Excerpt extracted from an article published in The Business Times on 24 August 2022.

Amid change and volatility lie opportunities. Vincent Magnenat, Global Head of Strategic Alliances and Asia Regional Head at Lombard Odier, tells The Business Times in a roundtable discussion, on how private banks are helping clients build resilience into their portfolios in these uncertain times, and how they are shoring up their services for the new generation of wealthy clients.

The Business Times: What are the biggest headwinds for private banks amid the current inflationary environment, and how are you responding to them?

Vincent Magnenat: We should almost speak about the inflationary environment in the past tense as the tide is rapidly turning, with markets increasingly concerned about growth prospects rather than by the change in future inflation regimes.

Over the last 12 months, the fear that a new regime of higher inflation could prevail in the future led many private investors to doubt the benefits of diversification, as traditional balanced portfolios suffered massive losses. Private banks have spent, and will probably continue to spend, a lot of energy to convince their clients that the virtues of decorrelation between key asset classes will ultimately return, while expanding the scope of this diversification to real assets should allow them to access a much broader universe of private companies.

Read more about investing in private assets

The Business Times: How are you adapting your services to the digital demands of the new generation of high-net-worth clients?

Vincent Magnenat: Even before Covid-19 accelerated the shift towards digitalisation, Lombard Odier always understood that the next evolution for banking will be built on cutting-edge technology and we have been investing in our own banking technology for over 50 years. Most of the next-generation clients are digital natives and are looking for a seamless technology experience when banking, just as what they are used to in their daily lives with big tech. This is why our technology platform and solutions are designed to provide clients with a smooth, personalised, transparent and secure digital experience.

Our recent study on high-net-worth individuals has shown that regardless of which generation they are in, clients still prefer elements of physical interactions. Ultimately, personal relationships with clients are still key, and the quality of advice delivered through a mix of physical and digital engagements will define the new way forward.

Find out the role of relationship managers in the post-pandemic world

The Business Times: Amid the increased awareness of environmental, social and governance (ESG) investing, where do you see the biggest gaps in understanding?

Vincent Magnenat: The rapid growth of ESG products over the last few years has led to rising confusion among the different types of approaches and methodologies, increasing the risk of greenwashing on the supply side and of future disappointment on the demand side. As with any other investments, private investors need to understand what they are buying and align their choices of providers and products with their own preferences and convictions in terms of sustainability. 

Most ESG products today are still based on subjective scoring methods. Slightly more advanced strategies are relying on more factual impact metrics, such as carbon footprint, water consumption, etc, but still have large discrepancies in the scope measured and little-to-no predictive power in terms of future trajectories. Only very few providers, including Lombard Odier, propose methodologies relying on science-based frameworks to analyse the “temperature trajectory" for individual companies. We hope this will be increasingly adopted across the industry