Markus Werner, Head Intermediary Business, on the future challenges facing independent asset managers.

Markus Werner, in your role as Head Intermediary Business, you are responsible for the business with independent asset managers in Switzerland and Liechtenstein. How important is this business for the bank?

It has been a strategically important business area for us for 30 years and includes not only asset managers but also multi family offices, fund management companies, trust companies and law firms.

We serve our partners from our locations in Vaduz, Zurich, Geneva and Lugano and would like to expand the business in a targeted manner going forward. Alongside the continued expansion of our platforms in Switzerland and Liechtenstein, this also includes international diversification into Germany and the U.K.

The pandemic seems to be coming to an end at last. What was digital collaboration with asset managers like during this difficult phase?

It went extremely well. We were already familiar with most of the digital tools, such as MS Teams. Our newly developed online banking service for independent asset managers was fully operational when the pandemic hit, which was exceptionally helpful.

«There are very exciting new developments here»

In spring 2020, we quickly converted the processes that had previously been carried out physically to digital solutions. Thanks to agile principles, the changeover was pretty straightforward.

One big topic that is currently shaking up the industry is «open banking». How will this change the cooperation between banks and independent asset managers?

There are very exciting new developments here. Several banks, including LGT, have started to get serious about OpenWealth, including within the OpenWealth Association, where LGT is an active member. OpenWealth simplifies the use of open banking solutions, especially for asset managers.

«These standardization efforts will massively reduce development and operational expenses»

The aim is to create standardized interfaces between the bank, the various financial intermediaries and IT service providers. Asset managers can use these interfaces to obtain client data from and deliver client data to their bank, process client data automatically in their own systems, reconcile securities positions electronically, trigger transactions digitally, update client profiles and, in the medium term, even open accounts.

These standardization efforts will massively reduce development and operational expenses as well as implementation deadlines for both asset managers and custodian banks.

Open banking brings advantages, but probably also poses risks, especially in the area of data protection and cybersecurity. How do you assess the risks?

The opening-up of interfaces and the increased exchange of data definitely present both banks and asset managers with new, extremely significant challenges. For us as a partner of asset managers, the protection of client data is fundamental.

«Asset managers have attractive USPs compared to banks»

It must therefore be guaranteed by both sides that data is exchanged in accordance with the highest security standards. Relevant monitoring and security mechanisms are mandatory prerequisites for the secure operation of systems and interfaces.

What does LGT offer external asset managers in terms of open banking?

LGT already offers them electronic, bi-directional interfaces and is working to standardize additional electronic interfaces in cooperation with the OpenWealth Association, including for opening accounts, processing transactions or debiting management fees. Efforts are also underway to standardize data technology with regard to KYC issues.

Asset managers are not only partners, but also competitors of banks in the competition for end clients. How do you assess their competitive position?

Asset managers have attractive USPs compared to banks: Their flexibility, independence, individuality, client-specific expertise and very close client relationships will continue to ensure they have great opportunities in the future.

«Since the beginning of the year, we have been holding the ‹Fit for Sustainability› series»

However, to remain successful, they must use market changes, especially regulatory ones, to their advantage. In my opinion, growing customer expectations mean that further specialization will be necessary. As a result of FinSA/FinIA, asset managers will in some cases also have to examine new business models or cooperation opportunities more closely.

Another important topic for the entire industry is the area of sustainability. What does LGT offer intermediaries in this area?

For intermediaries, we will launch a comprehensive and very attractive offering this year, including services such as access to research content in the area of sustainability, the creation of transparency through the provision of sustainability ratings and analyses, knowledge transfer, and support with regulatory issues.

Since the beginning of the year, we have been holding the «Fit for Sustainability» series of events tailored to our intermediary clients, in which internal and external specialists highlight exciting topics relating to sustainability and sustainable investing. In the January event, for example, we showed how LGT will implement «net-zero» by 2030.

«The situation is challenging»

Our next event on the topic «Significant role of the financial industry for people and the environment» will be held at the end of March 2022, featuring the well-known environmental researcher from ETH Zurich, Reto Knutti.

Regulatory pressure, increasing importance of sustainability, generational change: In light of these developments, what do you expect for the asset management industry as a whole?

The situation is challenging. This is due not only to regulation and the associated costs. Client needs are also on the rise, and we are finding that clients are becoming increasingly price-sensitive. Margins are under pressure. In this context, the structure of the industry naturally also plays a role: About half of the independent asset managers consist of firms with four or fewer employees.

Asset managers will define their business models more specifically to cope with future client needs and increasing complexity. The outsourcing of services or mergers into operational service centers present interesting options for controlling the cost structure.

«We see this development as a great opportunity for LGT»

Nevertheless, the market has great growth potential. For example, the Boston Consulting Group expects global growth in wealth management of 3.2 percent over the next 5 years. In the area of independent asset managers, growth is likely to be even somewhat higher.

We see this development as a great opportunity for LGT and plan to make further investments in improving our offering for our partners. With the expansion of our Active Advisory offering, new digital services, an extension of our sustainability offering, and access to our private market offerings, we aim to help asset managers serve their clients even better.

Markus Werner has been a member of the Executive Board of LGT Bank since 2011 and Head Intermediary Business of the banks in Switzerland and Liechtenstein since 2018. He has been with LGT Bank since 1996, and is a Swiss certified banking expert and a Swiss certified finance and investment expert AZEK.