Head of UK private banking for Lombard Odier, Dominic Tremlett, joined the Swiss private bank in 2011 in Switzerland. He moved to the bank’s London office in 2013 and one of the features that "attracted" Tremlett to make the move was the Swiss private bank’s investment in its IT infrastructure. Tremlett gives Meghna Mukerjee the details

 

Lombard Odier’s work with its technology infrastructure is both extensive and impressive. The Swiss private bank that is owned by eight partners has created its own asset and investment management system, and the IT segment has become a ‘third pillar’ for the bank.

Approximately 200 people out of a total workforce of just over 2,000 are dedicated to the in-house IT development at Lombard
Odier.

Head of UK private banking for Lombard Odier, Dominic Tremlett, says that over 30 years ago, it was one of the partners of Lombard Odier who "fully realised and acknowledged" the opportunities that IT systems used in wealth management throws up.

"He looked at everything available in the industry and decided that we needed to create our own system so that we can have controls over how it operates and as well as any upgrades it needs.

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"It was a very big decision, but it was a positive one. It has given us advantages in the speed of reaction we can create. We know the system is dedicated to exactly what we want to do," says Tremlett.

There are myriad advantages of an inhouse IT system, explains Tremlett.

"We control our system and can adapt quickly to changing circumstances, which in the current world is useful as everything is changing constantly in the private banking space.

"What we see from most competitors who don’t have their own systems is the reliance on third parties. There is also a pecking order. If a supplier has 10 banking clients all coming to it at the same time for upgrades, there is a waiting list.

"Additionally, other banks end up with a collection of legacy systems that don’t talk to each other. Especially if the client is international, it is difficult to pull all the information together from different accounts.

The client ends up talking to half a dozen people, and more often than not, someone somewhere is putting together an excelspreadsheet that is prone to error. Several larger institutions have had to bolt systems together and they really struggle with it,"
he explains.

 

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Sharing fruits of success

Tremlett says that besides the obvious profits that an in-house system reaps, it most importantly provides unparalleled "efficiency"
levels, leading to much better client experience. The Swiss bank has also started to selectively work with third parties by way of providing IT systems for smaller banks and wealth managers.

However, Tremlett reiterates: "Let’s be clear – we are not an IT vendor. We are a Swiss private bank and an asset manager – that is the core of what we do. It just so happens that we have a fantastic in-house asset and investment management system that wedecided to share with others, to cover the costs as well.

"This enables us to continue developing our IT capabilities because we can share the cost of it with other banks, wealth managers,
and family offices that we are providing the systems to.

"We are selective about who we work with – we don’t want to lose our own competitive edge. But we have a great service so we won’t be too shy to talk about it," he adds.

 

Ahead of the curve

Swiss private banks are often viewed as a tad bit old fashioned, however this "couldn’t be further from the truth" he explains.

Lombard Odier is now on the third version of its systems. Its latest online and mobile banking app version is called G3. The app is available for Apple devices currently but there are plans to make it available to other devices in due course.

Tremlett highlights the fact that G3 is a dedicated wealth management system, not a retail or corporate system that has beentweaked or adapted for private banking, which sets it apart.

The G3 app has the capability of accessing a large volume of data and can carry out difficult transactions, such as cross border
transactions for instance, within seconds.

As Lombard Odier has envisaged its clients using this app largely while they are travelling and on the move, a lot of the attention
to detail has gone behind the security of the app. The app doesn’t collect data for the same reason, and has to be online to work.

Through the app, clients can access their portfolios that present current valuation as well as enables access to real time market data. As high and ultra high net worth individuals (HNWIs, UHNWIs) have bank accounts in several countries, clients have the option of choosing different currencies to access their accounts as well.

The app provides clients with portfolio breakdown by asset class – benchmarks, short term performances and longer termperformances. The app can additionally be tailored for data and analysis purposes, giving the clients a deeper understanding of their portfolio. Clients also have access to exactly the same screen that their relationship manager (RM) is looking at, which isadvantageous.

The app also allows clients access to a consolidated view of portfolios – as it recalculates the entire portfolio in seconds, making the process much easier, especially if there are various accounts in different countries to consider.

