Strategy

LODH Helps Russia’s Rich Out of the Mercedes Into the Private Jet

Paul A Adams, Geneva, 30 October 2007

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Arnaud Leclercq, is a man with a mission: to develop LODH's business in the emerging markets with particular attention to Russia.

Following in the footsteps of Edouard Odier, Switzerland's first Ambassador to Russia, Arnaud Leclercq, a partner of the Group Holding of Swiss private bankers Lombard Odier Darier Hentsch, is a man with a mission: to develop the bank's business in the emerging markets with particular attention to Russia.

This is a task he is tackling with much relish not least because he believes “Russia lies at the heart of the dominant issues of the 21st century”.

Mr Leclercq, who has just been named “Outstanding Young Private Banker in Europe for 2007” by Private Banker International, has dedicated the last 15 years to emerging markets. Before joining LODH, he gained experiences in both industry and banking where he held several development and executive positions in Russia. In July 2000, Credit Suisse Private Banking recruited him to grow their private client base in Eastern Europe. Later he was appointed managing director for Central Europe, Russia and Central Asia.

It is sometimes forgotten that since 2005 more than 35 IPOs have been concluded in Russia raising funds in excess of $20 billion. This represents a good indicator to the high levels of private wealth that have been created in recent years and explains why LODH places so much importance in this new market.

Prominent examples include Viktor Vekselberg who recently purchased over 30 per cent of the Swiss engineering group Sulzer to become the major shareowner, billionaire Roman Abramovich who purchased Chelsea Football Club for $233 million, and Alisher Usmanov who bought a 14.6 per cent stake of the Arsenal Club for some $150 million.

Many others have created somewhat more modest fortunes. Mr Leclercq recalls an example: “Less than ten years ago, the Pyaterochka supermarket chain and its rival Magnit did not exist, but now they are opening hundreds of new stores across Russia every year. Pyaterochka has a market capitalisation of $5.9 billion, while Magnit posts sales in excess of $1 billion. The real estate sector is also booming, especially in Moscow and the surrounding area. Since 2005, Austrian and US investment funds have seen sufficient quality and transparency in the market to merit massive investment”.

According to Mr Leclercq “Last year Russia witnessed an unprecedented increase in the number of high net worth individuals. According to various studies, they number some 119,000 and due to the important role played by Russia in the global economy, this number is constantly growing”.

After a whole or partial sale of the company, it has become possible and desirable for many Russian entrepreneurs to separate personal wealth from the company's accounts. It is at this juncture that different banking and financial advisors are usually engaged to provide the expertise needed to meet the particular needs of the company founders and the companies that they created and built up.

In addition, this is likely to be the time when the newly rich individuals experience a marked change in life style. No longer required to provide around the clock hands on management they can enjoy their fortunes and use it to create further wealth. Mr Leclercq characterizes this point as moving from the “Mercedes to the private jet”. Typically the individual will buy homes in places like London and Geneva, will have family members scattered across the globe, and children being educated at various locations.

Mixing with and talking to foreigners in similar circumstances around the globe will often alert them to the benefits of private banking. The most likely next step is contact with Mr Leclercq or one of his team of ten client relationship managers located in Geneva, Zurich, London, Gibraltar, or the recently opened LODH office in Prague, all of whom speak at least two languages in addition to Russian.

In selecting a private bank, Russian ultra high net worth individuals are looking for a secure independent financial institution that is unlikely to be subject to take over and which can provide a genuine personal service over time.

In addition to asset structuring and management services, these people are looking for a discrete relationship that can include advice on a wide variety of subjects like real estate, tax, art collections and introductions to others. For example, investors interested in acquiring businesses and property in Russia or businessmen wishing to attract funds for projects in Western Europe and that may be of interest to Russian businessmen wanting to spread their commercial interests.

Creating and safeguarding wealth for future generations and providing advice on the transfer of wealth to heirs represents another important aspect of the relationship. According to the Swiss private bank, this all comes naturally to LODH. It’s a family firm of private bankers handed down from generation to generation for more than two hundred years and is now run by nine managing partners, who represent the seventh generation of bankers.

Jean Pastré, the managing partner in charge of the LODH’s European development, told WealthBriefing that: “After the UK, France, Netherlands, Belgium and Spain, Central and Eastern Europe, and more specifically Russia, were the natural next steps in our business development strategy on the continent. The remarkable economic growth of the region over recent years has made it a key centre of economic activity”.

The bank began building up business in Russia through intermediaries and a strong network of local contacts. Many relationships came through the international Family Business Network run by IMD, the Swiss based Management School, of which LODH is an active member.

In order to reach out to family run businesses in Eastern Europe, LODH, has financed the translation of books like “Who, Me?” a practical guide on Family Business succession into local languages. And to introduce Swiss private banking the guide “Why are the Swiss the Swiss?” by Joêlle Kuntz has been published in Russian and distributed widely.

Mr Leclercq explained that, in the main, these new clients like to take direct responsibility for their affairs and wish to deal directly with a representative of the bank. Few have chosen to establish family offices and many make use of the possibility to monitor their assets and trading with direct access to LODH's online platform.

“It is the ambition of Lombard Odier Darier Hentsch to become the primary Swiss private banker for the region. Not necessarily in terms of volume, but in terms of providing sound financial advice, superior quality products and services. Looking at our first success, we start to do so. What we want is to respond to our clients' needs. In this way following the initiative in Prague, we could consider opening an office in Moscow in the near future. If our clients ask us to do something, for sure we will respond to them,” said Mr Leclercq.

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