CaixaBank’s private banking leader, Victor Allende, has lost none of his ebullience during the restricting times of the Covid-19 pandemic, which hit his Spanish homeland hard in its early days. Yet he is becoming more thoughtful, if not slightly more introverted, as a result of this latest crisis.
“All our private banking centres are open and our clients are asking for physical meetings in addition to digital contact. They want to see us in person,” says the bearded banking boss.
Further reading
The issue for Mr Allende is that his leadership role, for which he has been widely praised across the private banking community, is changing beyond recognition.
“I previously thought that my job had everything to do with visiting our bankers in the branches, encouraging them personally and explaining things,” says a smiling Mr Allende, his eyes shining across the Zoom link.
Arm's length
But now he is more frequently found in his Barcelona headquarters – and occasionally the satellite office in downtown Madrid – plotting the new strategy for Caixa’s growing private banking presence.
“I have realised, I need to let them do their own thing. I have pretty much changed the balance of how much time I spend in their branches, but it has not been easy for me. Everything has changed, a lot.”
For the first month of the lockdown, Mr Allende found himself in twice daily video meetings with his advisers, but that timetable has since been reduced to a couple of virtual meetings a week. He faces the inevitable future with a fateful shrug, recognising there may not be any going back to his exuberant tours of the private banking outposts.
Early mover
This is by no means the first transformation he has masterminded. His private banking unit spearheaded the digitalisation for which Spanish banking has become famous, in an innovative milieu populated by high-tech rivals including BBVA and Santander. CaixaBank was one of the early movers back in 2015, introducing an advanced digital platform to facilitate the acquisitions of Portugal’s BPI and a string of Spanish purchases including Barclays, as the country’s bloated banking sector was slimmed down.
This consolidation continues with the addition of Bankia’s business, leaving Mr Allende responsible for €73bn ($86bn) in assets for 65,000 clients. Having introduced the Linea Abierta (‘Open Line’) digital service, followed by a virtual ‘wall’ where consultants and clients meet, he has more recently concentrated on developing the ‘Ocean’ mutual fund sales portal.
Today’s main challenge is to further boost fee-generating activities. “Charging fees is crucial to our profitability,” stresses Mr Allende, adding a hint of steel to his customary affability. “Our approach is to move from a non-fee to an absolutely fee-based approach. We have adapted quickly in the last three or four years and are in the middle of that change.”
With the figures at his fingertips, Mr Allende laments that while 55 per cent of his private clients pay for some kind of discretionary portfolio management arrangement, only 22 per cent of total AuMs are invested in discretionary portfolios. “So you can see, we have come a long way, but we still have a very long way to go,” he adds.
Although many of these clients are using DIY trading tools, they are expected to eventually seek a deeper relationship. “In the next five to seven years, a big percentage of our clients will want to do some things by themselves, so we will offer them the best execution-only facilities with ocean as our third party mutual funds platform,” he says. “But then the next day they might need advice, so we must create a holistic platform for them.”
ESG expertise
This emphasis on investments shows Mr Allende sees the successful private bank of the 2020s predominantly as a portfolio manager, with products typically incorporating environmental, social and governance (ESG) strategies, often required by changing regulations. “Within the next three or four years, everything in the asset management business will be ESG,” he emphasises. “Everything.”
“If you are not open to social sensitivities, you will simply be put out of business,” he suggests. “There is no queue on the street of clients asking us for ESG or sustainable strategies. We are the ones who have the responsibility to change the world and provide clients with these products.”
This is just the beginning of the redrawing of the investment landscape, believes Mr Allende, with Caixa now claiming it can tailor portfolios to individual needs. “We are going to change a huge amount of our portfolios, and move clients into impact investment, not just ESG,” he says.
Yet despite the championing of this sustainable investing trend by the likes of big brand managers BlackRock and Robeco, he does not see ESG strategies as a key selling point for private banks. “The key differentiator for us will be who is charging how much for what and who can successfully introduce a fee-based private banking business.”
A programme of widescale segmentation will be carried out in conjunction with the bank’s business intelligence department, identifying eight different groups of clients, all expecting different products and solutions. “We have been looking at clients from our premier banking division, with the likelihood of them becoming future private banking clients,” says Mr Allende, whose career was particularly shaped by a stint with US bankers Morgan Stanley. “Their cultural and social attributes tell us which type of product preferences they will have. We have done a fantastic job there.”
This transformation and hyper-personalisation require a change in work patterns for Mr Allende’s army of 680 private bankers, with numbers up by 30 from 2019. “We can now personalise the portfolio and help the private banker adapt the commercial approach for each client,” he says.
Each private client will be digitally flagged to advisers, with an indication of their propensity to engage in activities such as buying mutual funds or trading equities over the telephone. “This requires a team approach,” suggests Mr Allende. “It is impossible to do this with just an individual private banker approach.”
The risk here is that relationships will in future essentially be determined by technology and data rather than personalities.
“The algorithm is now defining the theoretical relationship of the banker with the client, which then leads to the offer,” he confirms. “This is risky, if the algorithm is not working properly. So we need to leave the private bankers with some flexibility in how much they can deviate from the standard formula. We will give them some room for manoeuvre, but not too much.”
This move to data-led analysis will involve a total change in the firm’s ethos, believes Mr Allende. “You have to change the organisation and our daily practices. This will give us an incredible capacity of knowing our clients and building commercial relationships. It is a huge transformation.”
Watch and learn
Although those who know him say the vision and the leadership of Caixa’s private banking operation comes directly from Mr Allende, he credits the new paradigm to other operations he has witnessed from his peer group, particularly in foreign territories.
“The only thing we have really done is to travel a little bit, see what others are doing and then apply that to Spain,” says Mr Allende humbly. “We didn’t invent anything. We just looked at what others were already doing successfully and copied those best practices. But we have gone a little bit further putting them together, and more importantly, with a high conviction in their implementation. Ideas are out there for all of us. The challenge is whether we can implement them.”
