Former Coutts international boss Alexander Classen changed lanes last year, moving to family office Bedrock as managing partner. He tells finews.com how the European wealth manager wants to expand its 10 billion Swiss francs in assets and why the U.S. market is attractive.
Well-known veteran Swiss banker Alexander Classen made a splash when he left private banking and last year joined Bedrock, a Geneva-, Monaco- and London-based family office founded in 2004.
Bedrock has grown from a handful of employees to nearly 100 in recent years, and now manages $10 billion in assets including through its BRT tech unit.
Classen's hire is a signal that the family office is ready to expand: his last job was Chief Executive of Coutts International, and he previously worked for Goldman Sachs and Morgan Stanley.
Bedrock is a minnow in comparison to those international firms, but seeking diversification in a mix of wealth management and family office services, niche asset management, and tech expertise for other small wealth managers.
Bedrock in Zurich
The Geneva native has just opened an office in Zurich for Bedrock, on a quiet tree-lined Zurich street between the lake and the city's financial center. Several works by French street artist JR are waiting to be hung in the rooms where Classen and several new colleagues hopes to soon be welcoming ultra-wealthy families.
Classen tells finews.com he has enjoyed the move from huge multi-billion private bank within an international institute to a small boutique.
«When you’re a bank executive, you get paid in part in the stock of your firm, and it’s not always a foregone conclusion to have a significant impact – even as a senior executive. Whereas the impact here is immediate,» he says.
He tells finews.com why he is looking anew at the U.S., what Bedrock's Asian expansion plans are and what sort of acquisitions he would consider to boost the boutique wealth manager.
Alex Classen, where has Bedrock been recruiting?
Since beginning of the year, we’ve hired five relationship managers in Monaco, London, Geneva, and Zurich. We have a healthy pipeline, so I expect our recruiting efforts to carry on into 2018 and beyond. We’ve also hired a head of sales to run a four-person asset management sales team out of London, and we’ve hired for (back-office software unit) BRT.
Family office bankers are paid a share of the business they bring in. Does this make it easier to hire?
If you’re driven and have good traction on your clients, this is a very attractive proposition. You need to be very comfortable in making that switch and confident that your clients will eventually follow you.
«Of 60 applicants, I hired five people»
To hire the five we did, I saw perhaps 60 people. At the end of the day, some people fall back on a certain cushion of safety maybe they have come to appreciate too much. That’s always the tricky bit. On the other hand, there is no cap on what you can earn as a family office banker.
Bedrock has focused on organic growth. Would you consider acquisitions?
We have already looked at couple potential acquisitions for our wealth management and family office business.
«Quite a few Swiss wealth managers under 1 billion Sfr mulling an exit»
There are quite a few sub-1 billion Swiss franc (in assets under management) players in Switzerland who have either cost pressure or succession-related reasons to consider such an exit.
What sort of financial firepower do you have for deals?
We don’t give figures, but we do have the means towards an ambitious growth program for the next few years. We won’t make big acquisitions, but we have a sound growth and investment plan we can draw on.
Does Bedrock have any plans to expand outside of its four European locations?
We still have so much of a market opportunity in front of us in existing locations. That being said we will certainly keep an eye on opportunities in other regions we don’t actively cover, like Asia.
«We could open in the U.S.»
Other markets including the U.S. might come to fore. Historically Bedrock has operated under the premise that it is extremely important to find the right strategic partner and people wherever we go.
Why the U.S.?
We have a fairly significant Latin America client base. And we’re increasingly hearing about the desire to book in the U.S. and not necessarily in Switzerland. Let’s face it, we will have full transparency through the automatic exchange of information very soon.
«Why not book closer to home?»
Some clients feel it might be better booking closer to home. For example in Miami, where many Latin American clients have second home, through a U.S. custodian.
Could you envisage opening up shop in the States?
I wouldn’t exclude that over the mid- to long-term. The U.S. is an interesting market because there is a fairly vibrant family office scene there. The regulatory environment has become more conducive to firms like ourselves establishing a beachhead there.
Tell me more about Asia.
We explored some cooperation opportunities, but we’re still in a fairly early stage. Those would probably not require a local presence, at least not at first. I think priority will be given to deepening penetration in our existing locations.
How do you want to expand your asset management business?
We want to differentiate ourselves by not just delivering strongly on the core wealth management and investment management. We believe boutiques like ourselves need to develop niche strategies which will be additive to your portfolios.
Can you give me an example of a Bedrock niche?
The disintermediation of banks from lending gave rise to an attractive opportunity: the peer-to-peer lending space (P2P). We set up a fund with a company in Charlotte, N.C. It’s a low-volatility, low-correlation investment strategy which has delivered between 0.5 percent and 1 percent monthly since its launch two years ago.
«Niche strategies your private banker won't show you at a bigger bank»
The fund returned almost 9 percent last year, with quarterly liquidity. This is a niche strategy where I don’t think your relationship manager is going to show you this if you go to a bigger bank.
How do smaller players find these opportunities?
It’s tough because often smaller boutiques just don’t have resources from a research point of view to bring about the opportunities. The fact that we have such a strong investment mindset at the top of house helps a lot, because it runs down the whole organization.
«Four of five partners are from the investment side»
My four partners (Ariel Arazi, Maurice Ephrati, David Joory, and Alexandre Koifman) all come from the investment and trading side. They have proven to be excellent in spotting investment opportunities over the years, and the result is a good long-term track record.
How important are the niches for family offices today?
A good plain vanilla investment management platform is just not enough anymore – even with a very good track record. You need to offer ideas, themes, opportunities and club deals, that are really distinctive and attractive at the same time.
Let’s talk about your back-office software, BRT. What are your growth hopes there?
Until now, we had only been covering the population of wealth managers in and around Geneva and London. If I just think of the number of independent wealth managers in Zurich, there is a massive opportunity for BRT.
«We'd like to see low double-digit top-line growth annually»
The reporting tool can include financial and non-financial assets, so if you want to include your yacht, your artwork, your properties or even your operating business at a certain valuation, that’s something we can do.
What are Bedrock’s financial targets?
If I take a five-year view, we’d like to see the three businesses – wealth management, asset management and BRT – grow their yearly top-line by a low double-digit percentage.
How are you addressing the millennial question?
The reality that is emerging clearly is that roughly two-thirds of the next generation will fire the existing financial advisor of their parents. That’s a pretty significant threat! We need to actively think about how to respond to this, and make sure we can not only keep the client relationship but also cover this next generation in a satisfactory manner.
What does that entail?
The first is content. This generation almost feels guilty about inheriting the wealth. Impact investing is coming to the fore. They have a desire to invest in a purposeful and positively-impacting manner.
«What technology are we putting at the disposal of the next generation?»
We are starting to deliver this investment theme to clients who request it. We also need to look at what technology we are putting at the disposal of this next generation. We have an ongoing assessment of the technology and development needs of our platform.
