How does a Rothschild bank work
"It's not easy to be called Rothschild and get into the banking business"
For the first time, Ariane de Rothschild, the president of the private bank Edmond de Rothschild, speaks about the future of the family-run group after the unexpected death of her husband. Personnel changes take place, but the strategy remains.
The family-run private banking group Edmond de Rothschild was hit by a stroke of fate in January: Benjamin de Rothschild, the son of the company founder Edmond, died at the age of 57. It is true that he was no longer at the head of the banking group, but his wife Ariane, a former stockbroker with experience on Wall Street. Nonetheless, in the months since then, speculation about Edmond de Rothschild's future had intensified. In an interview with the NZZ, Ariane de Rothschild rejected merger and takeover rumors.
Since 2015, she has brought the parts of the family business closer together: the three banks, which were previously individually managed, asset management and activities outside the financial sector - wineries, agriculture, the hotel industry and the foundation system. IT, corporate culture and legal structures were unified under the name Edmond de Rothschild. Risk management also had to be relaunched after the group's Luxembourg arm was involved in the scandal over the Malaysian sovereign wealth fund 1MDB.
In order to complete the strategy, Rothschild is now restructuring the head of the banking group: Vincent Taupin, the CEO, is retiring in June - at his own request, as President Rothschild emphasizes. François Pauly, who has been a member of the Board of Directors since 2016, will succeed him. Pauly brings a lot of experience from Asia and Europe to the group, says Rothschild and makes it clear: "There will be no change in strategy." Cynthia Tobiano, today's CFO and Deputy CEO, will take over the management of the group's numerous holdings with Ariane de Rothschild from 2022. It will be Pauly's responsibility to find a new CFO. In addition, Yves Perrier, until recently the head of Amundi, Europe's largest asset manager, will join the board of directors. “He's a straightforward personality, challenging and direct,” says de Rothschild, and he's been a long-time companion of the family and the bank.
Edmond de Rothschild manages around CHF 175 billion in assets and is one of the medium-sized private banks. She looks after wealthy private clients as well as institutional clients (asset management). Both markets, however, are in a state of major change driven by financial, regulatory and technological changes; numerous banks find it difficult to maintain their margins. Edmond de Rothschild, who was recently taken off the stock exchange, also struggled with high costs and occasionally achieved only small profits in recent years. In an interview, Ariane de Rothschild explains the strategy in which she sees the future for her company and her family - and how she wants to carry the Rothschild myth into today's reality.
Ms. Rothschild, you are announcing a number of personnel changes at the head of your group. Are these consequences of your husband's unexpected death?
Many people wondered how the group would go on. Well, everything changes, but nothing changes in terms of group governance and strategy. The CEO change has nothing to do with Benjamin's death. The decision has been prepared for a long time and has not been taken in a hurry. When Vincent Taupin took over the job, we agreed on a limited period of time, as he always expressed the desire to retire as soon as the group's transformation bears fruit and he reaches retirement age. These two conditions have now been met.
Was François Pauly the natural choice or were there other serious candidates in or outside the bank?
A smooth transition was important to me; external candidates were out of the question. Getting an outside CEO on board in our profound transformation and presenting him with a finished strategy that has been approved by the board would, first of all, not be fair. Second, it would be very difficult to get used to it quickly enough. An outside CEO needs a few months to get to know the culture and the roots of the company.
There were merger and takeover rumors about Edmond de Rothschild. Was that never an option?
I am fascinated and somewhat perplexed by this speculation that has been going around since 2015. Well: let them speculate further. We made it clear that we have plenty of excess capital. Like any bank, we observe the market and consider where there are interesting buying opportunities - banks, asset managers, private equity. But we're getting back to culture here - it takes 7 to 8 years to instill a solid culture in a company.
They talked about the Rothschild myth - which has a lot to do with European history.
Meanwhile, a large part of the future of asset management lies in Asia, specifically: China. How do you convince the Asian billionaires of yourself?
A myth must not be misused, it must be nurtured so that it will last for generations to come. In Asia, the name Rothschild is fascinating, but we have to provide content. Many Asian customers focus on three questions. First, how did the Rothschild family survive and pass on their wealth for eight generations? Second, how does the Rothschild family invest and how can they participate? Thirdly, the younger generation wants to be successful, and at the same time do good and thus achieve an effect - this is another reason why they are interested in Rothschild.
You run a banking group and sometimes also produce good wine and cheese - how does that fit together?
