He built Julius Baer to the largest Swiss private bank and his vision for Switzerland is a blueprint for the industry. But Boris Collardi's body of work is under attack.
For the second time in short order, Julius Baer has Swiss financial regulator Finma on its case: the wealth manager is at the center of an enforcement proceeding for failing to prevent money laundering during the tenure of former CEO Boris Collardi.
The case fits a pattern: the 130-year old private bank took and transferred money of suspicious provenance from from wealthy South Americans. Internal controls failed, and compliance overseers either looked away or were apparently overruled by top management. Anti-money laundering officials never learned of money flows which warranted notification, and Julius Baer's board was idle.
Cost of Doing Business
These unseemly events can't be chalked up as accidents; the bank shouldn't be let off the hook with explanations of organizational lapses, poor controls, or a misguided incentive system in relation to its heady growth.
Instead, the serial money laundering offenses represent collateral damage from a carefully-weighed risk strategy which took into account the possibility of being sanctioned. As in the Volkswagen scandal where top management crossed the lines of legality in favor of faster growth and higher profits, Julius Baer's board in 2009 knowingly chose a CEO who was apparently willing to take on more risk in search of payoffs.
Plaudits for Paciness
Before he became CEO of Julius Baer, the native of Nyon, Switzerland had hardly stood out. Upon taking over, he embarked on a furious series of deals. Collardi became known for «pacey banking,» his frequent dealmaking and aggressive style widely applauded.
The largest were ING's Swiss private bank, Merrill Lynch's international wealth activities, Commerzbank in Luxembourg, Bank Leumi's assets in Switzerland, and a big stake in Italian asset manager Kairos.
No Sleepless Nights
At 35, far younger than his CEO peers, Collardi fulfilled expectations for both growth as well as internationalizing Julius Baer. From 2012 on, Collardi had in Daniel Sauter a chairman who didn't suffer sleepness nights from risk, but understood little of wealth management – the CEO had free rein.
As a result, Collardi grew in stature and became a widely-respected voice in Switzerland's financial center. From 2012, be presided the Association of Swiss Asset and Wealth Management Banks, sat on the board of the Swiss Finance Institute, and since 2018 is a director of the Swiss Bankers Association.
Brash Export Industry
Collardi's strategy and style spread among Swiss private banks: firms positioned themselves as «active consolidators,» in his vernacular, splashing out on businesses and teams at home and abroad. His vision, summarized in 2017 as Swiss banking as an export industry (competitive regulation, sustainable investments, and a clean image) is still considered the post-secrecy blueprint.
At 43, Collardi was at the pinnacle of his career: after building Julius Baer into Switzerland's largest purely wealth-focused lender, he defected for a partnership at Pictet. The 215-year-old blue-blood Genevan private bank recognized in the dynamic Swiss private banker's strengths a potential solution to many of its problems (sluggish wealth management growth, weak international presence).
Net Profit at Crisis Level
Two years later, the weaknesses of Collardi's blueprint and style have manifested in an ugly and damaging way at Julius Baer. The missteps aren't his alone: the Sauter-led board and in particular the governance and risk committee which greenlighted Collardi's strategy and risk-taking share blame.
Now led by CEO Philipp Rickenbacher, the bank faces uncomfortable questions about how solid the decision to entertain such risks was in its bid to build a leading pure wealth management bank. If the bank looked in rude health when Collardi left, nearly three years on the picture is more nuanced:
Two enforcement proceedings by Finma over money laundering, strict sanctions and limitations on acquisitions, an altered strategy which no longer centers on net new money targets, and more muscle towards building controls, processes, and reputational damage management.
Fizzled Success Story
The numbers mirror this: at 465 million Swiss francs ($488 million) in profit last year, Julius Baer is about where it was in 2009 when Collardi took over. In fairness, last year's result was marred by one-time effects, including a 100 million franc write-off on asset manager Kairos. Collardi bought the stake for more than 500 million francs, but the deal never fulfilled its initial promise.
Julius Baer's share price? Ten years after the Collardi era began, the bank's stock is 12 percent higher than 2009 (by comparison, Vontobel's shares are up more than 130 percent in the same period). Collardi's success story has practically vanished in thin air over the last six months, leaving Julius Baer to clean up the wreckage.
Out of Sight
At Pictet, Collardi has kept an intensely low profile, cloaked in the safety of the seven-man partnership. The Finma enforcement proceedings raise the possibility that Collardi himself may face investigation.
The specter will cause shudders among his partners at Pictet as well as in the influential Pictet, de Saussure, and Demole families. Whether Collardi truly is the right man to lead Pictet to more wealth management growth and influence is likely to be a hot topic in the salons of Geneva.
