Does the asset manager around the corner still have a future?

Although the market is growing, many small private banks and asset managers are putting themselves in the spotlight. They refer to rising costs due to stricter regulations and digital innovation. But not everyone thinks about selling. “We don't want our customers to end up with shrewd types.”

Five minutes. That's all Philippe Benijts needs to realize that he doesn't want to sell the asset manager he controls if larger competitors propose a takeover deal.

With more than 400 million euros in customer assets under its belt, DDEL Portfolio Solution, where Benijts has been working for ten years now, is perhaps one of the least well-known asset managers in the country. But since more and more players in the industry are chasing extra scale, the Brussels DDEL is also regularly knocking on the door.

Benijts' message is clear. “We want to remain completely independent. Many potential buyers see our clientele as a commodity,” he says. “We don't want our customers to end up with shrewd types. Before joining DDEL, I also worked in the private banking sector. I don't want to go back to the dark side. '

DDEL is gradually among the last of the Mohicans among the smaller independent private banks and asset managers in our country. Belgium has around thirty private banks, asset managers and stock exchange houses that focus on specialized financial services for wealthy customers. This market is dominated by the four major Belgian banks and six other major players, whether or not owned by a foreign group.. Together, they account for more than 90 percent of the nearly 480 billion euros in assets under management in the sector.

In addition to those big boys, there are twenty medium-sized private banks and niche players. This includes branches of international banks, but also independent Belgian boutiques that, like DDEL, manage less than 1 billion euros in assets.

That club of smaller boutiques is prominent on the radar of potential buyers. And not everyone says no when a competitor comes calling with a offer you can't refuse. Just before Christmas, it was announced that Dutch-listed Van Lanschot Kempen had got its hands on Antwerp asset advisor Accuro.. Almost three years ago, the Dutch also took over the Belgian company Mercier Vanderlinden. The Belgian branch of Van Lanschot has been known as Mercier Vanlanschot since New Year and does not rule out further acquisitions.

Earlier last year, it was announced that Frank Vlayen, the former CEO of Dutch investment giant Waterland, had acquired half of the shares in Leo Stevens Private Banking, also in Antwerp. In the years before, the private bank Dierickx Leys had vacuumed up small brokerage firms such as Lawaisse in Kortrijk and Van Goolen in Antwerp. The Brussels Leleux took the tiny East Flemish brokerage firm Bockland on the head. “Everyone is always talking to everyone in this sector,” says an observer. “But now the market is really moving. At least one goes out every year. '

However, private banker is not exactly a job without a future. Entrepreneurs are more often thinking about how to transfer their business and their wealth to the next generation, a trend that just about everyone in the financial sector is capitalizing on. Big names such as KBC, Belfius and recently ING Belgium have announced their intention to significantly expand their private banking network.

Lucrative market

Consultants have been arguing for years that profit margins here are higher than elsewhere in Europe. In addition, Belgians usually have no problem fully outsourcing the management of their assets to the bank. This discretionary management, as it is called in the jargon, is usually cheaper for a bank than developing a team that must assist customers with individual advice. This makes Belgium, a fairly fragmented market in private banking, an interesting hunting ground for ambitious banks looking for scale.

At some point, you reach a breaking point and realize that it's better to join another group.
- Yves Van Laecke (Commercial Director of Bank Nagelmackers)

On the other hand, there is a need to invest heavily in new digital applications and measures to keep up with the stricter regulations. Five years ago, the arrival of the so-called European MiFID guidelines for consumer protection already left banks and stock exchange houses with tons of extra paperwork. In the meantime, requirements have been added to screen customers, professionalize management and check whether internal housekeeping is in order. For those who do not have sufficient critical mass, that task is becoming increasingly difficult.

“One of the main reasons why smaller houses are partnering with a larger competitor is that their costs keep rising due to stricter regulations,” says Jason Kalamboussis, ING's banking analyst. “You have to invest in money laundering controls and compliance, checking whether the rules are properly followed everywhere.”