A wealthy family does not put all their eggs in one basket; Just banking would be far too risky. Before 2015 we had rigid silos, with some seeing the aristocracy in the banks and a family hobby in the other activities. But it's not a hobby, it's the real economy. All of these silos - agriculture, winemaking, hotels, the real estate business - have been repositioned since 2015, some with completely new teams.
And what does your sailing team contribute?
The Gitana team shows the bankers that sport is also about performance and cutting-edge research, for example in relation to materials and flight concepts. The wineries share the values and culture of our bankers. The future of private banking goes beyond portfolio optimization: our private bank customers come to us because they have complex challenges - between generations, activities and investments. They are a reflection of what we do as a family.
If we were to say that Rothschild doesn't just offer banking services, but a lifestyle. . .
. . . then that is correct. I expect my bankers to think beyond banking. Take Asian customers who seek advice from us on which university is suitable for their children or how they can open up to other cultures.
Is your group big enough to survive? Banks have to invest a lot in technology, regulatory costs rise, margins shrink. Edmond de Rothschild attracted new money in private banking in 2020, but not in asset management.
Banking matured like other industries: mass and niche providers emerged. Both work, but you have to know which category you are in. Blackrock is huge, but a passive investor. We are neither one nor the other, we choose our battles. We focus on funds with topics in which we are well versed and have a corresponding track record. On the one hand, we are developing the illiquid part of our asset management very quickly and in a targeted manner: our platform has grown from one billion euros five years ago to 18 billion today. Second, we are building funds in selected, very technical niches on greenfield sites.
Investments related to agroforestry and the reclamation of contaminated soils, or in small and medium-sized companies in Africa. This requires very specialized teams. That is beyond the capabilities of a Blackrock. Most classic retail banks, on the other hand, are not big enough to keep up with the giants in asset management; this requires at least a trillion assets under management. She is in an uncomfortable position.
UBS competes with philanthropy, advice on art auctions or sailing excursions for rich clients in Asia. What's your comparative advantage?
It's not about Rothschild or UBS, customers in this league always have several banks. We have an advantage when customers make certain investments out of deep conviction, also because they want to change something for the better. Typical areas are agriculture or healthcare. Here we help to set up liquid or less liquid funds that reflect the convictions of our customers - including foundations. There is also a big difference between us and UBS: Your bankers don't invest their own money. Our customers want authentic behavior. As you can see, the family and I put our money into the same investments. We also have a long time horizon. That is the advantage of not being on the stock exchange. We don't think in quarters, but over generations.
They have four grown daughters. Is the next generation already working for Edmond de Rothschild?
My daughters are between 18 and 25 years old. I doubt you would send your kids into banking at that age. That would only hurt them, and regulators probably wouldn't be thrilled either. Except for the oldest, all of my daughters are at the university. Getting higher education is the most important thing at the moment. In addition, they should make their own experiences outside of the family and the company. We expect the representatives of the coming generations to also bring in their own personalities and views. One daughter is in Canada, one in the USA, one in England and one in Spain. That’s valuable. Also with a view to what they will bring to the group later.
Are you sure that your children will join the group later?
My kids noticed from a young age that my husband and I talked about business every day at home. In addition, the apple rarely falls far from the trunk. But one thing shouldn't be underestimated: It's not easy to be Rothschild and get into the banking business. People will neither welcome you nor be particularly nice to you. That is why it is so important to have a good education and a solid personality.
Did you experience that firsthand?
Absolutely, but I'm not the only one. It is the same in all family businesses. Gaining respect as a young member is a challenge. You have to make a first name, not a name. That takes a lot of strength, dedication and determination and, of course, hours of work. Otherwise you will always be the daughter or son of. . .
Is there a family council you need to convince before making any important decisions?
No. The big decisions in banking and other business are made by the board of directors. The importance of a good supervisory body for a company cannot be overestimated.
You seem to be an open person and appreciate the exchange in face-to-face conversations. Did you suffer in the pandemic?
The group switched to virtual collaboration in just two weeks. That was a year ago, though, and each of us has spent hundreds of hours on video calls since then. It's a painful experience for me. It sounds old-fashioned, but I like to meet people face-to-face in a room. Conversely, we have found that the closeness between our consultants and their clients has increased in the pandemic. That's the positive side of Zoom.
In the past there has been a dispute between two branches of the family about who can use the Rothschild name in banking. You should have solved this. How?
The two institutes now have the name Rothschild and an addition that clearly differentiates us. It is very important that we found a good solution. Confusion is unhealthy, especially in business. It harms customers and employees.
Are the members of the two branches of the family getting along?
All long-standing families have their ups and downs. But you can fight in business and still be family. We don't mix the two things.
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