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September 22, 2021

What lies in the future for Edmond de Rothschild Group and its new CEO?

By Patrick Brusnahan

The historic Edmond de Rothschild Group has appointed its new CEO,François Pauly. Patrick Brusnahan sits down with Pauly to discuss the challenges the bank will face in a competitive market and what is next for the banking giant

Pauly has had plenty of experience with the group already, having joined its board five years ago. He claims it is “quite fascinating when you see a company from both sides, the board view and also now the executive view”.

Patrick Brusnahan (PB): What have you identified as key priorities for the bank and for the group? Is there anything that takes precedence?

François Pauly (FP): The key priorities – and then that was my big advantage, as I was already a board member – didn’t change the day I switch from the board to the executive role.

It’s much more how we can implement in a limited time period, some of the strategic decisions, which have been taken now for a number of years. Getting to know people within the different layers of management and understanding their own priorities is particularly key in this recovery period.

And also, it’s about making things happen, accelerating in the implementation of strategy going forward.

PB: How much of a priority is it to keep staff happy?

FP: I think top talent, and all the staff, are key to our success. And it’s also key I guess, in a family-owned bank, that the CEO has direct access to the different entities.

As you know, we are not just based in one country, but we are spread over several countries in Europe and now with the end of some of the travel restrictions, it’s finally possible again to meet in person, where people didn’t have a chance for the last 18 months. Motivating our staff is key.

And also, we have to try to come back to a more normal life. This doesn’t mean that homeworking could not be part of how we will work in the future. But we believe in a bank like ours, we need to have this personal contact with colleagues and clients.

PB: How do you intend to motivate?

FP: The start of 2021 was quite successful. We are on track with what is in our budget for this year, which is always helpful to motivate the teams, especially when it is the case in all the geographies and in all the different business lines. We believe that we have some special offerings, both in asset management and private banking, which are unique.

PB: What are clients looking for from your banking group?

FP: I think when they are coming to us, it’s basically because they believe that we could add something special to a long-term view on how one has to invest, either as an institution or as an individual.

Because in our history, over the last two centuries, we have always been willing to take on investment challenges.

We show a track record under the same brand for a number of generations. Because of our own history, we have been attracting people who understand what kind of a conviction-driven investment house we are. We are lucky right now that due to the very special situation where you have this very low, and in some countries negative, interest rates, your classical offering in a private bank must be much larger.

Over the last 15 years, we developed illiquid assets, or real assets, like real estate, like private equity, like financing in the private debt market, which brings a lot of added value, and there is strong demand for this asset class. Our offering in the environment brings a substantial advantage compared to some of our competitors, who are only starting now to offer real assets in their global offerings.

PB: How would you describe the typical clients of the bank?

FP: If I’m looking at our private banking clientele, it depends largely on the different entities where we have been for a number of years and where we recently joined.

So typically, at the beginning, our clients have been entrepreneurs, and maybe they are still the first generation so we replicate that in some markets. We are very much connected to the start-up community.

In other situations, we are supporting already the second or third generation of entrepreneurs, which enables us to have maybe a longer-term perspective with these clients. They are no longer involved in a day-to-day business, but they are rather looking at their own investments and trying to think about how to manage their financial assets, or indeed other assets, and bringing them into the next generation.

We definitely have to address some of the big concerns they might have such as like how can I keep my family assets? How can I run a next generation programme? How can I diversify? How can I have maybe an exposure to new asset classes?

PB: Who would you say your main competitors are in the private banking sector?

FP: It depends a lot on where we are. In Switzerland, it’s typically the Geneva based private banks and the big Swiss banks. UBS and Credit Suisse because of their strong positions in some domestic markets.

In Paris, or also where we have a big operation in the Spanish and Italian markets, we are always competing with their domestic retail banks who have private banking activity.

What is more volatile are the US private banks, like Goldman Sachs or JP Morgan, that could enter a market in a very aggressive way, often through one angle, and then trying to look whether they could acquire over a short period of time, some of the more extreme or high net worth individuals, whatever name you want to put on them. That’s the kind of competition which we see.

PB: What is your vision for the bank?

FP: I think what we haven’t been discussing is that there is a change, which is fundamental that our clients are much more looking also at long term investments which are sustainable, which are in line with their view on how much they have to commit to limit all the negative impacts we’ve had in our last 30 years of growth, and not really looking at the short term impact on environmental, or social issues.

We put a lot of emphasis in our product offering on impact investing and ESG criteria. And we are seeing now, at least from our European clientele, a very strong interest. As the family has been investing over the last 15 years in much more high impact strategies than maybe other private banks, we certainly will put an emphasis on this.

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