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"Old school": back in the limelight.


The Swiss financial centre is at a turning point as a result of discussions relating to the exchange of tax information. Moreover, wealth managers--and the banking industry--are faced with a credibility gap. Swiss News sat down with Pascal Imboden, head of Portfolio Management at the VP Bank Group, to discuss the future of wealth management in Switzerland, lessons learned from the financial crisis, and the opportunities at hand.

Swiss News: Mr. Imboden, let's cut to the chase. These days, why should a non-Swiss have his or her wealth managed by a Swiss bank?

Pascal Imboden: If you're referring to the tax issue, Switzerland has clearly avowed international cooperation and is pursuing it resolutely. As soon as legal certainty has been re-established, the public will quickly return to talking about the genuine strengths of Swiss wealth management.

Which are ...?

Switzerland offers an unusual breadth of competency, affords access to all financial markets and products, and has a long history of experience in wealth management. Clients of Swiss wealth managers appreciate the proximity of their relationship with them, as well as a degree of service quality that stands out internationally. That includes the multilingualism with which most Swiss grow up. As residents of a small country, we are accustomed to international competition. And in addition to the strong capital backing of Swiss financial institutions are the country's stable political and legal system, independent monetary policy and staunch protection of privacy.

You mention the legal system and privacy protection. Aren't those precisely the points that have become a burden to the Swiss financial centre in the eyes of the broad public?

The current discussion on the exchange of tax information unfortunately gives rise to uncertainties that have to be eliminated as soon as possible. Not to be overlooked, however, is just how individual client needs actually are. For example: there are still regions in which democracy, a stable legal system and the effective protection of personal property are not matters of course. When speaking with clients from those regions, the current tax debate is not a central topic. They look at Switzerland as a bastion of stability.

The financial market crisis has shown that even banks are not able to predict a crisis. Moreover, many expensive financial products failed to deliver as promised. So as a wealth manager, and totally apart from the tax issue, don't you have a credibility problem for those reasons?

Without a doubt, mistakes were made. In certain instances, explicit or implicit yield promises were voiced or clients were not sufficiently informed about related risks. The credibility of the entire industry has suffered as a result. However, those who understand wealth management in the traditional sense--as a partnership oriented towards the long term--will come away strengthened from this crisis.

By referring to a long-term oriented partnership, you're using an elegant but vague catchphrase. What do you mean in concrete terms?

In a wealth management relationship, the client delegates the investment decision-making capacity to a specialist. That delegation is based on trust. And trust is engendered by my ability as a wealth manager to listen to clients carefully and grasp their fundamental situation so they feel understood in terms of their needs and expectations of us as caretakers of their wealth. That involves not only emphasising one's competencies and strengths, but also making it clear what the wealth manager cannot or will not do, as well as disclosing any existing or potential conflicts of interest. Finally, one should only promise what one can deliver. If the dialogue centres solely on the expected return, caution is called for. Of at least equal importance in a long-term partnership is to have a clear understanding of the wealth manager's investment philosophy and investment processes.

But often, more is promised than can be delivered over the long term. How can a client differentiate a good wealth manager from a bad one?

As a client, I would focus on concrete points during an initial conversation: Does the wealth manager communicate transparently? Does he or she provide added information when I dig deeper? How are my expectations being steered? Do I get the feeling that first and foremost a product is being sold, or are my needs being identified and understood? Those things alone do not make for a "good" wealth manager, but they can be used to separate the wheat from the chaff.

What constitutes successful portfolio management?

Of central importance are clearly defined processes and responsibilities. Nobody has a magic crystal ball to predict the future of financial markets. Thus, wealth managers should focus on investing in an efficient and broadly diversified manner in keeping with the client's needs. A portfolio management mandate is the wrong vessel to use in panning for "hot stocks".

But hasn't the recent past clearly demonstrated the limitations of diversification?

The concept of diversification--an intentional spreading of risk in order to minimise potential losses--has by no means failed. However, one must be aware of its limitations. In wealth management, an adequate response is to adjust the weightings of various asset classes to the given situation. Nonetheless, in times of crisis the correlation between individual asset classes increases, causing diversification to function less beneficially. But that is no new discovery. And, not all investment classes suffered during the latest crisis: for example, government bonds. However, in the years leading up to the crisis many investors shied away from sovereign debt--with the excuse the returns were too modest. In the meantime, they would have been happy had they held government bonds in their portfolio.

You emphasise values and talk about "old school" wealth management. Does that mean there have been no enduring innovations from recent years?

I see the great innovations mainly at the level of actual implementation. Over the past years, Swiss banks have invested massive amounts in IT infrastructure. Today, portfolio managers have extremely efficient instruments for the analysis and assessment of market information. In addition, modern portfolio management systems enable individually tailored wealth management solutions to be devised in combination with cutting-edge risk controls.

To conclude, I'd like to come back to my original question. Why should people have their assets managed in Switzerland?

Three specific factors: First, Switzerland has tremendous location-specific advantages. Second, the current financial market crisis has brought to light the advantages of "old school" wealth management as practised in Switzerland. And third, for years now Swiss banks have been investing in infrastructure and human capital, thereby allowing them to offer tailor-made solutions to the most demanding clientele.


About the company

VP Bank was founded in 1956 and, with 823 employees, is one of the largest banks in Liechtenstein. It has offices in Vaduz, Zurich, Luxembourg, Tortola (British Virgin Islands), Singapore, Munich, Hong Kong, Dubai and Moscow. The VP Bank Group offers tailored asset management and investment advisory services for private clients and intermediaries. The open structure enables clients to benefit from independent advice: products and services both from leading financial institutions and the bank's own investment solutions are included in the recommendations. VP Bank has been rated "A-" by Standard & Poor's. More information at:

About Pascal Imboden

Pascal Imboden is head of Portfolio Management at the VP Bank Group. Together with his team, he bears responsibility for the performance of portfolio management mandates and strategy funds.
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Title Annotation:INTERVIEW
Publication:Swiss News
Article Type:Interview
Date:Nov 1, 2009
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