Three Swiss private bank CEOs gone from their jobs within a month. The reasons for each departure are different, but they have one thing in common all three were ultimately felled by massive industry changes.
Former Wegelin & Cie partner Adrian Kuenzi tried for five years to establish Notenstein La Roche in the tumultuous Swiss private banking market – unsuccessfully.
Last week, it emerged that Joachim Straehle will leave EFG International before the integration of Banca della Svizzera Italania, or BSI, is finished. One month previously, former Credit Suisse banking head Walter Berchtold left Falcon Private Bank following a rupture with the firm's Abu Dhabi shareholders.
Clash of Generations
Three private banks, three long-standing executives, and three different backgrounds to their exits. Taken together, the departures show patterns and parallels. To be sure, each are less of a personal failing than they are the clash of Switzerland's old-guard private banking with various outside forces spurring fundamental change.
Kuenzi, Straehle, and Berchtold all grew up professionally in the old world of private banking, which is struggling to reinvent itself. Notenstein La Roche, EFG International and Falcon Private Bank all belong to the group of banks which has been hardest by these changes. finews.com looks at their vulnerabilities and draws lessons for the future.
1. Today's Private Banker
Wealth management executives today need far more interdisciplinary knowledge than several years ago. Specific areas range from extensive knowledge of risk management to technology know-how.
This development is banishing a generation of generalists: instead, private banking executives need to be open to change as well as receptive to disruptive external forces such as technology or even regulation. Intellectual flexibility is key, and continuing education probably a must. Berchtold, Straehle und Kuenzi (pictured below) all anchored their careers based on the traditional view of private banking – too little, it proved, to successfully be part of private banking's transformation.
2. Banks in the Death Zone
Falcon, Notenstein and EFG all operate what is effectively a dead zone of Swiss private banking: studies show that mid-sized firms are losing out (in German) in the sector's current coalescing.
These banks are hit hardest by billions in withdrawals of offshore money – long their bread and butter. As a result, revenue and profits have dropped as a raft of costly legislation and regulation hits.
To his credit, Straehle addressed the challenge head-on, attempting to bulk up by buying BSI – which turned out to be a Pandora's box of a deal. Kuenzistayed true to his goal of advancing Notenstein La Roche into leading private bank in Switzerland. Berchtold (pictured below) had been longing for a new challenge when he was parachuted into Falcon's C-suite to mop up after the 1MDB scandal and to rebrand the tarnished bank – but he got far more than he bargained for.
To be sure, it is far to early to judge whether any of the three left behind an «après moi, le déluge» situation, or how much time they spent equipping their respective firms for the future. But their departures underscore the difficulty of operating in this dead zone – a far bigger challenge than any of them had thought.
3. Private Banking Alone is Not a Brand
Bankers yearn for the golden years when a private bank's offering and positioning didn't play much of a role: clients needed little enticement, bringing suitcases full of often undeclared cash to Switzerland for manage. Of course, this era is well over.
In an age of far greater transparency, private banks are discovering they need to be «client-oriented.» But that's not all – they also need to differentiate themselves from their countless rivals. At Notenstein, Kuenzi has done the least in this respect: since it rose from the ashes of collapsed Wegelin & Cie in 2012, the bank has done little to set itself apart from competition. The fact that its parent, cooperative-organized Raiffeisen, has a AAA-rating isn't enough to convince clients to join.
Straehle (pictured above) also rebranded EFG following the turbulent acquisition of BSI, but the firm's identity as a «hands-on private bank» remained indistinguishable from rivals. Berchtold tried to do two things at once: strategically reposition Falcon as well as bolster its digital expertise. The result, «agile private banking,» is more of a gimmick than a clear differentiator from the competition.
4. Boards: No More Old War Horses!
When a CEO stumbles, the board is also in for their share of blame. Of course chairman and their search committees want seasoned executives familiar with customs and practices from a time when business models were untouchable. Beyond that, Berchtold and Straehle have both proven themselves in crisis, restructuring and growth phases.
As finews.com has reported, business, business models are being reexamined as bank executives who have advanced in a previous era struggle to find a recipe against eroding margins and consistently low to negative interest rates. Rapid advances in technology, far more demanding clients as well a raft of new, potential competitors from fintech add to the stress.
Against this backdrop, private banks need executives who can or have thrived outside of private banking, bold and unconventional, and prepared to grow intellectually even late in their careers by recognizing the risks linked with change as an opportunity. Equally, boards also need to scout for a broader set of qualifications for potential C-suiters.
