Status Update

Dec 9, 2019

Good morning, everybody. A warm welcome from my side, together with our CFO, Martin Sieg. Thank you all for dialing in into our call. And I would like to guide you through our main messages with using the Investor Relations presentation that is on the web, and we assume that this material is available to you. After our short messages, Martin and I will be more than happy to take your questions. So perhaps an introductory remark. What we communicate today is, from our point of view, a logical next step in a consistent development that we have done over the last years, and we have consistently worked into that direction. As we have communicated today, we are set to become a client centric investment manager. This will deliver to us a very consistent focus as a pure play buy side investment firm. This clear positioning will lead to additional new growth potential. We are convinced that investment expertise and technology are key competencies for us to deliver successfully to our clients and to win the future for us as a company and for our shareholders. I would like to go to Page 5 of the Investor Relations presentation. So what we are doing is it is about growth. It is about creating and using and profiting from the change that is ongoing in the marketplace and into the in the industry and to transform this change into an opportunity. And we act very clearly from a position of strength. 3 main developments on our business model. We transform into a purely client centric buy side only firm. We commit to be a pure play investment manager, and we clearly state that active investing and technology are the core skills going forward. We will translate this business model into a more focused approach, into more scaling effects, and this will lead to additional growth. We will serve client needs in 4 dimensions. We will continue to serve the client needs in Asset Management, in Wealth Management, and we will group the needs of clients that interact with us through platform, services, technology and our investment products in platforms and services. We will also group everything we do for direct clients who interact with us digitally or want to interact with us digitally in one defined challenger unit called digital investing. All client units will act as one firm and will have full access to all the core capabilities of Fronthovo. What are, from our point of view, the key needs and the key demands of the clients we want to serve? Page 7 shows the 2 main areas of client demands for which we intend to cater and which we think are also the driving forces why and how we adopt our way of working. The core mission for us is to answer to the needs of investors to find investment advice and investment solutions in an ever more challenging environment. We all know that simple saving by putting and hoarding cash on an account and hoping for the compounding effect of interest rates to kick in is actually that negative interest rates have done that. We are also aware that in an environment with ever lower expected rates of return, off the shelf passive solutions are not an answer to the demand of clients. Nevertheless, the general public is holding too much cash. Data shows that, as an example, investors with bankable assets of up to €1,000,000 across Europe are holding more than 80% of their holdings in cash. And partly as a result of this and obviously also as a result of demography and the design of many of the pay as you go schemes across the globe, the global pension gap is increasing. So there is an urgent need for professional investment advice and professional investment solutions, and we are here to put our capabilities at the disposition of these people in need. The other key dimension that is changing is how these clients want to interact with a provider of financial services. Client demands have started to converge and overlap across classical segments and across classical client groups. Clients move from products to a solution approach. The journey becomes ever more important. We, as providers, have to be there at the moment of truth when clients are asking for advice and for solutions, and they want to interact with providers from every sector and also from ours anytime and anywhere and increasingly in a digital way. We think and we are convinced that we have the strength and the capabilities to bring these needs together and to answer them convincingly for our clients. May I hand over to Martin to explain the strengths, which are the basis for our success going forward starting on Page 9. Good morning from my side. Please let me take you to Slide 9 of our presentation. My key message this morning, as we are evolving into an even more client centric investment manager, we definitely are acting from a position of strength. Over the last couple of years, our track record of organic growth is strong. We continue on this track. The financial results for the period from January to November 2019 is above 2018. We have successfully integrated a number of acquisitions over the last years, harvested the synergies and, for example, in the case of 24 Asset Management, we show very respectful growth in the businesses acquired. In this context, we also successfully adopted our capital structure to a modern forum, including a larger AT1 transaction in 2018 financed at a favorable rate. Key to our growth, to our positioning with clients and our culture is the strong investment performance shown at the bottom of Page 9. 89% of our funds have a 4 or 5 star Morningstar rating. In 2019, we are the 3rd best fund manager in Europe in terms of flows. This is also reflected in a large number of product awards received this year. We continue to be a digital innovator and disruptor. Our direct trade platform is well established. Our digital channels and financial products attracted $4,100,000,000 of turnover in the first half of twenty nineteen. COBMA funding, our digital platform to disrupt credit markets, gained a lot of track this year, and we won the Digital Economy Award just last week. So again, we are acting from a position of strength. How do we do this? Please turn to Page 10. We always act with a long term perspective. Our family shareholder structure continues to provide stability and focus on generations, not on quarters. As we evolve into a client centric investment manager, our values, ownership, foresight and tenacity and our competencies, as shown in the middle of the slide, are unchanged. They are the basis for everything we do. Based on these values and competencies, we look forward to manage the upcoming changes. And last but most important, our global talent pool. The most important component of the how we do it is our talent pool. We are by today truly diversified with professionals from 48 different nations working for Vontobel, bringing diversity and growth opportunities to the table. Thank you, Martin, for these explanations. How will we deliver? Let us turn to Page 12. 