The Liechtenstein lender's CEO is making a case for the bank to transform – and he doesn't want to hear any more griping from client advisers about the administrative burden rising, he tells finews.asia.

Paul Arni, you're trying to convert VP Bank into an «international, open platform for services around wealth and asset questions», so you are in the midst of a transformation. How difficult is it to get employees on board?

It's certainly challenging, firstly because I haven't met my management or employees in person for quite a while, but that is slowly changing. People also need to get to know each other because we've refreshed management in recent months. On the other hand, this transformation isn't happening simultaneously everywhere and doesn't affect everyone the same. But yes, the pandemic has certainly not helped.

You're referring to outsourcing VP's technology?

Among other things, but to be precise, we're outsourcing our information technology infrastructure. The rest of our IT remains with VP Bank. The IT strategy is a central element of our vision to be an international open wealth service pioneer. And yes, communicating the decision wasn't made any easier by Covid-19.

You also had to replace the head of Asia during a lockdown. How?

It wasn't a must but a further consistent step in the implementation of our strategic goals. I traveled to Singapore in April in a so-called business bubble in order to communicate the appointment of Pamela Hsu Phua as CEO of VP Bank in Asia to our local management in person, at least through a screen.

«The need for changes is clear to everyone»

The measures were rigid but for me, it was a huge benefit to see and speak to our employees even from behind protective glass.

How is the transformation coming along?

In line with our expectations. We communicate a lot and are beginning to sense that our employees understand and are accepting the strategy. Our planning is very structured and transparent, which helps illustrate the fundamental reasons for the transformation. I think everyone is now clear on the need for changes in our business.

VP's role has been boutique or niche, but the transformation you're seeking puts this to the test.

It's the consistent and targeted evolution of VP Bank. I'm convinced that it's dangerous for any company to assume that a healthy business will simply continue to be that. We built our strategy on three pillars: we believe our existing business will continue to flourish and want to keep developing our branches. Secondly, we want scale, meaning we are improving our systems and processes and building the technical foundation to become an open provider around asset and wealth services.

«Every extra basis point is one more than today»

We call the third part «Move» and it is to capture new business opportunities. The new division client solutions and the ecosystem that it is attached to, «Orbit» an open platform for private market investments, is an example. It will go live this summer.

You want to create a so-called open wealth service platform which will also include third-party services – a low-margin business. Does that make sense given margins in private banking where margins are eroding as it is?

Yes. We're not giving up our existing business with wealthy private clients, either directly or through intermediaries. We're expanding our offering through a platform and aim for services to clients that aren't booked with us. Every extra basis point that we can earn is one more than we're earning today.

How will that work specifically?

We can win a multiplier effect from our strong intermediaries business in that an extensive, open offering is more interesting and also offer services to clients who don't have an account or custody relationship with us. We can expand the market we're addressing without significant acquisition costs in this way.

«The change can mean more time and effort»

I believe that with this vision of an open wealth provider, we can take an internationally pioneering role.

We hear that a tighter risk management regime led VP Bank to let go of some client relationships and intermediaries. Why exactly?

Yes, under the leadership of a new chief risk officer we updated our risk management's processes, governance, and rules. On one hand to set these areas up more solidly after strong growth in recent years, but also to lay a stable foundation for further strategic growth. That also includes redefining our target markets over the past year into core, other, or inactive.

Are client advisers upset about the higher administrative burden attached to this?

We need to get away from viewing a deeper understanding or our client relationships as an administrative burden. It's the core understanding of our business. We made a modern workplace available to our advisers at the beginning of this year with the introduction of an «RM cockpit» which among other things shows pending items in each client book. Switching over to a new method of working can in some cases lead to more time and effort for advisers.

The credit case at VP Bank last year and Archegos this year at both Swiss majors illustrates that a single client relationship gone wrong can wreak havoc on an entire year. What this a wake-up call to improve risk management?

I don't think we can compare these two cases, but in any event, I didn't need a wake-up call to be convinced we need robust risk and credit management. And this happened before we embarked on the new strategy cycle.

«Tokenization is a client demand in Liechtenstein»

I don't want to deny that the credit case was substantial and painful for VP Bank last year. That's why I had the episode thoroughly investigated externally, and too the necessary business and personnel decisions as a result.

You plan an offering with tokenized assets. Where does that stand right now?

We're in a pilot phase of digitizing assets. A client asked us if we could digitize an artwork. It sounds simple but includes complex aspects like technology, compliance, and operational questions. We worked with an outside partner and will probably by autumn be able to offer tokenization of artworks.

NFTs are a huge trend – one that clients are willing to wait for VP Bank with?

Liechtenstein as a center has two advantages: it is home to many foundations whose assets are partly non-bankable. There is a desire to digitize them, mainly in order to make them part of reporting. Secondly, the regulatory and legal framework in Liechtenstein with the blockchain law since 2020 is a competitive advantage.

The strategic transformation also costs money – at the same time, you cannot exceed a cost-income ratio of 70 percent. What's revenue doing?

The strategy process is carefully designed and well-supported, also in terms of financial planning. We're not planning a «hockey stick,» but are successively expanding our business, including our existing private banking and intermediaries business in each branch. In Asia, for example, with new, experienced leadership in Pamela Hsu Phua, we've lain the groundwork for our entire Asian activities.

«Markets are with us»

We also see a lot of growth potential from our cooperation with Hywin Wealth. The advantage of VP Bank is that compared to some competitors, we hardly have an inherent conflict of interest in terms of working with intermediaries. This business is responsible for about 50 percent of our business and so in terms of investments, it's balanced with our private client business.

In other words, VP Bank's profits rose in the first six months?

I can't issue any statements before our first-half results are disclosed but the fact is our business activity satisfies me, we are consistently working towards our strategic milestones, and markets are helping us too.

Paul Arni took over as CEO of Liechtenstein's VP Bank in autumn 2019. The 56-year-old Swiss banker began his career at UBS, then Credit Suisse. He later oversaw Julius Baer's clients in the Zurich area. Before VP Bank, he managed Deutsche Bank's wealth management arm in Switzerland.