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BNP Paribas WM’s Arnaud Tellier: “This is not a case of stop-and-go, we want to accelerate growth”

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Arnaud Tellier, a veteran of BNP Paribas and a household name in Asian private banking circles, was appointed chief executive for Asia-Pacific, BNP Paribas Wealth Management in November 2019. Tellier sat down with Asian Private Banker to discuss his vision for the business, changing client preferences, and market priorities.

Arnaud, congratulations on your recent appointment as CEO WM APAC. Why has the bank reverted to a single leadership structure?

If you look back, we have always had a single CEO, with Mignonne [Cheng, chairman of APAC, BNPP WM] and then Pierre [Vrielinck, head of strategic planning, BNPP WM]. We tried dual leadership for a month — it could have worked, I don’t think there is a reason why it wouldn’t have — but my sense and experience is that a single point of leadership is more efficient and effective for a business such as ours.

You bring to the role deep and varied experience from your time at BNP Paribas in Asia — CEO Singapore, head of investment services WM, head of Southeast Asia WM. On paper, there is probably no one else with a stronger feel for how all the pieces of the private bank — and the group — function together, and for what needs to be done to drive the business forward over the next decade. What is your vision and what is your plan?

We need to take stock of where we are today. But make no mistake, this is not a case of ‘stop and go’. We want to continue the growth trend that we have been experiencing and accelerate. The message I am spreading now is that we need to pursue and achieve sustainable and profitable growth. Scale matters — I can’t see how many small banks can operate in a profitable manner in this environment — but I am not focusing solely on AUM. We have close to US$100 billion in client AUM, having closed out 2019 with a little more than US$98 billion, and I would like to see us cross the US$100 billion mark. But you will never see me making big announcements on targets, whether in terms of AUM or hiring.

The message I am spreading now is that we need to pursue and achieve sustainable and profitable growth

We are a large organisation, we don’t just rely on a few individuals. We’ve been in Asia for a very long time — as a group we are at 160 years in China and India this year — and we take a long-term view.

Does the group’s legacy in Asia count for as much today considering the dramatic changes we are seeing — whether in terms of new sources of competition, changing client profiles and expectations, and the increasing regulatory burden?

A legacy is no guarantee for future growth, but a legacy and a history such as our own is a strong asset. I’m meeting clients who have had a relationship with us for 30 or 40 years now. That’s an important measure of the trust and loyalty of our clients. Trust, loyalty and a strong track record are crucial for us to have a strong base to keep developing our franchise. At the same time, we must increase our focus on attracting new clients and the next generation, which means we must adapt and evolve to meet new expectations.

Digitisation will play an important role in this sense and, at the global level, BNP Paribas WM continues to invest aggressively in its digital capabilities at the global level. How are these investments transforming your day-to-day business and operations in Asia?

We are moving steadily towards a data-driven approach, both in the way we manage our bankers and in the way we interact with clients. For our bankers, we have gained a better view of how they work, we can see if their clients have a suitable asset allocation, and if RMs are making the right kinds of recommendations to clients. And we are engaging our clients more effectively. No longer is it the case where we ‘spray’ our clients with recommendations.

I am excited to announce that we will launch the digital leg of our advisory service soon

Connected to this, I am excited to announce that we will launch the digital leg of our advisory service soon. It will enable us to provide tailor-made recommendations through ‘myWealth’ [BNP Paribas WM’s e-banking platform]. We have been testing the service with select clients for some months now. This is a major ‘next step’ for us.

It also speaks to a broader trend in the business, where clients are increasingly investing via managed solutions and mandates, which is conducive to top-line stability and the alignment of bank-client interests. Is this something you are keen to accelerate?

Absolutely. We have been and we remain a very good transactional bank, but we are moving towards an advisory model and mandates. Right now, mandates and funds penetration is trending towards 20% which — considering where we came from — is a sign of how clients are choosing to interact with us.

In what other ways are changing client preferences shaping your product and service offering?

We are seeing a strong trend towards private investments. Hedge funds, less so, and we typically take care of this piece via liquid solutions. We did explore ‘Cayman’ but our experience was that the demand just wasn’t there, nor was the performance when factoring in fees.

But on the private equity and private real estate sides, we have been able to expand a lot. And that includes direct opportunities, where our ultra high-net-worth clients are showing some interest. That’s a segment where they, of course, have a portfolio invested in bonds and equities, and more and more they are giving us discretionary mandates, but they are also allocating 20-30% of their assets into direct private investments — whether credit, equity, or real estate.

The Blackstone opportunity you brought to clients last year, along with a handful of other banks, created a lot of positive noise. Is your offering here dependent on what is sourced at the global level?

