“A key indicator of success is when clients introduce their children to us” – an interview with Frédéric Rochat, our Managing Partner

Are you achieving that? Your profits dropped in the first half of 2024.

When you look at our numbers, as you would for any asset manager, you need to make a distinction between the underlying profit of our asset management organisation and the cyclical nature of net interest income. The former is developing in line with our plans. The latter is suffering due to the industry-wide decline in net interest income, which is currently affecting the entire sector.

Are costs currently growing faster than revenue at Lombard Odier?

The organic growth of the business and our strong capitalisation allow us to invest. A major part of our annual profit is always reinvested in the further development of our activities. We invest in the expansion of our client support operations, further development of our investment expertise, and in the improvement of our IT systems. IT is becoming a key differentiating factor in our sector. Without the right technology, a bank is unable to offer a contemporary client experience while meeting all regulatory obligations.

We are also currently investing in the construction of our new headquarters in Geneva. We look forward to inviting our clients to our new home starting next year.

Lombard Odier takes a long-term approach and thinks in cycles of five to ten years. Yet asset management is global, highly competitive and dynamic. Singapore, Abu Dhabi and New York also want a piece of the pie. Can your approach be successful in today’s world?

This is where our model differs. Many competitors are listed on the stock exchange and have to deliver ever-higher results every quarter. This can lead to tension between the short-term interests of shareholders and the long-term interests of clients.

We are privileged to be privately owned. This allows us to think longer term and focus on doing the right thing for our clients – an attractive position that enables a close alignment of interests between clients and the bank. Our clients appreciate this.

Your clients also want returns first and foremost. What draws them to Lombard Odier?

Yes, of course our clients want returns. They strive for capital preservation and solid investment results throughout the cycle. But they also look at the long-term perspective and are seeking a banking partner who will stand by their side, and will also support their partner and children. We strive to be the long-term asset manager of choice for entrepreneurs and their families. For Lombard Odier, the best indicator of success is when clients introduce their children to us. This means we were able to build a real relationship based on trust.

You have hired a lot of people from the former Credit Suisse. UBS passed these people through a “cultural filter” to weed out those individuals who were only motivated by bonuses. What approach have you taken?

We are committed to organic growth – we do not grow through acquisitions. When we want to hire additional employees, regardless of where they come from, we take our time during interviews and consider them very carefully.

Can you provide specifics?

We typically conduct eight to twelve pre-hire interviews, not just for client-facing bankers or investment managers, but for the vast majority of positions within the organisation. We assess whether people are entrepreneurial, hard-working, and competent, but also whether they are a match for our approach, our values and our culture. For both sides, it is a real journey of discovery that is less about metrics or a formal filter and more about assessing character and the ability to fit into an organisation that is very human.

The inheritance initiative by the Young Socialists (Juso) party is aimed at entrepreneurs and company owners in Switzerland. These people are your client base. Does the initiative worry you?

Naturally, we are very concerned about this initiative. We greatly value direct democracy in Switzerland, but this is an unfortunate case of misuse of the instrument of direct democracy. One can always discuss and argue over tax models. The opportunity to rethink any framework is always there. But we should be careful not to give in to populism, as is the case in too many countries around us. This is not what Switzerland should be.

The initiative proposes an inheritance tax of 50 percent with retroactive effect – from the day of the vote – for assets exceeding 50 million francs. It also looks at the introduction of an exit tax for those tempted to leave the country. What are your biggest concerns?

The element of retroactive effect and the exit tax create uncertainty for many clients and entrepreneurs across the country. And this means that people who are potentially within the scope of the initiative are already considering their options.

The initiative runs the risk of completely backfiring. It’s not so much about whether we want to tax wealthy people more or not. The initiative strikes at the very heart of what has always been Switzerland’s recipe for success: a competitive and prosperous economy, coupled with a generous social welfare programme. A typically Swiss formula based on deep-rooted pragmatism has brought us high levels of employment and prosperity, especially compared to other countries in Europe. The initiative would destroy the delicate balance enshrined in this formula.

Read also: Key questions on inheritance tax in Switzerland

Don’t you feel you’re painting too grim a picture?

No, we need to always keep in mind that the Swiss economy is not only based on large listed corporations and companies that are in the SMI index. What makes the Swiss economy so strong is its deep structure, consisting of hundreds of thousands of small and medium-sized companies. They include leading exporters of goods and services that are in demand around the world thanks to successful innovation and value creation strategies. Others are leaders in the domestic market.

Most of these small and medium-sized companies are privately owned. Many of them are family businesses. Our most successful Swiss SMEs are all worth more than 50 million francs. They would all fall within the scope of the initiative. Their owners would have two options: leave the country – with the risk of relocation and job losses for the company – or stay and sell the company so their heirs can pay the inheritance tax upon succession. Do we really want to bring about an involuntary liquidation of what makes the Swiss economy so successful?

What do you mean by involuntary liquidation in this context?

We need to put aside the notion that these entrepreneurs have 50 million francs waiting in their bank account to pay the tax. Rather, these assets are usually invested in the companies. So if they have to hand over half of their assets to the state, this will force an aggressive sale of these companies to foreign buyers.

Others would simply leave Switzerland. There is always the risk that when entrepreneurs move away, the company will follow them over time: first the headquarters, then part of the production and other capital assets would also gradually be relocated abroad. Many of our Swiss entrepreneurial clients are currently reviewing their options.

The Swiss Federal Council has stated that the retroactive taxation clause should not apply. Does this give you hope?

The Federal Council has provided helpful input, particularly with regard to the exit tax component. But now, it’s over to the National Council and the Council of States to take a position, and then the date of the vote will be determined. 

A date in 2026 is being discussed… 

All the actors involved should carefully consider whether this is an optimal time.

What would be better?

It might be beneficial to bring the matter to a vote as quickly as possible to eliminate the uncertainty as early as possible.

The example from Norway shows us what can happen. Many entrepreneurs left the country following a sharp tax increase.

Or look at the example of France. In the early 2010s, several French governments increased wealth tax, inheritance tax and income tax, and introduced an exit tax. As a result, some of the most successful entrepreneurs and investors had to leave France. Many of them moved to Belgium, Great Britain, Portugal, Italy or Switzerland. The economy and jobs in France have suffered enormously.

And so I ask: Is France really the model we want to follow? It seems to me that our Swiss model, based on common sense, moderation and balance, should be preserved. Let us not be distracted by the populism that is seducing many of our neighbours, often with poor results.

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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