Dexia addresses ‘false freedom’ of open architecture movement
Jouard: ‘no need for third parties’
Roxane McMeeken on why Dexia’s private banking makeover embraces expansion Eastwards as well as improved service levels with an emphasis
on financial planning, but doggedly sticks to its anti-open architecture stance.Private banking operations at Franco-Belgian financial services group Dexia are being beefed up, but a question mark hangs over whether the firm will embrace the use of external asset managers.
Speaking at PWM’s Open Architecture Forum in October, Philippe Jouard, head of private banking operations at Dexia, stuck doggedly to his firm’s official line that open architecture – selling competitors’ products – was off the agenda.
Coming from Mr Jouard, the tough talk is not altogether convincing. He has previously been on the payrolls of leading open architecture enthusiasts Credit Suisse, JPMorgan and UBS.
Away from the buzz of the conference he admitted that when he joined Dexia at the start of the year, “it was a fairly old job that we were doing”. His mandate was to modernise private banking at Dexia. Since open architecture is at the cutting edge of private banking, Dexia’s stance is raising eyebrows.
Third-party products
Mr Jouard defended the group view with the argument that “when a group like Dexia offers a wide enough range of funds of sufficient quality there is no need to sell third-party products”. Yet two of Dexia’s fixed income products were recently downgraded by the fund ratings agency Moody’s.
Dexia practices open architecture in hedge funds – the one product group it offers where it has absolutely no in-house capacity. But this represents less than 20 per cent of the company’s product offering. In the other product areas – equities, bonds, cash and property – Mr Jouard maintained that “if there are similar products offered by third parties on the market, frankly the clients don’t care.” He added that access to thousands of funds would in practice be a “nightmare, false freedom”.
Mr Jouard is nonetheless overhauling Dexia’s private bank in every other way, starting with geographical expansion. While the group is established in Belgium, France and Luxembourg, Mr Jouard plans to expand younger businesses in the UK and Eastern Europe.
In the well developed UK market the key is to bring something new, he said. “UBS came in with a specific strategy of being very tax-focused. We are testing the water to see what we can offer.”
Currently Dexia runs E1bn in assets from British clients. Mr Jouard is aiming to double this in 18 months and he is currently recruiting London-based staff. The client base was built from the recent acquisitions of local wealth managers Ely Fund Managers and Pembroke Asset Management.
In the incipient private banking markets of Eastern Europe, Mr Jouard said the idea was to be one of the first movers in potentially lucrative areas, such as Poland, Hungary and the Czech Republic. “We see wealth being created rapidly in Eastern Europe, so we offering services to new entrepreneurs, such as the structuring of assets and creating international holding companies.” There is no regional office yet, he said, but “we are building a team out of Luxembourg of people who are familiar with the area”.
Organic growth
In Belgium, where Dexia controls 15 per cent of the retail banking market, the emphasis is on building the private banking business organically. Dexia private bank currently has E4bn of Belgian assets and Mr Jouard revealed that the plan is to double this within four years.
Central to this plan will be enhancing Dexia’s service proposition. “We call ourselves a private bank, so a certain level of attention, service and tools has to be proposed to clients in order to make us stand out from an average retail bank,” said Mr Jouard.
Dexia will therefore work on its financial planning service, he revealed. “Financial planning is a term repeatedly misused. It’s more than just tax planning. This is especially so for people with E500,000 to E1m. They need serious planning, not just playing on the Nasdaq index for the fun of it.”
For these customers, who have enough money to invest seriously, but not enough to last a lifetime without careful handling, Mr Jouard is putting in place a long-term and coherent service. “Asset management must play a key part in retirement and pension planning, ensuring that our clients meet their targets year in year out.
“If over a 25-year time horizon your planning shows you need 9 per cent performance, then we’ll go for that and not 85 per cent performance, which would be far more risky.”
In its other home market, France, the Dexia Group is launching a new platform aimed at independent financial advisers. It will offer them access to funds and back office support.
At the Forum: pages 16-22
Jouard: ‘no need for third parties’
