Renting high-end office space and then biding time until clients show up is not a private banking strategy, Julius Baer banker Heiko Schlag tells finews.com. The Swiss bank's top executive in Germany has his own recipe for success. 

Julius Baer is recruiting heavily in Germany. You've managed to attract high-profile private bankers over and over.

The recruitment of new relationship managers is a key element of our growth strategy. It may sound presumptuous but it is part of the DNA of Julius Baer Germany that we only want the best relationship managers. That’s why we don’t enlist external recruitment firms. I speak to the potential candidates personally. My demands on quality manifest themselves through the fact that I hire one out of 28 candidates as a relationship manager.

Do they all join you?

I’ve been with Julius Baer since 2011. In the first years, recruiting was more difficult. The typical question of a potential relationship manager at that time used to be: will Julius Baer still be active in Germany in a year’s time? Will you, Heiko Schlag, still be with Julius Baer a year from now?

Justifiably so, given the strategies of Swiss banks in Germany…

Exactly, there was so much going-in and going-out of Germany. My philosophy is the same as Julius Baer’s: we think long term and sustainably, and we simply can’t afford to hire people who don’t share those values.

Which type of private bankers correspond to your high expectations on quality?

They have to be seasoned and experienced people who can work both independently and in an entrepreneurial fashion, and at the same time function as part of a team. Divas aren’t much in demand. Relationship managers need to have a high level of social skills, who take care of and are able to safely guide customers through uncertain times.

What do you mean by entrepreneurial?

Our private bankers need to be confident of reaching pretty ambitious business plans. The reason for that is that we can’t afford to simply exchange a team of relationship managers in case of failure. Which is why I’m extremely cautious in the recruitment process. In case of doubt I say «no».

The growth of Julius Baer, the recruitment drive and the expansion of the branch network are being talked about. That should make recruitment of seasoned relationship managers easier?

Absolutely. There are two main factors in this, in the human resource jargon called «pull» and «push» factors. «Push» means that private bankers experience events at their company that make them leave. Often these are concepts or new strategies that change the way customers are being looked after. For instance a new segmentation of clients: they are being moved from one area to another, which is akin to a disloyalty program for those customers and their relationship managers. The second factor, «pull», is about how attractive a company is. There’s no reason for us to hide in Germany.

Five or six years of continuity are enough for such a change in recognition?

Franz-Josef Strauss, the former prime minister of Bavaria, once said capital had the heart of rabbit, the legs of a deer and the memory of an elephant. Which means: customers don’t like to be caught in the middle of an adviser merry-go-round, especially as we are banking with businesspeople, family offices or also churches. The relationship between client and adviser isn’t easily replaced – much like with your doctor.

You joined Julius Baer during the tenure of Boris Collardi as CEO. How have you seen the change in leadership to Bernhard Hodler?

It was absolutely seamless. Our strategy remains unchanged for the further expansion of our business.

What is Julius Baer doing differently compared with its rivals that allows you to open one branch after another in short succession – Hanover being next in the summer?

It is definitely not a case of merely piling up branches. We always say A before doing B. In other words, we don’t take the lease of a nice little tower, hire the staff and then look at how many assets under management and revenues we can win. We open a branch only when it is profitable to do so. The property developer also starts building once he’s sold 90 percent of the project.

So Hanover already is profitable, before you are opening up shop?

Last year, we hired four relationship managers from Hanover who have now built up a volume of more than 300 million euros working from our established branch in Hamburg. This is the starting base for Hanover.

Recently it was reported that you were planning to open a branch in Berlin.

I don’t confirm market rumors. But there are worse things than being brought in connection with the move of successful relationship managers.

How about growth of assets under management?

We don’t publish those figures, even if we have nothing to be ashamed of there. Since I joined Julius Baer in 2011, assets have grown by a billion euro amount every year. Since 2014, we have doubled the number of relationship managers from 40 to 80 soon.

But Julius Baer Germany is not yet profitable?

Sure it is. We have been profitable with our onshore business since 2015. The bank including the European custody business has had its first profit in the business year 2017, a low single-digit million euro amount.

Julius Baer has been a very active buyer in the current wave of consolidation in the banking industry, but not in Germany. Why not?

Consolidation is also ongoing in Germany and in the past we have looked into it intensively and considered potential takeover candidates. However, we opted for an organic growth strategy, mainly because we look at the process of merging of two business cultures with a sense of great respect. Organic growth may take more time, but the success is long-lasting – and year after year.

The German wealth management industry is highly competitive. Does this affect your pricing and hamper margins?

Not at Julius Baer. Of course, rivals are trying to gain market share through an aggressive pricing – a strategy I don’t understand. You bite the hand that feeds you. We have a clear pricing strategy and justify it with a high quality customer offering and advisory.

Heiko Schlag joined the Swiss private bank in 2011 as the head of Julius Baer Europe and head of private banking in Germany. In 2013, the 54-year-old banker integrated the Merrill Lynch's activities in Germany, and has expanded Julius Baer's German presence successively since then. He began his career at Hypovereinsbank, where he advanced to run the German bank's domestic private bank in a 20-year career.