Success in Asia is difficult for private banks to achieve, but LGT’s continued assault on these markets is paying off.
TThe major achievement for Prince Max of Liechtenstein when devising a long-term strategy for LGTthe family portfolio management company he chairs, was that its impressive long-term growth will ultimately come from clients in Asia, not Europe.
“I’m investing in Asia because we like the broader macro dynamics, with more growth,” says the friendly European royal, visibly at ease with both clients and staff in one of his offices near London’s Piccadilly Circus.
“Europe still has an incredibly rich set of competencies and traditions that it can leverage, and beautiful environments, cultural sensitivity and finesse that remain unparalleled.”
But while they boost tourism, these qualities do not translate into its main goal for its target markets: “incredible” economic growth.
“We have lived on our historical strengths for too long,” he says of Europe’s once unstoppable financial sector. “We have not been forward-looking enough to develop capabilities that will allow us to make money well into the future.”
When asked which financial centers will prove most successful in the future, Prince Max barely mentions London, Zurich and Luxembourg – the natural habitats of Europe’s blue-blooded wealthy families.
Instead, his conversations with London-based families show that many are leaving for Singapore and Dubai due to tax issues and the perception that the British authorities lack ambition and purpose.
“Reasonably liberal melting pots have always done well historically,” says the LGT chairman, given his company’s Asian trajectory. “They attract people who might score low in other jurisdictions. They go there, get together, have a good time and the food is good.”
He is also aware of the vulnerability of financial centers. “Singapore is heavily influenced by what is happening in China and globally,” he said, commenting on the Lion City, where LGT has invested heavily. “Like Liechtenstein, Singapore is a small country, highly dependent on open markets and a well-functioning economic and political system.”
Success in Asia, he said, depends on working with the next generation of investors, who participate in the ongoing transfer of assets that shape the backdrop of family businesses in the region.
“From a family governance and long-term asset allocation perspective, Asian families are looking for examples where they can potentially learn something, and we are an obvious one for them,” he says, citing his own family’s 26 successful intergenerational transfers. .
Dates and offers
2019 Acquisition of Validus Wealth in India (now LGT Wealth India)
2020 Acquisition of the asset management activities of UBS Europe SE in Austria
2021 Acquisition of Crestone Wealth Management in Australia (now LGT Crestone)
2023 Acquisition of abrdn’s discretionary fund management activities in Great Britain
Generation game
At LGT, these generational transitions were challenging. “My mother was most concerned about who I would marry, because getting the next generation right starts with who you work with,” he recalls.
His mother, from the House of Kinsky, a prominent clan of Bohemian nobles dating back to the 13th century, understood the concept of family well. Her practical approach has since inspired the LGT Next Generation Academies, where younger investors prepare for the family transition.
As the first European royal to marry a partner of predominantly African descent – Panamanian-American fashion designer Angela Brown – in 2000, Prince Max’s choice of partner caused more than a little controversy within his extended family. Although his closest relatives were convinced “with her many qualities,” not everyone in some more conservative parts of the family – which is large – “applauded,” he recalls.
“Values play a key role in choosing the right person to form your family with,” he says. “My mother’s primary concern was of a very rational nature.”
A rational approach was also crucial in determining LGT’s change in direction. “We clearly felt we were a bit underperforming,” he says, discussing the dramatic change in strategy that has seen assets under management triple to more than SFr356 billion ($410 billion) over the past decade.
“Private banking had become fragmented. It was clear that it would consolidate further and even more clear that being too small could endanger your existence,” says Prince Max, who shares his family’s business philosophy.
“We saw the urgency to grow and believed that if you do it right, it will translate into a more robust, better quality business that will deliver good rewards for all stakeholders. We wanted to do this right,” he says with a touch of understatement.
This meant that we had to look much further than the bank’s home market. “We had to grow internationally and what we have done well is the geographical dimension, which pushes hard into Asia, our fastest growing area.”
China, Asia’s main growth engine, has many challenges to overcome. “The centralization of power has not resulted in better decision-making over the past seven to eight years, and changes in the overall system of governance have not been good for supporting entrepreneurial activity,” reflects Prince Max. “We are seeing some great successes in China. But overall the dynamic was very, very difficult.”
But unlike many family businesses that have withdrawn from China, he sees positive reasons to support Beijing in the long term. “China is being rewarded for its foresight to achieve a broad clean energy transformation, recognizing that electrification will be a crucial element” of a “long-term” and “intelligent” industrial policy. It is expected that family offices will return once they see governance concerns, which have increased over the past decade, being addressed and reversed.
Strategic calls
LGT’s story around geographical reorientation goes back twenty years, with a major strategic decision to withdraw from a German market that was once central to its growth plan and increasingly embroiled in burdensome, complex and expensive regulatory burdens.
He vividly describes how, after the 2008 global financial crisis, German business found itself caught between two forces: the rising costs of infrastructure, combined with the pushback on regulations against foreign private banks, hitting LGT “particularly hard.”
This headwind left the Prince with two options. “Either we buy the right company and quickly reach a much larger scale, or we divest and focus our efforts on markets where we see opportunities in a better light.”
After a planned takeover of BHF Bank fell through, he and his advisors opted for the latter. They left Germany and began a renewed assault on Asia, over a much longer time frame than rival players. “Of probably 2,000 European banks, only a handful are successful in Asia, and we are one of them,” he says proudly, demonstrating his keenly competitive nature, both on the ski slopes and on the tennis courts. LGT re-entered Germany in 2022.
The bank is now “number six” in terms of market share in Asia, says Prince Max, with this important “geographical dimension” combined with an investment call for investments in private markets.
“Private equity has generated the highest returns over the past thirty years, which has been very rewarding for all investment managers who have built a skilled presence,” he says, highlighting LGT’s diversified private equity strategies, which have assets worth have generated €60 billion. $65 billion).
This includes the €5.5 billion Lightrock fund focused on sectors and companies with a strong impact on the environment and society, which he calls “a bit of an investment management speedboat”.
In addition to investment capabilities, he emphasizes “culture,” bringing in the “right people” to identify and acquire new companies and convincing them to join a happy ship.
Most clients, who invest with different banks in the market, are starting to ask advisors with whom they want to maintain a relationship about the culture at their banks – including employee turnover, satisfaction and consistency of business strategy.
“They eat and drink and ask: ‘How do you like it at LGT? Is it better there than where you worked before?’ We built that culture, which is unique and has served us well in terms of the overall happiness of the people who work for the organization. That has been a crucial factor acquisitions and transfers well to our customers.”
Smart acquisitions have “increased scale without having to share the whims of the market,” says Ray Soudah, founder of Zurich-based strategic consultancy MilleniumAssociates. “We must hope that LGT will not grow too big and forget its unique and privileged circumstances and remain focused.”
LGT won Best Private Bank for Alternatives; Best Private Bank in Asia for the Next Generation and Best Leader in Private Banking (HSH Prins Max von und zu Liechtenstein) at the Global Private Banking Awards 2024.
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