For Bénédict Hentsch, managing partner of Geneva-based Darier Hentsch & Cie, a private bank with a 200-year history, it is all about knowing your client.
The interface with clients is everything. Our niche is to play everything to our cli-ents, as we do not have the resources to be everything to everyone.”
The bank has around Sfr35bn ($23.3bn) of assets under management and 15,000 private clients. Of the total, Sfr6bn is managed for 100 institutional clients.
His stated objective is clear and forthright: “I should be fired if we cannot double our market share by the time I retire.” The Swiss asset management market is an estimated Sfr3,000bn, so Darier Hentsch has only to increase its share to 2%. “We are just a tiny fish in a huge market.” The growth in its market will come from clients who are discontented with their current arrangements, he maintains.
“The emergence of two huge banks in Switzerland presents such an opportunity - to fill the gap created by their size, which works against providing a personal service. The key for these banks is not expertise but how to make it available for each client. Being much smaller, we can offer a direct, personal and constant dialogue with each and every one of our clients.”
Darier Hentsch has been building up its own expertise recently and has doubled the number of its re-search analysts to 20. Compared with the thousands employed on research by some banks this may not seem many, but he adds: “Re-search is not a virtual war where those with most soldiers win. If it was just a numbers game we would be out of the marketplace.”
It has developed a series of publicly traded funds, some managed in collaboration with outside expertise. There are plans for more of these. “We do not want a family of 100, just a few well brought up children.” By bringing together its re-search and institutional departments, these products can be given an institutional market focus. But the same research serves both private and institutional clients.
“Our strategy is that for each sector in which the bank has or will de-velop an expertise it will have a fund to document it, thus allowing its clients to participate in these investment fields.”
Smaller institutions and private clients can have a similar approach to investment, Hentsch believes. Today Swiss pension funds own on average 38% in equities, but most of the stocks are Swiss. The next challenge will be to help diversify from the domestic market, with the eurozone the next place they are likely to look.
“The best client relationships are those where the client trusts you to manage their money. It does not matter whether you are dealing with an individual client or a committee of investors,” says Hentsch. “So in building up a relationship with any client, I try to philosophically walk them through their attitude to what investment should be.” He has some pretty definite ideas. “We have to be careful not to manage only in relation to benchmarks and relative performance. For example, what good will it do your client to have beaten the benchmark when it is 20% negative? So on something like passive investment, I can only say that it is a very partial answer; personally I prefer an absolute return mentality to protecting the wealth of my clients.”
Hentsch sees investment choices facing clients forming concentric circles as to who invests where, with the least sophisticated starting with funds and then moving outwards to individual stocks as they become more at ease.
Obviously, private clients and in-stitutional investors may start in different circles, but the service they receive should be the same. When it comes to the size of assets that clients bring, he says: “We do not have a limit on the lower side. But we have to say to a client with $100,000 that we cannot do the same for them as for a client with $500,000 or $10m. The investment answers will not be the same, but the quality of service should be.”
Whatever the changes in the marketplace, the fundamentals of helping people to manage their money do not change. “The human element stays as an anchor,” says Hentsch. “With increased market volatility as the norm, institutions will tend to look more and more at the human component of a relationship and its stability and don’t only have a regard for performance and benchmarks. In the long run, it is a question of making your client profitable and if you do that, you will be profitable too.” Fennell Betson”
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