‘We emerged stronger than many of our competitors’: Bank of the West on success after the financial crisis

Transcript

The wealth management industry has seen major changes in the years following the global financial crisis. Greater client expectations and regulatory constraints are changing the face of the sector. World Finance speaks to John Bahnken, Senior Executive Vice President at Bank of the West, to discuss how the institution has coped with economic changes and increasing regulatory measures.

World Finance: Well John, the private banking sector has changed considerably over the last few years. For one thing, it’s under far greater scrutiny. So what’s the market like now?

John Bahnken: The market does continue to be under great scrutiny, but really that’s no different than what it’s been in years past within the wealth management business. I think the much greater area of change that we’re seeing is in client behaviour. So since the financial crisis, there is no doubt that clients have become much more conservative in both their investments and the leverage that they use, and as part of that what you’re also seeing is that investment expectations tend to have come in quite a bit from where they were. So people are much more willing to trade off risk and returns with volatility in the market.

[T]here is no doubt that clients have become much more conservative in both their investments and the leverage that they use

World Finance: How is regulation changing wealth management and how have you adapted to this?

John Bahnken: I think regulation has changed in general, the banking industry in the US. There clearly has been some level of change that’s taken place within the wealth management business. I think in many respects, however, the greater change has taken place in the consumer banking business. In the US, consumer banking protection has become great and has had a very very significant impact on the overall offering of products and services, whether it’s everything from debit and credit cards, to mortgage lending, to the kinds of investments that individuals make regardless of their wealth levels. Specifically within the wealth management area, I think the changes have been a little bit more subtle, the changes are much more about transparency and simplicity in the products that are offered, a lot more around disclosure, pricing, things like that.

World Finance: The United States’ wealth management industry is quite different to that of the one in Europe. So what challenges do you face in the United States?

John Bahnken: I think it’s a combination of changes and opportunities. You’re right, the wealth management business is quite different in the US, a lot of that is history. I think probably the area of greatest change is the acceptance of universal banking. So how banking and investing comes together is much more obvious I think to clients here in Europe than it is in the United States, but that’s changing and I think it’s changing for the better. Being able to serve clients for all aspects of their financial lives is becoming a very appealing offer to clients. I think another area of change that’s taken place and difference, is the difference in investing characteristics and behaviour. So here in Europe, I think global investing has been a phenomenon for a much longer period of time. In the United States, just given the pure size and scope of the country, people have focused a lot more historically on domestic US investing, but that’s changing also and people do now want exposure in other parts of the world. I think those are probably two of the bigger changes, or differences that we see.

World Finance: And how do you manage risk?

John Bahnken: We’ve actually always been a fairly conservative banking organisation, and I think you could see that coming out of the financial crisis, where we emerged stronger than many of our competitors, and I think that’s something that our clients like about us. But the reality is that we’re not a cookie-cutter type of a risk manager, so our business is all about understanding our clients’ long, deep relationships, and then being able to tailor solutions for them, but also solutions that meet our needs as well, so it’s sort of a mutually beneficial type relationship that we find works best for us.

World Finance: What do you see as the top trends in wealth management for 2014?

I think we’re very very well positioned

John Bahnken: I think there are probably three that come to mind off the top of my head. First is this move to universal banking, being able to serve all facets of an individual’s financial lives. Very very important trend, and big opportunity, and what’s remarkable is there are still many organisations within the United States, wealth managers that have been very slow to embrace it. But being able to do that well is important, it is a big opportunity. The second is this continued conservatism that we’re seeing around the world. So we’re now five or six years since the financial crisis, but investors have been very very slow to come back and take greater risk within their portfolios. Again, whether that’s the investments that they make or whether that is the kind of leverage that they use, they’ve been very very slow to do that. So I believe that that might be more of a secular change that’s taken place within the business rather than purely cycles that we roll through. And then the final piece, and it’s important for a company such as BNP Paribas and a very important trend, and that is global investing. Being able to invest round the world is a very very important trend historically. Americans have been focused on the US and the ability now to focus more on Asia and Europe, and whether it’s developed markets, emerging markets, frontier markets, being able to pull all of that together is of increasing interest to American investors.

World Finance: Well then, finally, how is Bank of the West set up to capitalise on these trends?

John Bahnken: I think we’re very very well positioned. We’re very excited to be part of the BNP Paribas Group. We work very closely with our teammates round the world, in Asia, and in Europe. And one of the key things that we’re able to do, which we find resonates very strongly with our clients is, we’re able to bring to them insights from people on the ground in Asia, in Europe, and in the United States for other parts of the world. Many organisations are a little bit more limited in the way that they can deliver investment insights, where they bring insights from New York, or London, or Hong Kong or place like that. One of the advantages that we can offer clients is that we have people on the ground in all the major economies round the world, and we find our clients value that very very significantly.

World Finance: John, thank you.

John Bahnken: Thank you very much.