Doris dreams of Pan-European sales network

Yuri Bender goes to Milan to find Mediolanum boss Ennio Doris making plans to spread his company’s philosophy into every part of Europe.

Ennio Doris is a very persuasive man. Back in 1981, he convinced an up-and-coming young businessman called Silvio Berlusconi to take a 50 per cent share in his new financial services direct sales venture. Friends of Mr Berlusconi, now one of Europe’s most controversial political leaders, say the deal sealed over coffee in the seaside resort of Portofino for the equivalent of E250,000 is the best investment the Italian premier ever made. Now, 63-year old Mr Doris, the Milan-based multi-channel bank’s charismatic founder and chief executive, wants to persuade the rest of Europe to adopt the Mediolanum model. The business which Mr Berlusconi bought into is one that combines private banking levels of service with commission-led reward structures more common to retail distribution. It allows customers to access investments through television, telephone or the internet. One of Mediolanum’s army of 5000 tied salesmen is also assigned for home visits to each family. These advisers are taught an “anti-seismic” approach, says Mr Doris, which entails responding correctly to the shocks and jolts of tumultuous times. He credits this approach for a 15 per cent growth in managed assets to E21bn against the market slump of 2002. Special programme Mr Doris recalls watching the tragic events of September 11, 2001 unfold on Italian television. “I immediately sent a text message to all our advisers, saying that four hours later, there would be a special programme dedicated to New York with advice to our customers,” he says. His subsequent presidential-style broadcast over Mediolanum’s corporate TV network instructed advisers to get out and see all the bank’s clients, tell them to sit tight and keep their assets invested in the group’s products. The result was that many even committed new money to Mediolanum, while competitor banks were suffering huge fund outflows. Clients are generally steered towards diversified fund-based single or multi-manager products. Management of a specially-created Dublin-registered fund range has been outsourced to US managers State Street Global Advisors (E4bn), SEI (E2bn) and Northern Trust (E500m). Management fees on all these funds have recently been hiked by 10 basis points in order to boost profits. There has also been creative “modification of performance fee calculations” in favour of Mediolanum. Partners are never allowed to overstep the mark and intrude into the customer service sphere. It is a classic separation between fund manufacturing and distribution. “It is dangerous for people to do things of which they have no experience,” explains Mr Doris. “For this reason, we have partners in managing assets, but don’t like to have partners in distribution.” He stresses the power that comes with captive distribution is fundamental to Mediolanum’s strength. “Liaison with customers has to be 100 per cent ours. Management of sub-products can be outsourced. But a direct link can never be outsourced. “We could have significantly reduced our investment in Germany by outsourcing our call centre,” says Mr Doris. “But we did not want to do this. We need to control the relationship and drive it. We need to know customers and what they need in order to increase their loyalty.” He says investments in new ventures are the reason for the 26 per cent fall in consolidated profits to E50m for the first nine months of 2002. International growth Whereas 90 per cent of assets under management currently comes from the Italian market, Mr Doris is aiming for a 50/50 domestic/foreign split within six years, with international growth soon expected to eclipse Italian ambitions. Following Mediolanum’s purchase of Gamex, a German firm of independent financial advisers (IFAs) in 2001, the salesmen are being gradually re-trained for wearing the Mediolanum badge. The operation will run side by side with Mediolanum’s German “virtual bank” subsidiary, Bankhaus Agust Lenz. “Long term, our German strategy will be represented by full-time agents who work only for us, as in Italy,” says Mr Doris. Spain, where Mediolanum acquired Fibanc in July 2000, is even more of a challenge than Germany, he believes, due to the lack of front-end loaded mutual funds suited to broker sales. “People said it would be impossible to re-create our model in Spain, as the Spanish banks are more aggressive in their own territory than Italian banks. But we knew these difficulties and were prepared to face them.” Mr Doris is believed to be examining some small French companies, and Poland is also on his radar. “We want to impose our own model and for this reason, we have to change the companies which we buy. It is more difficult to change big companies. If possible, we would go for an empty box, just to get a licence.” A move into purer private banking is also crucial to the global expansion strategy. Over E400m of group money has been pumped into the new operations for higher net worth individuals, Banca Esperia and Mediolanum Private. Mediolanum Private is devoted to foreigners with at least E350,000 to invest. Banca Esperia, a joint venture with Mediobanca, is aimed at wealthier investors, predominantly Italians, with assets of over E5m. Mr Doris hopes to benefit from the money flowing back after Mr Berlusconi’s latest Italian tax amnesty. “This is aimed at customers who would otherwise go to Switzerland or Monte Carlo,” he confesses. But as the relationship with Mr Berlusconi comes under increasing scrutiny, Mr Doris admits this particular political connection is at times more of a hindrance than a help. “It is true that today’s situation can cause some problems for us,” says Mr Doris, referring to the large stake still held by Finninvest, Mr Berlusconi’s holding company. “Some potential customers refuse to become our clients. But it can also work in our favour, as others accept our propositions more readily.” He denies that Mediolanum exited institutional business – including a highly publicised private equity joint venture with State Street – due to any conflicts of interest. “We realised this business was not gratifying and decided to withdraw. There were no political reasons for changing direction. Institutional business is not rewarding in terms of profits.” This is the key difference between Mr Doris and other leaders in Italian business, according to Mediolanum watchers. “Doris has less than 1 per cent market share, because his model does not allow for physical outlets, but he always makes money,” claims one seasoned observer. “The big Italian banks such as Intesa BCI and SanPaolo IMI are looking for social and political power. Ennio Doris is just looking for return on equity. That’s why he has to go abroad. Unlike the competition, he is a real entrepreneur.”

Ranking for Italian mutual fund net inflows Cumulative 2001/2002 1 - Gruppo Mediolanum - E2,889.4m 2 - Gruppo Credem - E1,936.0m 3 - Gruppo B. Pop. Milano - E1,401.6m 4 - Gruppo B. Pop. Novara - E945.6m 5 - Gruppo RAS - E656.6m 6 - Gruppo Generali - E623.5m 7 - Bancoposta - E592.7m 8 - Gruppo Eptaconsors - E576.0m 9 - Azimut (2001) - E223.5m 10 - Gruppo BNL - E132.1m

The birth of a salesman Mr Doris, who hails from the village of Tombolo, close to Padova in Italy’s Veneto region, spent his early years working in a local bank, Banca Antoniana. Then one of the bank’s directors offered him a job with an engineering firm. “As general manager of a firm at the age of 28, I thought my career was in good shape, until one day I had a meeting with the boss,” remembers Mr Doris. “We had to go to Padova to the headquarters of the bank in his car, a huge Citröen Palace. “When I got in the car, I made a comparison between his luxury Citröen and my small Fiat. I was sitting behind my boss, who was driving. As the back seats are lower than the front, he appeared to be sitting in a throne. I thought: ‘This is the kind of car I want to have. He is driving my car and my life.’ I wanted to drive my own life. “Six months later, an old friend from school suggested we become advisers in the life assurance sector. I agreed to be paid by commission, rather than a salary, and I never looked back.”