, mainly boosting organic growth, through an enhanced segmentation approach, according to clients’ geographical location, wealth band and behavioural criteria, while reinforcing in particular the dedicated set-up for UHNW clients.

These strategies will enable the bank to add value for clients, while increasing the bank’s return on assets. The huge percentage of private banking clients’ assets held today in cash is testament to private banks’ inability to segment their client base, believes Mr de Leusse.

 “There is a difference between offering and marketing,” he says, believing other consumer industries are way ahead in this space. “If we are able to better segment our client base, using CRM tools, and market our offer better, we will be able to more effectively propose the right product to the right client.”  

Implementing a digital transformation - which would enable both the bank and the private banker to develop a strong relationship with the client - is also on the agenda, with plans in the pipeline to set up working groups with clients and private bankers to better understand digital requirements.

The final goal is to allow the bank to “systematically” address client needs, by bringing in suitable experts. “We are not quite there yet, but have made some progress,” he admits.

Making sure clients gain access to the bank’s capabilities is a crucial element of future development. As with many institutions, one of the biggest challenges is to ensure all parts of the bank work together towards a common objective, rather than in silos.  

“I think there is huge potential for us to work more closely with other structures of the group,” says Mr de Leusse, highlighting the successful example of the collaborative approach developed with the French regional banks, Caisses Régionales, whose retail client base is a “bedrock in terms of profitability” for the private bank, though the large majority of Indosuez WM’s client assets (€85bn) is sourced from UHNW and HNW clients.

In particular, he aspires to develop a “much more structured approach” with Crédit Agricole Corporate & Investment Banking (CA CIB), and intends to set up a dedicated team with the aim of introducing CA CIB’s M&A expertise to Indosuez’s wealthy entrepreneurs much ahead of any potential business transaction. “Liquidity events are the best opportunity for a private bank to gain clients’ wealth.”

Growth strategy and buying opportunities

Buying opportunities in private banking will continue to emerge, believes Mr de Leusse, benefiting in particular large and financially solid organisations such as Indosuez, which has the support of the Crédit Agricole group.

In October, the bank signed a referral agreement between HSBC Private Bank and CFM Indosuez WM in Monaco, reinforcing the position of CFM Indosuez in the principality, where it has been operating since 1922.

By the agreement, HSBC Monaco clients who fit Indosuez’s strategy will be introduced to CFM Indosuez, which will on-board them applying its compliance and risk filters.

These types of deals - effectively “beauty contests” - will become more and more common in the future, expects Mr Leusse, preferring these to traditional bank acquisitions.

Despite its size, Indosuez WM is well balanced between onshore and offshore assets, with clients almost equally split between domestic and international, both in European and emerging markets. Only around 30 per cent of total assets are sourced from French clients, and more than 50 per cent of assets are non-European.

Entrepreneurs have increasingly global wealth management needs, he says, and wealthy clients will always seek to diversify their assets within safer international centres, given economic and political risk, and considerations of physical security. This will drive future growth of offshore private banking.

The bank wants to increase its footprint in key domestic European markets - Italy, Belgium and Spain - by acquiring businesses and obtaining a critical size, expecting to benefit from further consolidation in the sector.

In the Americas, the Middle East and Asia, it aims to hire talent and acquire portfolios. “Organic growth will be the core of our growth, and acquisitions such as the one in Monaco are just growth accelerators.”

Efficiency gains

With the ultimate goal to maintain a cost to income ratio below 75 per cent, despite its ambitious growth and digital investment programme, the bank is looking to streamline and standardise its organisation and processes across entities. As an example, Mr de Leusse aims at creating service centres in selected geographies to manage compliance risk for specific client segments.

He also has a card up his sleeve, the ‘global lean management programme’, aimed at streamlining processes, improving efficiency and reduce operating costs. He successfully used this approach - based on the belief that staff productivity is increased by “empowering managers” – when he was deputy CEO at CA CIB and in charge of 2000 staff, and was able to cut costs by 10 to 15 per cent, he claims.  

Another way to improve cost-income ratio is by decreasing the bank’s marginal operating costs, for example by further developing the third-party activity of Crédit Agricole Private Banking Services in Switzerland, which is today the third largest provider of back office and IT outsourcing services for private banks.

More generally, a key success factor for the bank is to “unite staff around a common project and ensuring everybody’s involvement” for example by promoting company-wide initiatives, such as the recent management programme which involved 450 staff - out of the total 2700 - to contribute to the bank’s future strategy development.