After years of success, Zurich-based investment house Vontobel appears poorly positioned to navigate the financial markets successfully. An urgently needed course correction isn't discernible. What now?

No amount of sugarcoating will help. Zurich-based Vontobel suffered significant client outflows through the first nine months of the year, according to figures published Tuesday, where the Asset Management unit saw 5.4 billion leave.

It's clear that Vontobel's positioning as an active investment manager with its high-conviction investment strategy hasn't paid off recently and is unlikely for the foreseeable future. There is no end in sight to the restraint among investors.

Complex Development at an Inopportune Time

This was confirmed by Vontobel Chief Financial Officer (CFO) Thomas Heinzl on a Tuesday media call. Risk-averse investors will continue holding back until there are signs that interest rates have peaked. Until then, money will mainly flow into passively managed financial products, Heinzl explained, which isn't Vontobel's model.

It comes at an inopportune time, especially since Christel Rendu de Lint, one of the co-CEOs recently appointed to succeed Zeno Staub, is responsible for the company's entire investment management. Based on communication from within Vontobel, including the family shareholders, there's unlikely to be a strategy change in the foreseeable future.

Difficult Situation for Vontobel's Chairman

Vontobel will have to accept a prolonged lean period in Asset Management because, without noticeable adjustments in this division and continued volatility in the financial markets, nothing will change the company's difficult situation.

One wonders how long the Chairman of the Board of Directors, Andreas Utermann, an experienced asset manager, will wait before taking direct action. He's unlikely to stand idly by and watch asset management languish. At the same time, he must not overstretch his operational influence.

Three-Year Business Plans

The other designated co-CEO, Georg Schubiger, must also exercise patience. His Wealth Management division acquired 3 billion francs of new money through the first nine months of the year. To be sure, other wealth managers did as well, but in some cases, even more so.

The impact of Credit Suisse shouldn't be overstated, even if there's talk in the industry about who is moving to where. Vontobel, too, will have hired over 50 additional client advisors by the end of the year.

It will certainly take some time before these people are profitable on the bottom line, as CFO Heinzl emphasized on Tuesday morning. The «business cases of the individual relationship managers, who are currently transferring to Vontobel and will do so in the new year, are designed for three years.

Bonanza Meets Disillusionment

Of planned hires, 22 have already started work, with others joining in the coming months. It will be some time before they transfer their client assets, in whole or in part, to their new employer. In this respect, Schubiger must also prepare himself for a lean period.

The frantic hunt for Credit Suisse and UBS advisors and their client funds is proving to be a sobering affair, which requires staying power. Not all financial institutions possess this quality in these currently rather challenging times.