Not everyone can cope with the rising costs for this, adds Yves Van Laecke, the commercial director of Bank Nagelmackers. 'The supervisor is imposing increasingly stringent requirements, which are not always commensurate with the size of the bank or asset manager that must adapt to them. Some houses want to stay on an independent course, but do not have the tools or resources to meet all the requirements of the regulations. At a certain point, there is a breaking point and the realization grows that it is better to join another group. '

“Indeed, these stricter regulations are often used to explain why smaller houses put themselves on display,” responds Hans De Schouwer of Accuro. “But that wasn't the reason for us to go with Van Lanschot. You may have questions about the proportionality of some measures, but in themselves, these regulations are not so stifling. With Accuro, we did receive a proposal to sell every two years, but we were always able to go ahead on our own. The fact that we are now selling is because we share the same values with Mercier Van Lanschot and together we can grow into one of the most relevant players in investment advice in Belgium.”

Near Ghent Value Square, founded almost twenty years ago by some of the anciens of the former securities bank Bank Corluy, according to CEO Koen Hoffman, a lot has been invested in further professionalization and digitization in recent years. “That took a lot of time and energy, but we are now reaping the benefits. From the onboarding from new customers to managing our assets under management: everything is automated. That also has to be done to survive. You have settings that look very stately from the outside, but run on underlying systems that are completely outdated. Sooner or later, they run into themselves. '

We're not the type of banker who drives around in an expensive car or needs a fancy office. We keep costs low.
- Philippe Benijts (Partner DDEL Portfolio Solution)

Benijts from DDEL Portfolio Solution does not deny that the regulations have significantly increased operating costs. “But we're also not the type of banker who drives around in an expensive car or needs a fancy office. We keep costs low, we specialize in passive asset management and don't do anything stock picking or speculation. As a result, we also don't need a large back office or analyst teams. We also don't do marketing and work by word of mouth. But the returns are there, and we are growing like an oil slick. Around a fifth of our customers work in the banking sector themselves. Some of them are even CEO of a major bank. '

However, a separate approach or tapping into a specific niche does not guarantee that you can take your own course forever, says a banking expert. “It may well be that you'll still hit walls at some point. Let's say you start out as a small independent house, with acquaintances and family members as first customers. As you grow, sooner or later you will meet potential customers who demand the same services and products more quickly as in the larger houses where they are already customers. It's getting harder to stand out from such competitors. For example, they can afford a team of seven analysts, but you can't. '

Shopping in Carrefour

Hoffman disagrees. “We don't want to play a private bank, we have our own face. We do everything we can to keep our business model as simple as possible. With our funds, we focus on value investing and don't do things like private equity, investing in companies that are not on the stock market. Last year, we still grew, also thanks to the returns that we were able to present to our customers in the past. We see more and more people who want to talk to us. So they find their way to our specialty store around the corner. '

There is still room for newcomers. Don't people still go to a delicatessen store?
- Koen Hoffman (CEO Value Square)

However, no new specialty stores seem to be added. DDEL, Value Square and a few other independent players that remain today were founded in the early 2000s by private bankers and asset managers who wanted to work for their own account. But you haven't seen those kinds of initiatives for years. “As former private bankers, we ourselves started with Accuro in 2006,” says De Schouwer. “Today, that would be a lot harder. If only because you need a lot more staff. The war for talent also plays a role: you won't find a compliance officer on every street corner. '

That doesn't mean you don't stand a chance if you were to launch your own asset manager today, says Hoffman. “If you really want that, you can do it. The regulator has become stricter, but it is not unreasonable. You also need to do things as efficiently as possible: if your intention is to manage 1 million with ten people each, you won't get there. But there is certainly room for newcomers. Compare it to shopping: you may always go shopping in the Carrefour, but you'll swear by the deli for some things. This is also the case in the world of asset managers. '

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Source: De Tijd

Link: https://www.tijd.be/ondernemen/banken/heeft-de-vermogensbeheerder-om-de-hoek-nog-een-toekomst/10518963.html

Author: Pieter Suy

Date: 16/01/2024

Photo: Photo by Scott Graham on Unsplash