1st, we will deliver by taking the client's view. 2nd, we will deliver by transforming ourselves into a pure play buy side investment manager. 3rd, we will deliver by concentrating our advisory and relationship experts into units that are solely and exclusively driven by the client needs, committed to delivering solutions to them as they demand them. We will deliver by grouping our experts into centers of excellence where they can profit from economies of scope, and we can commit to outstanding quality and an increase of our expertise going forward. And we will run this as one firm with shared goals, flat structures and fully aligned incentives with our clients and investors. This focus on a pure play buy side investment manager does also imply that we will exit the ECM and DCM and the pure sell side businesses. However, this does not mean that we do not intend to continue to be the leading voice on Swiss equities as we will transform this capability as part of our buy side offering. This approach translates into a new way of working as shown on Page 13. Everything we do is done to put the client in the center of all our endeavors and all our activities. The 4 client units, asset management, wealth management, platforms and services, digital investing, are here to serve and cater for these clients. And all of these client units have full access to our key centers of excellence. Investments and technology as being the 2 core capabilities supported by structured products, marketing and analytics and the 3 important functions of HR, legal and compliance and finance and risk. Let us deep dive into the client units, its growth opportunities and the most important centers of excellence. Page 14 shows the growth path of the 4 client units. So in Asset Management, we will continue with the very successful track and the very well run business going forward already in 2019. We will complement the asset class specialization on the basis of the unchanged multi boutique approach with even more regional sales focus. We will increase footprints in the U. S. And in Japan and also in selected European markets. Among them, we will open an office in France. The new setup and the new way of working and the increased local footprints in Asia and in the U. S. Will also help us to serve global banks worldwide in a more meaningful way. Wealth Management will continue to build on the expanded network of locations with proven experts that we have in our home market. We will regain speed in hiring as we continue to be seen as an employer of choice in the market, and our hiring pipeline is back up and well filled. In addition to the activities and in an extension of our service offering, we will move skills and capabilities and talent from our corporate finance franchise to the buy side as well and will advise entrepreneurs and other decision makers from the SME segment in a holistic pure play buy side approach and by this extend our focus to ultrahighnetworth. Platforms and Services combines full access to all our investment products, including structured products, full access to our technology platform and to our services on the basis of these platforms and technology. We continue to work with this offering very strongly with our B2B partners, and we have the ambition to become the leading partner for intermediaries in wealth management services in Switzerland, Germany, Hong Kong and Singapore. In digital investing, we pool all activities that reach out directly to end clients, starting from the distribution of structured products, moving on to our newer initiatives such as Vault. We have decided to build an explicit challenger unit that will make our competencies available through platforms and ecosystem through a broader investor public. These client units rely on the centers of excellence. Starting on Page 15 with the global investment expertise at the core. The bedrock of the center of excellence is the proven and unchanged multi boutique setup from our asset management activities. This center of excellence comprises 300 distinguished investment managers and investment specialists across the globe. Will extend the service offering with a more bespoke outsourced CIO offering and a combination of all our research capabilities from a buy side perspective. We strongly believe that the capabilities of which we have named a few, we are among the leading and largest emerging market investors in Europe. We are a strong and leading multi asset and income solution provider. We have established ourselves as one of the key forces in ESG investing and making ESG accessible and investable across the globe, and we are very proud that we have been doing this for decades and many, many years with a strong commitment to active investing with having 5 funds with track records spending more than 27 years. This center of excellence will feed investment advice, investment content and investment solutions in all client units. Structured products remain a key part of the offering to our clients. We are convinced, as we show on Page 16, that structured products add very interesting capabilities and a very interesting edge to investors in terms of income generation, customization, access to underlyings not directly available and very bespoke risk management approaches. Obviously, the demand for this asset class underscores that assumption as public data shows that both in Germany as well as Switzerland, 5% of AUM are invested in structured products. We have a proven and strong track record in this business with innovation, platforms and products, and we will continue to provide service as parts of overall investment solutions. We strongly believe that technology and data will only become even more important going forward as shown on Page 17. We have decided to group technology and data staff more strongly within our organization as we are convinced that we need critical mass and depth of the talent structure and that we need to build a work environment and a culture that can bridge with the tech environment the best people in this field are used to expect from every employer. We also strongly believe that the age of 2 speed in IT solutions that so many people in our industry still work with are gone. We will intend to transform our whole technology infrastructure into 1 global, 1 speed delivery organization. We will continue to use the insights and the information that we gain in order to help our clients more proactively and to access clients more broadly through ecosystems and platforms. Let me conclude on Page 19. Based on the decision to transform into a client centric investment manager, we're happy to confirm our 2020 targets. We think that what we announced today is a help in order to achieve these 2020 targets. We also strongly believe that the focus and the scale of this business