Since Nordea is a household name in Scandinavian markets, private banking bosses in Stockholm have decided the main expansion drive will take place not on their doorsteps, but further afield in Europe and Asia, where Nordic expatriates increasingly find themselves.
“A lot of people have left the Nordic countries and now live elsewhere. These are the mainstay of our business,” says Jhon Mortensen, CEO of the group’s Luxembourg-based international private banking arm, managing €15bn of the group’s €149bn total. “But over the last few years, we are trying to get other nationalities interested in what we have to offer. That is where the growth is coming from. People are moving from one country to another, and as I keep telling my superiors, that is where we come in.”
While asset allocation and risk management activities are essentially carried out in the Swedish head office, clients moving to a new country require a dedicated wealth planning services, so recruiting new talent has been key to the Nordea offer. “Our clients might own real estate in one country, get divorced in a second country and then have children in a third country,” he says, vividly demonstrating why his team of 80 relationship managers need to be able to supply specific advice to a highly mobile customer base.
And these private bankers must have serious organisational back-up to make sure they can advise to the best of their abilities. A client in the €10m plus bracket, looked after by the recently established high net worth desk, would be offered top tier service. Entry level is around €300,000. “We were fortunate enough in Nordea not to suffer so much from the crisis, so we have been able to attract people. Our brand name has improved in relative terms, although all banks were hit,” adds Mr Mortensen.
Positive inflows returned in 2009, “a reasonably good year for us” and certainly better than the previous two, even though assets under management were reduced due to market effects.
The crisis has seen investors become more critical of the performance of funds, rather than blindly accepting their bankers’ recommendations, says Mr Mortensen. His relationship managers officially work on an open architecture basis, but are also keen to select the group’s funds where performance stands up. The funds market is screened once a month, after which adjustments to his recommended list of products are made.
Mr Mortensen does appear to be something of a traditionalist regarding active management of portfolios, although there is a cursory nod to passive trends. “We are using and recommending ETFs, but in general, we try to use alpha-producing funds for our clients,” he says.
Hedge funds receive even shorter shrift, waved away in an affable fashion, although the bank is in the process of creating some Ucits III vehicles, much more acceptable to the mentality of conservative clients. “Hedge funds were never widely used in our portfolios,” he says, with these alternative products representing less than 5 per cent of portfolios, well below industry norms in private banking.
“There was a time when we thought we have to do something about this low allocation, but in the end we didn’t. We are very hesitant of recommending something to clients which they do not fully understand. The only hedge funds we really recommended were one or two actually built in the bank, where we can see inside them.”
Allocations to alternatives may increase in the future, but Mr Mortensen is in no hurry to accelerate the process. He does state that all hedge funds which will be used in the future will be Ucits III funds, allowing daily liquidity. “I would always trade performance for liquidity,” he adds.
One area where Nordea has moved with the times is a no-nonsense requirement of all clients to be on firm legal ground, despite the perception of Luxembourg as a tax friendly centre. While many banks are moving begrudgingly to the “onshore” model, following attacks from the US administration and the OECD on some traditionally secretive jurisdictions, few are making this commitment.
“We have always encouraged clients to do wealth planning and save tax if they could, but always in a legal manner,” says Mr Mortensen. “Now we demand that you can convince us that you are paying tax, if you want to open an account here. It is now purely an onshore model.”
Despite this unequivocal stance, he still believes clients are entitled to keep their affairs private. “Banking secrecy still has its validity as a lot of clients are anxious about the discretion it provides to them. We have a Zurich branch and there are clients who prefer Switzerland to Luxembourg and we can provide that to them if they want it.”
