The needs of wealthy entrepreneurs are undoubtedly complex, and BNP Paribas is attempting to serve this demographic by offering a holistic approach that incorporates digital innovation. John Schaffer speaks with the Co-CEOs of the bank’s wealth management division, Vincente Lecomte and Sofia Merlo, about their plans
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France-headquartered BNP Paribas’ wealth management offering largely focuses on catering to entrepreneurs, with a variety of services being accessible to wealthy business owners – from research such as the recent 2017 BNP Paribas Global Entrepreneur Report to physical networking events and bespoke apps.
Yet the bank is in no way limited to serving this demographic. Its private banking services incorporate the affluent and mass affluent clients from all walks of life.
The co-CEOs of BNP Paribas Wealth Management, Vincent Lecomte and Sofia Merlo, held various C-level roles within the bank before jointly taking on their current responsibilities in 2011.
BNP Paribas’ wealth management division has a global AuM of €341bn ($362bn), an 8% increase on the previous year.
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By GlobalDataFrench wealth accounts make up a significant amount of the bank’s wealth management AuM – approximately €90bn – making the bank the top wealth manager by AuM in its home country.
Merlo tells PBI that much of this success can be attributed to leveraging the bank’s large retail banking network in France. However, she says that more recently many clients have also been referred from the corporate side of the business:
“Sixteen years ago, when the merger with Paribas took place, we had approximately 80% of wealth management clients coming from our retail banking side. Today, we receive clients from three channels.
“The first are retail clients, coming from within our network. Then we have synergies with the corporate banking side, which incorporates all entrepreneurs. Thereafter, we have referrals from our own clients who are bringing in new clients.
“For the above €5m segment, half of our clients come from referrals; the other half come from synergies within the wider group.”
In terms of client segmentation, the entry level for BNP Paribas’ wealth management services is €250,000, which is notably lower than many global private banking players who often have a minimum requirement nearing the $1m mark.
For mid-tier wealth management clients, the bank requires €5m of investable assets, and €25m for its more bespoke UHNW proposition.
Apps for the entrepreneur
Both Merlo and Lecomte are especially keen on providing digital capabilities to wealthy clients, with a significant focus on the entrepreneurial client base. This is to create a network for its global clientele.
Lecomte says the bank launched a cloudbased initiative two years ago in response to demand from clients to share business ideas. The first app release was focused on nextgeneration clients:
“We gathered clients, including entrepreneurs, together with our teams to define what they want, as part of our Client Experience initiative.
“That was the starting point to analyse and further enrich the way we serve entrepreneurs – from onboarding to developing client loyalty and getting feedback.
“These new digital services and functionalities are part of the story because our entrepreneur clients expect new services from us.
“Two years ago we launched the NextGen app as millennial entrepreneurs were telling us that they wished to be connected together, to do businesses together, and to leverage ideas from others.”
BNP Paribas Wealth Management will launch an app in early 2017 to target UHNW entrepreneurial clients.
The app is set to be called Leaders Connect, and will allow networking opportunities. Lecomte says the app idea evolved out of the annual Leaders Club networking event, which allows UHNW clients to share investment
ideas and collaborate.
The wider BNP Paribas group also has an app, called Open-Up, to connect clients with startups.
A one-stop bank
Alongside innovative apps, the bank provides a number of initiatives for entrepreneurial clients, including the Woman Entrepreneur programme at Stanford University in California and incubation centres to support startups that are being led by the bank’s millennial client base.
Merlo says BNP Paribas Wealth Management uses the expertise of the wider group to provide a “one-stop bank” solution for its clients. She adds that the bank also uses its global footprint to facilitate the worldly aspirations of its entrepreneurial clients:
“For instance, we have entrepreneurs in France who are creating companies in Silicon Valley.
“We serve them in both countries for their corporate and wealth management needs. Our role is to help them build their businesses in the locations they want to be in.”
Growth markets
Merlo and Lecomte stress that a core focus for growing the private bank is to continue leveraging the retail banking network.
Merlo tells PBI: “Our priority is to have our footprint in Europe, Asia and the US, where we think we could grow from our
retail banking business.
“We are adapting the model that has been applied in France. We did that in Italy when we merged with BNL, where we are seeing double-digit growth. We continue to invest in Italy.
“In Belgium, where we already have a large footprint, we are continuing to grow and recruit people. We could further strengthen our footprint in the north of Belgium, for instance.
“We entered Turkey six years ago, because we thought there was big potential. We doubled our size in Turkey when we merged BNP Paribas and Fortis – and we continue to show double-digit growth annually. We now have 15 private banking centres in Turkey, and we are doing what we call the upstream on the retail side, while also developing the
corporate side.”
As Turkey has been supportive of fintech entrepreneurs, BNP Paribas developed a digital business angel platform three years ago via which it could merge startups operating in Turkey with the bank’s clients who were willing to invest. “We are the only private bank to provide this kind of service in Turkey,” says Merlo.
Morocco is another country where BNP Paribas started its private banking business due to having a subsidiary. “We have five private banking centres in Morocco covering all the different regions. The other country we are growing in is Poland. There, BNP Paribas acquired Bank BGZ.”
Next-Gen attrition not an issue
Client attrition among next-gen clients has become pandemic for private banks. The PwC 2016 Wealth Management Trends survey shows asset attrition rates of more than 50% in intergenerational transfers of wealth.
However, Lecomte says this is not an issue for BNP Paribas, especially among millennial clients with entrepreneurial aspirations:
“We don’t see this attrition. We actually see the opposite, because they need to have a long-term partner who can meet their complex needs and accompany them in developing their business further.
“At the same time they want to acquire more skills, gain access to more innovative investments such as private equity and socially responsible investments, so they need experts like ourselves and are keen to leverage on all the skills that they can mobilise to meet their own objectives.
“Knowing that roughly 75% [of next-gen entrepreneurs] leverage their family connections, we are investing in next-gen programmes such as our NextGen Club, for example. We have approximately 1,000 alumni from these NextGen sessions that we have been organising for the last 10 years across the globe.”
Lecomte says the most significant investment for BNP Paribas is in staff: “They are the most important asset we have,” he says.
The bank has set up a training programme called Wealth Management University – a global compulsory programme for all relationship managers that takes several weeks to complete and requires managers to take an exam before they are able to serve clients.
High private equity allocation
According to Lecomte, allocations towards private equity (PE) and angel funding stand at nearly 20% of clients’ portfolios, especially in the case of entrepreneurial clients.
“We have developed 15 years of expertise in PE. We don’t directly manage PE funds ourselves, we rely on third parties that are fully dedicated to this business.
“We launch approximately three funds a year. Because the cycle is quite long, we make sure we do all the reporting and monitor the whole private equity fund cycle.
“We recommend our clients to be invested in this asset class for diversification purposes. We can also propose some co-investments. We have some initiatives to launch as part of the upcoming Leaders Connect app.
“It’s about encouraging our clients to share ideas and see if there are opportunities to co-invest among themselves,” Lecomte continues.
“Co-investments is upon our guidance and control which is one of the value-added services we propose to our clients through this app – but it’s up to them to make their own decisions. We apply the same process in terms of due diligence and expertise.
“We will have strict rules through the Leaders Connect app in terms of the responsibility that clients take in those
investments.”
