Erich Pfister: «We Had to Replace 20 Percent of the Client Advisers»

Erich Pfister, Falcon Private Bank

Erich Pfister, Falcon Private Bank

Erich Pfister joined Falcon Private Bank in 2014 and started restructuring the company. In an exclusive interview with finews.ch, the manager explains the reasons behind the changes that became necessary at the bank.


Mister Pfister, one and a half years ago, you said that you planned to establish Falcon as the leading Swiss private bank with access to emerging markets. Is your goal within reach?

We are at least well on our way. Since I started at the bank, we had to undertake a few changes, not least to the structures. I brought a few new people to the bank and renewed the management in Zurich, London and Singapore. We also had to replace 20 percent of our client advisers.

Sounds like Falcon was in a mess.

No doubt, it was a lot of work. The objective was to move the bank, which had a sound core, to a new level. Today, Falcon Private Bank has a stronger sales organization with better trained staff. Last year, we had all our client advisers undergo a certification procedure and improved the cooperation between the front-end and the product developers. With the result that we now are able to reach out to a much broader client base.

Have you already seen an effect on your result?

The restructuring will take at least another twelve months. We have seen a clear improvement in our activities since the beginning of this year. Taken together, we take care of 18 billion Swiss francs, 14 of which under active management.

Are you attracting new money?

We had outflows because of the process cleaning up. Falcon has committed itself to dealing with legitimate money only. Today, we have a slightly positive money flow – and we will hire further financial advisers.

You must have been very unhappy about the news making a link between Falcon and the 1MDB state fund of Malaysia involving money-laundering allegations. Do you expect an enforcement procedure against your bank in Switzerland or abroad?

I have nothing to add to our transparent communication.

As a private banker with lots of experience with customers in emerging markets, do you believe that it is pure coincidence that Swiss institutes frequently attract negative publicity in those regions?

I don't think that this is a specific problem of Swiss private banks. The awareness for such issues is rising however. The automatic exchange of customer information with those regions is becoming more likely. There's a debate taking place in Indonesia, one of our focus markets in Asia, about a far-reaching tax amnesty. This is a development which might actually benefit Swiss banking.

How?

In the tax disputes with Europe and the U.S., Swiss private banks have already extensively dealt with the issue and adapted the necessary changes. We now have the expertise to encourage customers to be transparent. And this makes us attractive.

Finma, the Swiss financial market regulator, declared the risks involved in banking in emerging markets a focal issue. The industry still has some catching up to do surely?

Finma Director Mark Branson is right to point out that compliance is a key issue for banking in emerging markets.

Why?

Evaluating the background of assets in emerging markets is a great challenge for banks. Due to the developments in those countries there are grey areas which need be looked at and documented thoroughly. We are taking the issue very seriously and put in place the necessary procedures. Of course, there are cases where a bank will be lied at and abused. It is very important to have local staff.

In Singapore, we added further Asian employees with excellent networks and who know the region inside out. All the new offshore business with Asian customers has to be approved by Febby Avianto, our Asia boss. That way we've already detected several risks at an early stage.

Falcon is also interested in markets, which aren't even emerging – for instance in Africa. You were mentioned as being interested in the Barclays business there.

Regarding Barclays, I only said at the time that we were interested in expanding in Africa. Looking at the issue today, I don't have a great appetite for the Barclays business.

But you are interested in African clients?

Definitely. In London, we added a small team from Standard Chartered, which is now primarily focused on Africa. I will present a strategy for that market to the executive board in coming weeks.

What will it say?

We need to concentrate on a few countries. Compliance and growth potential have to be kept in balance. We are interested in Kenya, South Africa – and in second place Ghana and maybe Nigeria. Our focus is to hire small teams of client advisers.

The Middle East is your gate to the African market. Recently, you received the license for the onshore sale of financial products in Dubai. What do you expect of this license?

In general, it was important to extend our presence from two representational offices in the region. The growth we would like to achieve in the Emirates, Kuwait and Saudi Arabia would otherwise not be possible. Nowadays, sending a client adviser over it isn't good enough. You need product specialists onshore, people who know how to create complex solutions for customers. For that you need a license.

The markets are in turmoil because of regional conflicts and the oil price. Is the timing right for an expansions?

The Middle East still has a great potential. The customers have the need to diversify their assets further – not least away from oil-related investments. With our offshore centers in Switzerland and Singapore provides political stability. Structures adjusted to the rules of Islam and large families are in fashion and they require a lot of know-how.

Why didn't Falcon apply for a license in Abu Dhabi? After all, the bank is being controlled by the rulers of that country. Will you do you so later?

We might do so in the medium term. The reason why we opted for Dubai was that Abu Dhabi wasn't ready in operational terms. The owner let us decide.

In Asia, you appointed Febby Avianto last year and expanded the team. How can a small player grow in a competitive market like Asia?

We are focussing on what we know better than others. We concentrate on the Muslim countries in the region – primarily Indonesia and Malaysia. Thailand and Singapore are further target markets.

Other Swiss banks are also doing business there.

We have the possibility to pair our clients with our owners because the owners are financially very strong and are looking for further investment opportunities.

With such powerful owners, Falcon would be able to participate more actively in the consolidation of the industry. Do you have such plans – not least in Switzerland?

We discussed this on the board and decided that Falcon can be a consolidator. Switzerland is an important market and should be expanded further. But our current focus is on emerging markets. We have looked at potential targets – but the portfolio has to fit our strategic markets. In the end, the owners decided.

Walter Berchtold, the former Credit Suisse top executive, might be able to help identify potential takeover targets. He joined Falcon last year as member of the board. In what areas does he help the bank?

I have experienced Walter Berchtold as a very active member of the board and a great addition to the bank. His expertise gained at a big bank is extremely valuable for instance in the evaluation of large loans we intend to add to our portfolio.


Erich Pfister, 51, is global head of private banking at Falcon Private Bank since 2014. He joined the institute under control of Abu Dhabi after years spent at Credit Suisse and its unit Clariden Leu. At the private bank he worked as head of Middle East & Asia and head of Emerging Markets.

Pfister studied law at the University of Zurich and lives in Thalwil.

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