"Clients can get a global view of their portfolios, across geographies. The big advantage for the bank is that the main RM can oversee all of the client’s portfolios and the client does not have to talk to many RMs.

"We are proud of the app. There is hardly anything available in the industry that is quite as detailed and interactive.

"We continue to monitor where the client demand is and get feedback on what’s missing. That’s also the advantage of having our own systems because we can fast-track any urgent changes required," says Tremlett.

Additionally, for large, multi-banked, institutional clients, Lombard Odier also offers a global custody platform.

 

Data and details

The vast amount of data and the level of granular information available on the G3 app is of particular interest to the Next Gen clientele, says Tremlett. "They want to drill down to the details. There are a lot of young entrepreneurs nowadays who fall within the HNW and UHNW brackets. We just have to keep up with the way these clients want their information.

"It was fine a few years ago to send paper statements by post monthly. Now it is not. As a private bank, if we don’t keep up, we get left behind."

Having easy access to data also helps keeping costs of compliance under control, says Tremlett.

"All the banks have to update their IT systems at the same time to keep up with changing regulation, and to do it in a timely manner is tough. The compliance and risk teams at Lombard Odier, however, can easily extract data. They are not reliant on some third party producing the data for them."

Using social media more than it is currently being used by Lombard Odier is also in the plan.

"We see that the next gen clients especially are interested in accessing relevant pieces of research on twitter, for example. They want a quick burst of information.

"We are looking into how we can best make use of social media, as we have to be careful from a regulatory perspective about
what information we put out there."

 

UK focus and fund launches

Beyond its home market in Switzerland, other important markets for Lombard Odier are the rest of its European operations as well as Asia, which is a "key growth engine" for the private bank.

The UK market is a particularly important one for the Swiss private bank. In the UK, Lombard Odier is on track to double its assets under management (AuM) in the next three years.

"We intend to continue growing in the UK and we are investing in our business. We expect to hire three to four senior private
bankers here in the coming 12 months. I would expect that trend to continue in the next few years."

In January 2014, Lombard Odier launched two funds with a risk-based approach for private clients, mirroring the strategy used on the bank’s own pension fund in Switzerland.

Vantage 3000 aims to have a max drawdown of 10% and Vantage 1500 has a max drawdown limit of 5%. At the end of February2015, they had a collective AuM of EUR330m.

This approach was being offered to some sophisticated institutional clients for a number of years, as well as Lombard Odier’s own employees’ pension funds.

While traditional approaches can overexpose investors to equity risk and may not be dynamic enough to cope with markets, Lombard Odier’s aim is to keep clients’ portfolios balanced and not expose them to more risk than they’re willing to take with a diversified approach through these funds.

In October 2014, Lombard Odier launched risk-based mandates based on risk allocation. According to Lombard Odier, the risk-based overlay was developed due to client demand for exposure to the private bank’s current investment ideas as a supplement to the Vantage ‘risk-based’ approach, which aims to mitigate losses over the economic cycle.

In general, around 80% of the portfolio risk is allocated to Vantage funds and 20% to trading ideas made by the tactical assetallocation committee. As of February 2015, the risk-based mandates had attracted AuM $140m.

 

Expertise and heritage

The primary strength that the private bank has, reiterates Tremlett, is the 200-yearsplus history of being an asset manager.

"We have managed clients’ assets for multiple generations. We have vast experience in managing portfolios.

"Several large multinational banks tend to offer all services to all people but we focus on what we are very good at. We want to be
world class at that. Doing everything has its dangers," he says.

According to Tremlett, who was with Barclays for 22 years prior to joining Lombard Odier, the M&A trend in private banking is set to continue as the cost of operations keeps growing.

"Bank must have a level of scale to operate successfully. With the barrier to entry now being higher, industry consolidation will carry on," he says.

However, Lombard Odier’s focus will remain on establishing long-term relationships with wealthy families and individuals.

"There has been strong consistency in the ownership of the bank and the partners have long-term plans in place for the business. That also makes us very focused. It’s a much more considered approach for growth," adds Tremlett.