Not necessarily. To gain access — such as for the opportunity you just mentioned — you do need to be able to attract and negotiate with these big firms, and that means you need global scale. But we also have the capabilities to deliver local offerings. For instance, we recently launched an opportunity focused on Asia and it has proven very successful.

A number of your peers are focusing on ‘mainstreaming’ alternative assets by bringing what they would call ‘insti-quality’ offerings at low minimum entry points, typically via a fund of funds structure. Do you favour this approach?

No. In fact, we looked at the fund of funds approach but we were not convinced by the returns. We prefer to maintain a direct relationship with each opportunity that we launch with a manager. Most of the time we would set up a feeder fund, often with a minimum ticket size of US$100,000-250,000. And we allow clients who don’t want to use this structure — perhaps due to the additional costs involved — to go direct to the master fund.

We looked at the fund of funds approach but we were not convinced by the returns

In 2019, BNP Paribas upped the ante on ESG and sustainable investing. Once again, you held your flagship Sustainable Future Forum in Singapore, and the bank unveiled Craig Leeson [sustainability advocate and filmmaker] as its Global Sustainability Ambassador. At the ground level, I am seeing growing interest and sales for ‘sustainable’ product and mandates. What is the next step?

We will keep investing in and developing our ESG offering. We will soon be at the stage where our entire investments universe has a rating backed by an extremely robust methodology, which I cannot speak on too much at this stage. But sustainable investing and, indeed, philanthropy, are priorities.

We will soon be at the stage where our entire investments universe has [an ESG] rating

Turning to your regional footprint and strategy, we have spoken before about the need to address the imbalance between Hong Kong/Greater China and Singapore/Southeast Asia as revenue generators. How is the progress on this front, and what are your market-specific priorities?

We currently cover seven markets. In North Asia, Hong Kong, Taiwan, and mainland China, and in Southeast Asia, Singapore, Malaysia, Indonesia and Thailand. We also cover NRI and International, out of Hong Kong and Singapore. So as far as our regional footprint goes, we are precisely where we need to be at this stage.

In terms of market heads, we have a strong management team and we are of course always looking at opportunities to make more strategic hires, including in Greater China.

Southeast Asia is catching up … [it] grew at double digits last year while Greater China grew at single digits

Regarding the imbalance, yes, it still exists, but Southeast Asia is catching up. In fact, Southeast Asia grew at double digits last year while Greater China grew at single digits. So we will continue to invest in Southeast Asia. We have a strong leadership team in place with David Lim and Inge Kua. Indonesia is an important market for the bank as a whole, including Wealth Management. It is a market where both Inge and David have strong knowledge and depth and they are proving to be quite successful. In Thailand, we focus on the business owners at the higher end of the market and in partnership with our corporate bank. We will maintain this approach. But what I would really say is that the question of geographies is also a question about what we are doing onshore.

Is BNP Paribas a believer in ‘onshoring’ as a long-term wealth trend in Asia?

Absolutely. The local players are becoming more sophisticated and regulations are being designed to incentivise investors to keep their assets onshore. I’m not saying offshore is dead, but we are currently seeing a stronger momentum onshore. We are looking at geographies to launch in 2020 and 2021. And whereas the onshore piece was previously part of our market ‘clusters’, we have put in place a head of onshore strategy who reports to me and who will focus on our onshoring activities at our existing sites.

We are looking at geographies to launch in 2020 and 2021

Do you have a preferred mode of going onshore?

I don’t anticipate going onshore with a separate entity or JV. We will probably do this within our existing licences or within our existing sites. That’s not to say I am excluding JVs – we’ve been approached a number of times by potential partners. For Wealth Management, our preference would be to avoid any JV because we prefer to keep things centralised to maintain the highest of standards in terms of compliance, risk culture and management count.

The elephant in the room is, of course, China. What are your plans?

While China is an extremely important part of our strategy, we do see room to grow this business more. So we will keep investing in people covering China out of Hong Kong and onshore, and we will continue to monitor the evolution of the regulations and the market to develop our onshore presence. I expect China to be a core area of development in the next three years — of that, I have no doubt.

Finally, a number of your competitors are doubling down on the intermediaries segment, whether building from zero or upgrading their existing offering. Why not BNP Paribas WM?

Our aim is to have a direct relationship with our clients. I say that because we are not at all in the business of intermediaries and we are not in the business of paying intermediaries in the way we are doing business with clients. We are not even working with business introducers. In my time in the industry, I have learnt that dealing with intermediaries entails risks, you don’t always have access to the end-clients in the way you would with a direct relationship. That’s not a business we want to be in.

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