The Business Times

20 Oct 14

Old Swiss bank keeps up with the turning of the tide

Managing about S$1.5b in AUM, Bordier & Cie is in the midst of an overhaul to satisfy regulatory changes
Jamie Lee

The avoidance of tax evasion is not something for private banks to enforce, although banks should be prepared to provide tax-related advice that would benefit clients’ overall portfolio performance, says a top executive at Bordier & Cie, a 170-year-old Swiss outfit.

This approach comes as the bank adjusts its relationship-focused strategy to fit the changing regulatory and competitive environment and aims to grow to about S$2 billion in assets under management (AUM) by next year.

“I believe that, in the future, the regulators will look at banks to make sure that they do send statements to clients. Because if they don’t, then is the bank an accomplice in tax evasion? Maybe that goes a bit far, but that’s how the world is going,” said partner Evrard Bordier, who runs the Asian operations through the Singapore office, in an interview.

This means banks will have to provide tax statements and information to clients, and go a step further by advising against investments that are tax-inefficient for the clients, though they must stop short at playing regulator. “It’s not the bank’s job to ensure (the client) pays taxes,” he said. “I can give a tax statement to a client. But if he takes it and throws it in the bin, what can I do about it?”

Tax evasion should come to its natural demise in a few years’ time, added Mr Bordier, pointing to OECD regulations that would force banks to report data to tax authorities.

“When I first started to drive, there was no law about seatbelts. But with my children, when I come into the car, they’ll tell me, ‘daddy, you didn’t put your seatbelt on’. For them, it’s not even a question,” he said. “In the next generation, taxes will be a non-issue.”

Bordier & Cie, which manages close to S$1.5 billion in AUM, is in the midst of an overhaul to keep up with regulatory changes.

The changes would also allow the bank to develop further its relationship with clients, from whom they take a relationship, or custody, fee to maintain their assets. This runs contrary to the “high-net-worth brokerage model” that several private banks in Asia are employing, said Mr Bordier, the fifth generation in his family business.

“Instead of being a brokerage model, we’re saying, ‘it’s wrong – let’s try to come back to the values of the family’,” said Mr Bordier, twisting a ring bearing his family crest as he spoke.

It means building a portfolio made of “value securities” that is resilient in times of market stresses, focused on long-term cash flow, and is not tied to a benchmark for clients who have S$3 million to S$50 million in assets with the bank. “So if the market comes down 20 per cent and you lose 5 per cent, then the clients are very happy.”

The bank is trying not to adopt the transaction banking mentality in Asia, where clients typically are wined and dined by several private banks at a go.

“That’s the big difference in Asia that we’re applying. What we’re trying to do is to say, ‘look, we won’t call you for very hot pick of the week’,” said Mr Bordier, who hands out homemade honey to his clients twice a year. It’s made in a bee farm run by his brother, also a partner of the bank.

“You don’t have time, you can’t bother. Often, you just say ‘yes’ on the phone and you will sue us back because you didn’t understand the risk linked to what you are doing, because you have no time to listen to me.”

For Bordier & Cie, which charges 0.5 per cent in custody fees – or about double the fees charged by most European and local banks – this means that it can offer a full suite of advice at no further advisory cost.

“I make decent revenue that covers all my cost, and if we work on other elements, like passion investments, or real estate, or family office elements, we don’t charge for it,” said Mr Bordier, who runs a profitable three-year operation. “Otherwise, the clients . . . are not going to tell me about other investments, because they think it’s going to cost.”

The system overhaul will also ensure that certain transactions, such as accounting for a dividend payout, or a stock split, can be handled through technology. “I’ve never had someone congratulate me because I put the dividend right,” he quipped.

Slightly over 10 per cent of Bordier & Cie’s clients are from Asia, and Mr Bordier expects to grow this in Singapore and Asia – the two priority markets. In China, the big theme is inter-generational wealth, which Mr Bordier can personally identify with. The task is to ensure that the children do not squander the money and stay in the business – ever critical for Chinese entrepreneurs since most of them have just one child.

“We have people doing manufacturing and their children like art. We’re telling them, ‘why don’t you let them build their art capability, and bring them in as a business, and then you become a conglomerate? Otherwise, the children will never come back and work for you’.”

Given the current wave of consolidation private banking, Mr Bordier is clear that the bank will stay focused on a few markets. “The cost of serving too many people in too many regions is just impossible to keep up,” he said.

“I don’t think it’s a question of AUM, though. Someone who is very local will thrive, even at a low AUM base, because it’s an easy market, and it’s not cross-border. If you want to cover the world – like Citi or HSBC or another global bank – then you need a huge AUM base,” Mr Bordier said, adding that he thinks S$2 billion is the minimum needed to survive.

“(Below that), it is difficult to succeed unless you streamline your processes so much that you have very little.”