It was one of the largest acquisitions since the global financial crisis. PBI editor Mark Foxwell sits down with the charismatic head of Julius Baer UK to discuss the Swiss bank’s acquisition and integration of Merrill Lynch’s non-US wealth management operations
Adam Horowitz was supposed to retire in 2007. After having had a stellar career with Merrill Lynch, where he spent 12 successful years, the plan was to kick back at his ranch in Massachusetts, surrounded by his orchard of apples and peaches.
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However an unexpected phone call was about to scupper the 56-year-old’s plans to enjoy the finer things in life, and instead throw him into the driving seat for the UK part of one of the largest acquisitions in private banking history.
Horowitz, previously CEO of Merrill Lynch’s South African operations, was parachuted into Merrill Lynch to help manage the UK business and its integration into Julius Baer after the acquisition of Bank of America Merrill Lynch’s non-US wealth management operations in 2012. Julius Baer is the leading Swiss private banking group.
The private banking heavyweight, who took the helm of Julius Baer UK last year, says: "I was invited back by a friend at Merrill Lynch, who had taken on responsibilities for the wealth management business and realised that they had a significant restructuring to do. My own history is one of integration and building businesses, so it was kind of him to reach out. I’m delighted to be back."
He adds: "I wouldn’t have swapped 2013 for anything. It’s been the most interesting project on the street, in terms of where would one like to have been involved in 2013. I believe the acquisition of Merrill Lynch is the most exciting transaction to have been personally involved in throughout my career."
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By GlobalDataThe acquisition marking the bank’s biggest leap forward since it decided to concentrate on private banking five years ago, has not been an easy task. The Swiss bank has slashed more than 300 staff by the end of 2013, expects 400 more to come and last year profits took a dive, due to the start of the integration process.
Horowitz says: "The integration has exceeded our expectations in London. I don’t say that lightly. It’s beyond our expectations because any acquisition has significant uncertainty and unknowns."
However, the deal has given Julius Baer offices in eight new markets globally and helped bolster its footprint in Asia. Within the UK, the integration has transformed the bank into a force to be reckoned with.
Integration
Julius Baer announced the transfer of the UK business of Merrill Lynch’s International Wealth Management in July last year. This step represents another major milestone in the two-year integration process and will make Julius Baer one of the largest private wealth managers in London.
Although challenging, Horowitz is confident the process is and will be a huge success. And with his track record of integration, having been behind the merger of a leading South African stockbroker into Merrill Lynch in 2000, he has every right to be confident.
So far the integration of the new businesses in the UK is moving ahead swiftly and in line with the original plans to complete by the first quarter of 2015, under the hands of the South African born banker.
"It is a significant shift for Julius Baer in London, and puts the strategic objectives of Julius Baer to have a third centre in this region to augment Switzerland and the German platform in Frankfurt. This allowed Julius Baer to reach critical mass and be a participant in the London jurisdiction which remains one of the few financial centers that allows banks to service local and international clients from within a strong and well regulated framework. London is very attractive to a bank like Julius Baer which is expanding," the father of two says.
Horowitz says the most challenging task was winning the hearts of the Merrill Lynch clients. The bank did use "dual hatting" as a way to win the trust and respect of the customers. Instead of forcing the client into a position without considering what the value proposition was, the bank gave customers the option of switching.
"Dual hatting means wearing two hats, and we couldn’t think of a simpler way to do it. If you think of an acquisition, and the clients role in that acquisition, the respect for the client and for the clients assets, means you have to talk to the client and continue to service the client, and to give the client the choice as to whether they wish to transition to Julius Baer or not."
"Most acquisitions happen on a big bang approach where overnight something is sold. We entered into a 6 month dual hatting, operating model whereby we never broke the service model from Bank of America, and in parallel we introduced the Julius Baer service model, so that clients were never disadvantaged," says Horowitz.
Strategy
The Swiss bank is currently in the process of being able to offer UK residents and non-domicile residents a full private wealth management service.
"Our strategy and our global footprint, allows us to give clients international choice as well as cater to UK specific requirements such as Individual Savings Accounts or investor visa’s," says the chief executive.
"We have the opportunity, as the largest pure play private bank in the world to offer clients a dedicated wealth management service that caters to their international and local needs. Much of our client base have family and business interests globally and it takes a significant network and expertise to offer sound advice across international boundaries."
Julius Baer works with clients for the long term, emphasizing wealth planning and long term returns while paying careful attention to clients’ needs which is why relationship managers remain key to the bank’s strategy. Horowitz points out: "We respect and support that relationship. Our aim in London remains to be an employer of choice for experts in wealth management who see their responsibility to clients and client service as the reason why they wake up in the morning and go to work with a degree of passion and determination to excel."
"The fact that we have a truly open architecture approach to finding the right solution for a client, speaks to meeting client needs and above all keeping clients safe. Our tier one capital adequacy was last reported at 20.7% and that is an important verification of a strategy to ensure client safety."
Consolidation
Julius Baer has taken full advantage of worldwide consolidation. The loss-making Merrill Lynch unit was bought at a knock-down price and has propelled the Swiss bank into a global heavyweight. Horowitz believes the wave of consolidation will continue for another two to three years.
"Consolidation will continue. It’s difficult for business managers to acknowledge that the business model is not profitable and that one should move on. How do you move on, is a complex question. How do you build capacity or fix an inefficient business. Its complex, takes determination and it will take time," says Horowitz.
The pure wealth manager is on track to complete integration of the UK business by early 2015. Horowitz is determined to see the process through and believes Julius Baer could double UK assets under management in the near future. It’s a bold statement to make and so was Julius Baer’s decision to snap up the Merrill Lynch business to become a truly global player.
Having spent most of his life growing and integrating businesses, Horowitz appears to have the knowledge and experience behind him to justify such a statement.
