This interview was featured on PAVONE on 19 July 2024.

Lombard Odier Group is one of Switzerland's longest-established wealth and asset management company, having been in business for over 228 years. A global single-source provider of wealth services, with offices in Asia for more than 35 years; in 2023, the company entered into a strategic alliance with Mizuho Financial Group, Inc. to improve its services for ultra-high-net-worth individuals. We spoke to Pierre-Yves Lombard, Representative Director and Head of Private Banking, Japan, at Lombard Odier. about the current financial situation and his expectations for the Japanese market.

Tell me more about Lombard Odier’s business and history, as well as its presence in Japan.

Lombard Odier is one of the world’s leading global wealth and asset manager with a strong focus on sustainable investing. We are one of the oldest private banks in the world, founded in 1796 in Geneva, Switzerland. The founding families (Lombard, Odier, Darier, Hentsch) were involved since the beginning in creating and growing Lombard Odier into what it is today, with 8^th generation family members currently active in the management of different parts of the business. With over 228 years of experience, the bank has been a pioneer in wealth and asset management, continuously adapting to the evolving needs of our clients, while maintaining a strong commitment to sustainability and innovation. The combination of a very conservative management of the company and a strong appetite, throughout history, for innovation and rethinking everything have enable Lombard Odier to become one of the largest Swiss banks today. We are one of the strongest and safest banks in the world with the highest capital ratios (32% Tier-1 ratio) among our peers, the highest credit rating (AA-) possible for a bank of our size, no external debt or shareholders.

What was the turning point in the long history of Lombard Odier?

There is not a single turning point in our history but rather a culture of conservative management combined with constant innovation. Over the years, it has been necessary for the global leader in wealth and asset management to embrace technological advances and expand its global footprint, while remaining true to its core principles of integrity and client centricity.

In the late 1790s, the French revolution was ongoing, leading to the fall of the French monarchy and the rise of Napoleon Bonaparte. Shortly after, Napoleon temporarily occupied Geneva, where he stayed at our headquarters with his officer on the way back from the Italian campaign. During that period of turbulence, Geneva emerged a safe harbor for European clients looking for safety and security in Europe. In the first half of the 1800s, Lombard Odier’s partners strongly believed that the US, an emerging country economy after the war of independence, and decided to diversify client portfolios by investing into the ongoing industrial revolution there during the 19th century. This early international diversification really helped our clients protect and grow their capital during the turbulent years of the second half of the 19th century and the two world wars of the first half of the 20th century. International diversification has always been critical for our clients. Since the early 1990s, we have pioneered ESG research, sustainable investing and corporate sustainability and strongly believe that sustainability will be one of the biggest drivers of client returns in the future.

Why is the Japan market important for Lombard Odier?

Lombard Odier has established a significant presence in Japan over 30 years ago, and we are here for the long term. Japan was one of our earliest markets outside of Europe, and remains a very important and promising market for us, due to its significant wealth accumulation and sophisticated investor base. Japan is the third largest market for HNWI/UHNWI in the world according to the 2023 Global Wealth Report, there is strong potential to develop wealth management services in Japan. Japanese high net worth individuals (HNWIs) are increasingly seeking diversified and global investment opportunities, and our extensive experience in international markets positions us well to meet this demand.

 The first trend among Japanese clients is a strong interest in discretionary portfolio management, with clients entrusting us to manage their assets in order to grow their wealth over the long term. Japanese HNWIs realise the importance of growing their wealth while protecting it from downside risks such as market volatility and ageing social welfare commitments. Secondly, strong interest is seen from family businesses. Family services and advice on issues such as family governance, succession planning, educating the next generation, philanthropy and migration are highly valued by Japanese clients, represented by entrepreneurs and family businesses.

Read also :  the EV market in Japan

What is the most important mission of private banks towards their clients?

Clients are our utmost priority at Lombard Odier. Our mission is to be the private bankers of reference for entrepreneurs and their families, not just today but for the long-term – generation after generation. We offer clients a safe harbor from the world’s turbulences, so clients can preserve, grow and pass on their wealth to the next generation. Particularly for Lombard Odier, we are a privately owned bank with independence at the heart of our model. We are governed by a partnership model, where our six Managing Partners are owners and managers, taking into account the expertise and concerns from different perspectives and skill sets. Being free from market pressures, we are completely client-focused – with our clients’ interests aligned with our own at the highest level in the organisation.

As a private bank, we prioritise building trusted relationships, offering innovative solutions and ensuring transparency in all our dealings. Our goal is to be a reliable partner, guiding our clients through various life stages and economic cycles with a focus on their financial well-being.

The state of wealth management across Asia.

We believe the wealth management landscape across Asia is undergoing unprecedented change driven by four key trends

•  Asia’s Great Wealth Transfer, whereby around 70,000 HNWIs in APAC are set to pass on around USD 2.5 trillion over the next decade;
• Onshorisation, whereby wealth is growing in the region, and there is an increasing need for investors to access global opportunities from their local market;
• the Sustainability Revolution, which is creating new sources of investment opportunities that is leading to enhanced returns and reduced portfolio risks, and
• a current volatile macro environment that is plagued by rising uncertainty, with clients increasingly looking for the safest financial centers and safest financial institutions.

We recognise that private banks must be able to adapt to these changes to meet the holistic needs of HNWIs across geographies and jurisdictions, including Japan. We believe that we must be able to adapt to these changes. In such an environment, with the growing number of socially conscious high net worth individuals seeking risk management-based returns, portfolio diversification and sustainability-led management, we feel that they need a roadmap to protect their assets and investments in the long term in the current environment.

Read also Lombard Odier’s playbook for currency volatility in Asia

Some challenges facing Japan's wealth and investment markets

With the ongoing macro uncertainty, rising rates and geopolitical tensions, traditional investments approaches from the past would not enable the investors to protect clients and take advantage of the market opportunities of today. In this context, portfolio diversification is more important than ever to mitigate risks and ride out the volatility. This may include a mix of traditional muti-asset risk-based strategies at the core and alternative investments such as private assets, along with sustainability-focused opportunities to enhance portfolio resilience and sustainability.

In Japan, it is more difficult than ever to protect and grow assets over the long term. 20 years of excessively low interest rates and the recent depreciation of the yen have driven Japanese investors to look overseas for yields and investment opportunities. Increasingly, Japanese investors are looking to explore global opportunities and incorporating sustainable investment practices into their portfolios. Japanese investors are also increasingly interested in private assets.

The need for wealth management for high net worth individuals in Japan is an urgent issue and we can contribute to their long-term wealth management needs in Japan by leveraging our 228 years of wealth management experience and providing comprehensive management solutions and family service advisory to help them protect and grow their assets. We strongly believe that we can help you protect and increase your assets.

Read also family governance in Asia