Having been in his new role since 1 January 2015, Erich Pfister, the new global head of Falcon Private Bank, has a clear strategy for the lender. Pfister, who most recently moved from Credit Suisse, tells Valentina Romeo, how he aims to differentiate the private banking boutique by leveraging its strengths and keep ‘feeding the Falcon’ towards the East
These are both challenging and exciting times to be the global head of a Switzerland-based private bank.
Erich Pfister, a 25-year private banking veteran, started his new role as the global head of Falcon Private Bank in January 2015 and he is determined to pursue the firm’s goal of increasing exposure to emerging markets.
Headquartered in Zurich, Falcon Private Bank has 50 years of Swiss private banking expertise with a direct access to emerging markets through its government-owned shareholder in the UAE.
"We aim to increase our market share in our target geographies and leverage our established platform and our shareholder – IPIC, one of the world’s leading sovereign wealth funds from the UAE," Pfister told PBI.
Falcon Private Bank has offices in Geneva, London, representative offices in Abu Dhabi and Dubai, and a second booking centre in Singapore.
Pfister says: "As a pure private banking boutique, we are focused on the premium wealth management business segment and to pursue a niche growth strategy in our core markets – Switzerland, Eastern Europe – mainly Russia, the UAE and Southeast Asia."
Currently, Falcon Private Bank employs approximately 300 people overall and manages client assets of over CHF16bn ($17,19bn). Switzerland and Eastern Europe are the two main markets for the bank representing a combined 60%-65% of the total AuM.
Finding its niche
"To put it simply," says Pfister, "a private bank is either a global player or a niche player".
He is convinced that now more than ever, a private bank needs to position itself clearly in the market and have a differentiated value proposition to attract clients, without negative legacy issues. Pfister believes that competitors will also be reviewing their business models for the same reason.
Alongside concentrating on its core markets, Falcon Private Bank is looking "further east", especially at some "interesting countries" that are showing potential, such as Kazakhstan and Azerbaijan, he adds.
Contrary to many wealth management firms, there is not a strict minimum requirement rule for a client to enter the Flacon Private Bank. However the main focus in terms of the growth bracket for Falcon Private Bank is the so called upper- HNW segment, which includes clients with assets of CHF2-3m going up to CHF20m.
Falcon Private Bank has made a series of strategic business acquisitions in recent times.
In June 2013, the bank acquired the Central and Eastern Europe private banking business of Hyposwiss Private Bank Zurich, a wholly owned subsidiary of St. Galler Kantonalbank.
In March 2013, Falcon Private Bank acquired Clariden Leu (Europe), now Falcon Private Wealth, operating as an international private asset management firm and servicing global clients focusing on the Middle East and Africa, Eastern Europe, Asia and other emerging markets.
Pfister says: "The acquisitions of the Clariden Leu (Europe) and the Hyposwiss were important steps in developing and underscoring our emerging markets focus and expertise.
"Both acquisitions proved to be a perfect fit in terms of target market and customer segment." Going forward, the lender plans to continue monitoring "acquisition opportunities within the bank’s core markets".
Falcon Private Bank has also divested some of its business. Early in 2014, the Swiss bank exited the Hong Kong market selling approximately CHF800m and a number of staff to EFG International business in Asia.
However, Pfister says Falcon Private Bank is in "growth mode" and his aim is to enable double digit growth for the business in its core markets.
The lender also outsourced its IT back office systems at the beginning of 2013, which has allowed Falcon Private Bank to increase efficiency and concentrate its resources on its core business – private banking, says Pfister.
"We are currently looking at opportunities in terms of digital banking solutions," he adds.
Train and education
With the financial industry becoming increasingly complex, it is important to train RMs appropriately, especially in a boutique offering such as Falcon.
"We need to further invest in the education and training of our staff. Personally, I need to sharpen our brand profile in markets where we have unique competences and highlight the services we offer our clients," Pfister says.
Having concentrated on the UK market in the last two and a half years at Credit Suisse, Pfister’s aim at Falcon Private Bank is to achieve a "similar high standard of advising" from a regulatory point of view.
Having moved from a big private bank, the most striking element for Pfister at Falcon Private Bank is its strong entrepreneurial environment. Speed of decision making is a primary business differentiator compared to bigger organisations.
He adds: "Many entrepreneurs like to talk to smaller organisations like us, because we are more flexible and simply faster, with the strong and solid ownership."
Switzerland: the place to be?
In January 2015, the Swiss National Bank (SNB) decided to abandon a three-year-old cap on the Swiss Franc generating significant losses for many banks around the world.
Commenting on SNB’s decision, Pfister says: "Obviously everybody was surprised, including us. Our cost base, to a large extent, is in Swiss Francs, the revenue base is in US dollars, Euros and Swiss Francs, so it has an impact on us. We have discussed the situation to decide on which measures should be taken." However, Pfister believes that "drastic measures" will not be required.
A few Swiss firms, including bigger players such as Vontobel, had said they could absorb currency swings, while posting full-year profits below expectations.
Pfister says "with minor adjustments" on the costs, the bank will cope "quite well", as growth will mainly be generated from its international locations.
"Cutting costs is something you always look at. However, after a month into this job, I think the biggest leverage we have is to increase our share of wallet rather than cutting costs. I want to see us in growth mode rather than a cost-cutting mode."
Despite tax evasion scandals, Switzerland remains the world’s largest wealth management centre with $2trn AuM at the end of 2014, an increase of 14% compared to 2008, according to Deloitte.
Pfister supports this view. "Though we’ll continue to see a further consolidation process, Switzerland is still an important financial industry because of certain ingredients that will not go away.
"Looking back at centuries of experience, it is still an attractive environment, especially tax-wise, with a highly talented pool of professionals," he adds.