model and the new way of working will help us to continue with a sensible, conscious but organic way of cost management. The main message, however, that this sets us on a route for strong organic growth going forward. We have the privilege to start with this transformation on the back of a very long term entrepreneurial approach with a strong commitment from our core shareholders to entrepreneurial independence and to support this company on this future proof and future oriented journey. We believe the increased client focus will help us to do a better service, better fulfillment of the client needs and therefore, should lead to stronger organic growth. The deeper and better used capabilities help us to protect the high level of quality we already have and to increase it further and to profit from the economies of scope and the better access to all these capabilities. And we strongly believe that the collaborative model that we have built will be home to the best talents in our industry, both from a relationship, from an investments and from a technology side. We will also use this transformation to flatten and broaden our leadership structure, and we want to run the company in a more flatter, more agile way of working. As a last remark, I want to thank Roger Stuter, who has been with this company and provided his services to this company for more than 30 years. He has taken the moment of change of this new way of working in order to step back from his operational duties. I'm very happy that he continues to work for Foamtobel and to provide his services to us. He will continue to represent us in very important industry bodies and support us in a number of other functions. We I want to thank him personally for the service and the contribution he has done for our company over the last 30 years. With that, Martin and I are very happy to take your questions. Our first question comes from the line of Daniel Wrigley, Octavian. Please go ahead. Good morning and thank you for the presentation. I have a couple of questions. Maybe first, a bit of strategic one. On one hand, you were saying you want to expand more into the ultrahigh net worth individuals' client scope or client area. And on the other hand, you're cutting down on your ECM and BCM business. Now when we or when I talk to the bigger competitors in the Swiss market, they always say that this particularly this ECM and DCM businesses are needed to cater this ultrahigh net worth individuals. I just wanted to listen what do you think about this and how do you plan to cater the special needs of ultra high net worth individuals after having exited your sell sites and brokerage activities? Then the second question is more a bit technical. Can you maybe give us a little bit more sense what will be the top line and bottom line impacts, particularly in 2020 beyond? I think beyond the exit should be more or less neutral. But I think in 2020, you will be more or less losing the full top line of the exited businesses, but the costs remain largely on your P and L. And then the third question is regarding the reporting structure. How do you plan to report going forward, particularly on the segmental basis and in particular where our structured products allocate? I think it's in this products and services business. But then my other question would be is the net dairy trade is also included there? Or is this included in the digital segment? Yes. Okay. Thank you. So I'll kick off and then ask Martin to join in for the other question as well. So first of all, we obviously already serve ultrahighnetworths and have strong relationships to them. We just came to the conclusion actually that the wealth of investment solutions and the wealth of advice we have puts us in a very strong position to cater for them in a more systematic and in a broader approach. And we also do not intend to do this with copying or repeating what you cite, what some of our peers or larger competitors are doing. So we don't want to be the investment bank or the custodian for these ultrahighnetworth individuals. We want to exclusively and always sit on the same side of the table as our clients. We always will put us into the shoes of our clients who and always look at them from the perspective of being an investor. Therefore, we will offer all our advice, all our experience around ECM and DCM transactions or possibilities, but we will not execute them ourselves going forward as we think that this translates into an even stronger alignment of interest and puts us in a position to act always and ever only from the same side of the table as the entrepreneur, as the owner, as the C level executive. And that is an important point to us. So we intend to execute a very different approach in serving these client segments than what we see in other places in the market. And then on guidance on numbers, a few quick thoughts from my side. We think that the focus of the business model will lead to more or less a cancellation of revenues and costs and then obviously the improved scalability as we have a more concentrated scope and improved scalability in terms of market penetration should then and will lead to additional growth opportunities. But Martin, I think you have more on this. Yes. For the time being, we have no details available on the structure of the future reporting as all businesses except Corporate Finance and Brokerage will still be around in 2020. As you plan the outlook into 2020, the best thing is to look at your best guess of market developments, net new money, gross margin, transactional volumes. These things will all still be around. They are the best guidance at this point of time to look into 2020. Details on future reporting will be given in February when we present the full year results. There, we will have the structure of the future reporting available, while a restatement with figures that give you the content of the new structure will only be available later on, but before we go into the half year reporting period. Mr. Regli, does this answer your questions? Yes. Largely, may I maybe add one additional question. So with working with ultrahigh net worth individuals, particularly in the scope of or area of ICM and DCM? Do you then plan to have like partnerships with investment banks to do this deals? Or will you decide with which investment bank you advise your clients to do these deals on a case by case basis? And secondly, regarding no, that's Steve. Steve, with this one, sorry. Yes. You may not be happy with my answer here on the spot. My advice is give Hans Betelgehr a call. He will lead the capital advisory activities on the wealth management side, and he will be the person to stay in touch with on these questions. Okay. So no further questions. Gentlemen, there are no more questions at this time. So we thank everybody to join in for our update call, and we wish you a successful day. Thank you.